If you are planning an overseas trip at the end of the year, save in a foreign currency and secure the current exchange rate.
“When you travel overseas you will need foreign currency to meet your expenses and the amount required may fluctuate according to the level of the exchange rate,” Anthony Grant, CEO of South Africa’s First National Bank (FNB) Foreign Exchange, said,
“By saving in currency, it cushions you against the fluctuation of the local currency by averaging the exchange rate over a period of time. This can protect you against sudden Rand weakness during the course of the year due to economic event risk.”
FNB, which urged clients to use a Global Account to start saving now in the currency of the country they are travelling to, said this way made it easier to build up enough currency to cover travel expenses.
Generally, when people travel they save money in a Rand denominated bank account, the bank said.
However, it is possible to put money aside in nine foreign currencies. In addition to this, travellers who have a Multi-currency Cash Passport can transfer funds from the Global Account and use the Cash Passport for making purchases and ATM withdrawals in US dollars, British pounds, euro, or Australian dollars while overseas.
“We have noted that travellers from South Africa are seeking greater global transactional ability. People work overseas, receive foreign investment income, make investments in many different markets and have families around the world,” Grant said.
He added: “They expect to transact overseas with the same ease of transacting locally,” he said, adding that South African residents over the age of 18 may avail an allowance of R1 million per calendar year for any legal purpose.
This, he explained, includes investments, without having to produce a tax clearance certificate. Foreign investment as a foreign capital allowance up to R10million per calendar year may also be invested offshore subject to a tax clearance certificate issued by SARS.
“Before travelling overseas, conduct some research about the country you plan to visit and draw up itinerary of the activities and allocate a budget against each activity. In this way you will be able to determine how much you need to save for your travel,” Grant concluded.