Foreign Savings Accounts and CDs (Not Just For Those Abroad)

15 comments

As currencies like the Euro and China’s yuan become more popular, the days of the dollar dominating the world’s financial markets could be a thing of the past. So what does a weakening dollar mean for the 90% of people who read this site who have 100% of their money in dollars?

Well, diversification is a positive in almost every category of life, and currency diversification is something that has become a hot topic lately. The term currency diversification refers to spreading money across multiple currencies in case 1 currency (i.e. the dollar) were to someday lose a lot of its value, or even worse, fails.

Foreign savings accounts that spread money across multiple currencies around the world are becoming more popular for people who are interested in keeping their money safe.

Everbank is a popular online bank for those who are interested in diversifying their money across multiple currencies. Their accounts should also be of  interest to anyone who lives abroad or has to consistently deal with multiple currenciess (i.e. ESL teachers or location independent workers).

Everbank offers a couple of cross-currency products that are of note:

World Currency Access Deposit Account (Savings Account)

This account offers just a $2,500 initial deposit and you can put your money into a currency of your choice to hedge against a depreciating dollar. The account allows you to easily transfer between currencies and earn interest in 1 of 17 currencies.

The account charges no fee and the money is still FDIC insured.

The major benefit of this account is the flexibility to move your money around to different currencies. Instead of doing a money order or sending money through a post office, you can easily transfer money from one currency to the next with this account. This would be especially beneficial for anyone who lives or works in a country outside of the country they call home.

Everbank claims a competitive currency exchange rate – within 1% of the available market rate for a currency. I would still be weary of exchange fees, but this account is definitely intriguing for people who live in another country, or for those interested in diversifying their savings into another currency.

World Currency CD – single currency

Also pick 1 of 17 available currencies to deposit your money into a certificate of deposit.

You’ll receive interest payments based on the currency you choose to invest in, and you’ll also get an affordable currency exchange rate to change your dollars to the currency of choice.

The single currency CDs are available in 3, 6, 9, and 12 month terms; but, unfortunately for most people the minimums are a little out of reach at $10,000.

Regardless, the single currency CD is becoming more and more popular as the dollar declines. There are no monthly fees and your funds are still FDIC insured up to $250,000.

You’ll receive the option to find higher interest rates in another currency and this could be something to keep in mind for the future when your funds have a little more bulk.

World Currency CD – multiple currency

For a more diversified look, Everbank offers CDs in multiple currency “baskets” of anywhere from 3-6 different currencies. The specifics of this CD mirror that of the single currency, but the minimum is bumped up to a hefty $20,000.

These baskets are really fascinating as you can choose to keep your money in a certain area of the world or a sector. For example, the World Energy Basket CD is made up of 4 non-middle eastern energy producing countries – the Australian dollar, the British pound, the Canadian dollar, and the Norwegian krone.

These CDs are available in only 3 or 6 month terms, and I could see these becoming more and more popular with the index-fund loving investing crowd.

Have you had any experience with a foreign savings account or CD? Leave your tips in the comments!

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15 Comments

  1. Evan says:

    I would be worried about losing funds to currency risk, if I really believe in a particular country i would probably be more likely to check out ADRs.
    .-= Evan´s last blog ..What is Valuable May not be Worth Anything – Which Do you Want? =-.

    [Reply]

    Austin Reply:

    Do you buy ADRs with American dollars?

    [Reply]

    Evan Reply:

    Yup! They are traded on American Exchanges. For instance Toyota (TM) isn’t an American company but you can trade their stock freely
    .-= Evan´s last blog ..Nanny Groups Suck – Leave Ronald McDonald Alone and Just Tell you Kid No =-.

    [Reply]

    Austin Reply:

    So you’re stock would be diversified, but not your currency – interesting.

    I’ll have to look into this for a future post – thanks for the heads up.

    [Reply]

  2. The idea of bouncing money from one currency to another is not for the average Joe or LeanLifeCoach. However the idea is fascinating to me, and has been floating in those deep dark recesses of my mind for months. I just checked their website. It’s a little perplexing that they limit you to so few currencies and even more perplexing that on so many of them they won’t pay interest. I don’t get that?
    .-= LeanLifeCoach´s last blog ..Financial Intervention With Aging Parents =-.

    [Reply]

    Austin Reply:

    It’s definitely not a beginner’s game. You shouldn’t be messing around in different currencies if you don’t have a strong hold on money.

    I know some countries like Japan have historically not paid out any interest so if you wanted to hold your money in Yen, you wouldn’t get interest. You would be betting on the strength of the yen vs. the dollar and expecting to earn some money from the yen going up and the dollar going down (all speculation – another dangerous game).

    More than anything, moving your money to different currencies is a chance for wealthy people to insure their wealth. If America’s debt becomes too much to handle, it’s probably a good idea to have your money in other currencies. At that point, it doesn’t matter if you’re getting interest or not. You just want something that isn’t failing.

    Scary thoughts, but it’s really fascinating to think about. Thanks for the comment!

    [Reply]

  3. MossySF says:

    In the past, I owned a Wisdomtree ETF that effectively replicated a yuan money market fund. Unfortunately, paying no interest because the bank accounts in China are also paying no interest.

    As an alternative, I’m looking at putting some money into GICs issued by government-backed insurance companies. 15 year terms at 7.5%, 20 year at 8.4%.
    .-= MossySF´s last blog ..Vacation but don’t invest in Europe =-.

    [Reply]

    Austin Reply:

    Those are some good rates. Are they guaranteed or do they fluctuate w/ the market?

    [Reply]

    MossySF Reply:

    I got more info and the rates are guaranteed. Now the rates aren’t as good as they seem because inflation has been higher for China. On the otherhand, the rates are better than they seem because the government pegs the CNY to the USD meaning somebody with USD would buy at a nice big discount.

    More detailed info of my analysis at:

    http://personalbizfinance.com/pbf/2010/04/guaranteed-insurance-contracts.html
    .-= MossySF´s last blog ..Remote office technology =-.

    [Reply]

    Austin Reply:

    Thanks for the info. This is getting a little over my head but I’ll try to figure it out!

    [Reply]

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