Published On: Fri, Aug 16th, 2019

Top nine reasons why people send money abroad

Every year hundreds of billions of dollars worth of international money transfers are sent worldwide. Moving money across borders is becoming easier and more cost effective. Here is a look at the top few reasons which are fueling the rapid growth in the volume of international money transfers.

  1. Business

In dollar value terms the largest mover of money between nations is business. Payroll, materials, suppliers and marketing costs can be substantial. A majority of manufacturing businesses import production machinery from abroad. Service oriented businesses such as overseas contact centers get paid through international transfers. Business leads all of the other causes of international money transfers by a wide margin.

  1. Tax avoidance

Do you know how many US companies have offices in the Caribbean? How about Panama? A tiny island group known as the Caymans is one of the largest financial centers in the world. The reason for setting up offshore companies in these locations is simple – they don’t ask you to pay any taxes. Comprehensive business privacy laws ensure that banks in these places don’t share financial reports with any authority, not even their own government. A person of any nationality can setup an office in a tax haven and conduct business all over the world, legally. The volume of wealth which flows to and from the big five tax havens of the world is stupendous.

Photo/donkeyhotey donkeyhotey.wordpress.com

  1. Leisure

We love to travel to other countries for holidays. All of those hotel stays, taxi rides, car and boat rentals, air charters, tasting tours, safaris, excursions, tickets, gourmet meals, cocktails, spa treatments and massages must be paid for in local currency. That is why we find an abundance of money changers at almost every touristic destination. However, the smarter option is to use a reliable and friendly money transfer service to avoid the inconveniences and risks of carrying and converting cash at less than optimal exchange rates.

  1. Shopping

We don’t always remember to pack our flip flops, beach towels and sunscreen. When holidaying abroad some of us like to bring back gifts for loved ones as well. Occasionally we also treat ourselves to a little spree here and there. And then there are those who plan their entire vacation around shopping. Shopping addiction (compulsive buying disorder) is actually a medical term used by psychologists. Some people are known to pick their airline based on the luggage limit! Regardless of the motive for shopping, sellers of goods and services do not usually accept foreign currency. Shopping expenses incurred overseas are one of the leading causes for moving money internationally.

  1. Family

More than fifty million people worldwide currently live and work outside their home countries. Collectively they send more than $ 600 billion in remittances every year to meet the financial needs of their families. Remittances comprise more than 30% of the annual GDP of some of the smaller developing nations. This steady overseas flow of money makes it possible for millions of dependents to have access to housing, education and healthcare, and to pay their bills.

  1. Education

Getting a college degree can be an expensive proposition, and even more so when the goal is to get it from a reputed foreign institution. Not just the tuition but the cost of living can often add up to a significant number. Whether funded by self, family or the banks, overseas education is an important cross border money mover.

  1. Property

An almost ubiquitous goal among expat workers is to own property. Real estate however, is no small investment. Expats commonly remit significant portions of their overseas earnings toward the purchase of property, mortgage payments or home loan repayments. As we know the process takes several years and the amounts add up. Residential real estate is one of the best investments for expats due to the relaxation on taxes and interest rates which many governments offer. Moreover real estate is an asset class which usually appreciates over time.

  1. Immigration

When people move across borders for good, they like to take all their wealth with them. A permanent relocation of an international nature also involves selling property and other large assets which cannot be taken along. Sales of such a nature often result in a significant corpus to be moved across an international border. As immigration becomes easier and more streamlined, the volume of money moved in relation to immigration grows worldwide.

  1. Payments

Businesses and individuals often find it convenient to source providers of goods and services online. The popularity of online shopping is immense. Amazon, Alibaba and a dozen other online stores are now household names. Hundreds of thousands of freelancers bill clients for millions of dollars every day on sites such as Upwork. Fintech has made transactions so streamlined that international payments are now incredibly commonplace.  We scarcely realize it when we pay for something, that another person in another place may receive it in a different currency.

Author: Sharon Kalipai

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