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