Adam asks: “I’ll soon be moving to from UK to mainland Europe for one year for work. What is the best way to transfer money to Europe?”
Question 11 – What Is The Best Way To Transfer Money To Europe? – Shownotes
Today’s question comes from Adam:
Hi. I’m from the UK and I’m spending the next year working in mainland Europe. I’ll be getting paid into an account in Euros, but I’ll want to transfer money to and from the UK whilst I am there. At first, my money will be going from UK to Euros in the first couple of months to cover expenses. After that, I hope that I’ll be transferring the rest of my salary which isn’t used for costs back to the UK. What is the best way to do this?
Thanks for your question Adam, and this is one that is very close to my heart. Having moved from the UK to France in 2012 for two years, I found myself in exactly the same position. I would argue that there are two parts to your question.
Best Way To Transfer Money To Europe – Managing Your Money
The first is how to manage your money. You see, you’ll actually want to transfer money back and forward as infrequently as possible. However you transfer money, it ends up costing you a little. The amount you get charged (and how you get charged) will depend on your method for transferring the money, but you’ll effectively always get charged. Also, it takes some time to transfer the cash and so you’ll want to minimize your time wasted on doing this. I’d recommend that you check out our recent article on the concept of “hourly value” to show why:
So, you’ll want to transfer enough in one go when you head to Europe to make sure that you can cover all of your expenses until your income starts coming in, but on the other hand you don’t want to transfer too much and have to transfer it back into Sterling a few months later.
The only way to do this accurately is to create a budget which estimates all of your expenses whilst you are over there. Then, maybe add on a buffer of 10-30% (depending on how well you have made your estimates). This should, other than in an emergency, cover your costs until your income arrives.
So, based on this, you would then think that you should just keep all of your money in the European bank account and transfer it all after you’ve incurred your last expense. This isn’t a terrible plan. However, there are two things you should be considering.
- Exchange rate fluctuations: The exchange rate (how many Euros you can get for your Pounds, or vice versa) can and will move, and you will be effected by this. Take an extreme example. Say you had a surplus of EUR 2000 each month for 12 months between July 2014 and 2015. If you transferred that at the midpoint rate each month, you would have transferred EUR 24000 – which would have been translated into £18,124. However, if you’d transferred the full EUR 24000 in the last month, you would have only had £14,152. You would have been nearly £4000 worse off due to changing exchange rates.Now, this is an extreme example as the EURO fell sharply against the Pound in that year, but this can happen. So, you may want to spread your transfers over the year in order to reduce the variance you feel from exchange rates.
Note, this can work the other way, as a European working in England and sending money back the other way would be in the opposite seat – they’d be laughing if they’d held off, but you never know which way it will go, so it’s best to be safe and reduce your variance a little. This is similar to dollar cost averaging when investing in the markets:
Related Article: Benefits Of Dollar Cost Averaging (Moneystepper)
- What are your needs for short term cash in each country: For example, where is it more likely that you’ll suffer expenses for a car repair? Or what about your dishwasher blowing up?You’ll need to determine how best to split your “emergency fund” between the two currencies to minimize the need to having to make unnecessary foreign currency exchanges.
Cheapest Way To Transfer Money To Europe
Once you are happy with when you are going to make your transfers, you need to determine how. Firstly, let me tell you to stay away from the banks or credit cards. When you transfer money from one currency to another, there are three ways that you can be charged.
The most obvious is a charge. For instance, your bank may charge you a fixed cost of £15 for making an international transfer.
A slightly more sneaky way is through “commissions”, where the entity exchanging the funds charge you a % of your trade as a commission. This is usually only a few %, but if you are transferring large amounts, this can add up.
Finally, the third and sneakiest way, is through the exchange rate they use. For example, the official exchange rate may be EUR 1.4 / GBP, but if you are transferring £1000 into EUROS, your bank may use a rate of EUR 1.3. Therefore, your £1000 should be worth, EUR 1400, but they’ll only be giving you EUR 1300.
The cheapest way to transfer money to Europe, or to anywhere else, is to minimize all three of these. I’ve included a comparison table in the shownotes between some major high street banks and my three favourite currency exchange specialists for £10,000 translated on 01/09/2015 at 15:37 :
As a summary, don’t go with a bank. This is where they make a lot of money!
Instead, you should use a specialist. In the past, I’ve used TransferWise, UK Forex and Currency Fair. All three work on a very similar principle of peer-to-peer exchange. Effectively, they match up someone trying to exchange pounds for euros with someone trying to exchange euros for pounds. They then charge the interbank rate (the real exchange rate) and simply charge a fee for their matching service. It’s faster than the banks, I’ve found the company representatives and customer service much more helpful than the banks, and it’s a HELL of a lot cheaper.
The cheapest of the three will depend on the amount and the currency you are transferring, but the cheapest for our £10,000 transfer from Pounds to Euros (and actually for the majority of transfers I’ve ever tried) is Currency Fair, so they may be your best bet Adam for your first transfer from pounds to euros:
Stop giving your money to the big banks for their terrible service!! I’ve also added some additional information that anyone who wants to know more about transferring money abroad may find interesting.
Finally, you’ll see in the comparison that Currency Fair charge a £3 transfer fee. This is already included in our comparison showing that they are the cheapest. However, if you following the link below to Currency Fair, you will get your first transfer for free:
Hope that helps you Adam and helps save money for anyone else who is looking to transfer money abroad. If you want more information about how currency fair works, you can find a full free guide to sending money abroad below:
Ask Your Question
This show runs three times a week and answers all of your personal finance questions. If you have any questions, please don’t be shy to ask. You can ask in three ways:
- Leave a comment on any of the Q&A podcast shownotes (including this one)
- Email me at firstname.lastname@example.org
- Leave a message on the Speakpipe App which you will find below and on our “submit a question” page: