Finance Basics

There are many ways to send money from one country to another:

• Cash – You can send cash from the sending country, by using one of many different money transfer organisations, and your family can pick up cash in the country that they are in.
• Card-to-card – You can send your money by using a bank card and the person you’re sending to can collect the money in cash at an ATM or the money can be spent in stores where the card is accepted.
• An International Money Order (IMO) – Your bank will give you an international guaranteed cheque and your family can then cash the cheque at their bank or pay it into their bank account.
• Bank to Bank Transfer – If you have a bank account you can transfer money from this to a bank account in another country. The method used is often called a SWIFT transfer – this is the name of a transfer system. New bank to bank transfer systems are also steadily launching, such as Ripple’s real-time gross settlement (RTGS) system which can enable real time international cross-border payments between banks.
• Online – Many money transfer companies now let you transmit through the internet (online). You need to set up a special account and then the company will send the money to your friend’s bank account or make it available for the money to be collected as cash.
• Mobile – sending money through mobile phone, and smartphone is an area that is developing all the time due to new technology and increased smartphone ownership and usage. For example, it is possible to send money for collection from many countries into the Philippines Globe GCash, or Smart Padala International mobile wallets. When received this money can be collected as cash at many cash pick-up centers, or it can be received directly into a mobile wallet and be used for paying bills, loading mobile airtime, online shopping or for withdrawals at ATMs.
• If I send an amount in the currency of my home country, how much will actually be received by my friends or family and in which currency? The amount of the currency will be converted depending on the country of the recipient. The amount will be converted using the foreign exchange rate of that current day to its equivalent amount. The amount they will receive will be the same, but in some instances depending on the organization, they will deduct an amount as part of their service fee. Please ask this to the partner/organization you are going to use.

The amount you send will be converted using the foreign exchange rate provided that day to its equivalent amount into the receiving country’s currency. In addition, depending on the money transfer service you use, a fee will be deducted from the total amount. SaverAsia will provide you with the fee, exchange rate and the final expected receive amount, before you choose a service.

There are several components to the true total cost when sending money.

• Transfer fees: This is the most visible cost and can differ significantly among different companies. This fee usually represents the charge the sender pays and can vary depending on the amount sent.

• Receive costs: Receivers may sometimes be charged additional costs when receiving money. Funds sent for cash collection at a Money Transfer Operator (MTO) or MTO agent will not normally incur additional charges. Money received in a bank account can sometimes be subject to additional foreign exchange or other bank charges that the sender has no knowledge of before sending. These costs will be taken off of the final receive amount. Further receive costs can include charges when cashing out at a mobile money agent.

• Exchange Rate Fee: Normally, when calculating the exchange rate an organisation adds a “margin” – often called a “currency conversion fee”. This results in them making additional money from your transaction and is normal practice in the money transfer and banking industry. This is often a hidden charge, so you are advised to compare the rates offered by different providers

You should contact the company that you sent the money through and ask them to determine where it is. You should also make sure that the person you have sent the money to has contacted the organisation that should pay the money to them. If the money can still not be found, you should contact one of the organisations below.

Always make sure to keep your transaction slip as reference in case a problem in the transaction arise.

Money can be collected through partner/organization pay-out centres that are available for the recipient to visit. Make sure that the transaction number/details are ready to be able to verify and validate the collection.

Foreign exchange rate refers to the value of a foreign nation’s currency in relation to the home nation’s currency. When you are sending money overseas, the company transferring the money will do a  calculation to convert the currency you are sending into the receiver’s currency.

An exchange rate is a calculation used by the company transferring the money to convert the currency you are sending into the receiver’s currency. Exchange Rate Fee: Normally, when calculating the exchange rate an organisation adds a “margin” – often called a “currency conversion fee”. This results in them making additional money from your transaction and is normal practice in the money transfer and banking industry. This is often a hidden charge, so you are advised to compare the rates offered by different providers.

Banks offer different services to meet the different needs of their customers. You will need to understand the terms and conditions of the bank account or service to determine if it is right for you.

When you have found a bank account that suits your needs, check what documents the bank requires for opening a bank account. The documents typically needed to open an account include:

• Proof of your right to be in the country – e.g. your residency/work permit

• Proof of employment, e.g. work visa, letter from employer. Check the exact policy with the bank you choose

• Photo Identity e.g. passport

• Minimum deposit amount set by the bank. Check the exact policy with the bank you choose

Some banks may ask for more:

• Proof of address e.g. rental contract or utility bills

• Passport-sized photographs

If you need guidance on how to open a bank account, check our SaverAsia Financial Resources at www.saverasia.com to find migrant friendly services in your country.

Financial literacy is the ability to understand and manage your money. It is important because it provides us with the knowledge and skills to effectively manage our earning, spending, budgeting, saving and borrowing, and enables us to make the most of our money.

Financial literacy can help those working abroad and their families to:

• Make informed choices about life goals and ways to achieve them through migration.

• Enable men and women alike to set and achieve short- and long-term financial goals at the destination and in the home community.

• Improve savings capacity by using a budget.

• Use financial products and services with confidence.

• Develop risk management strategies.

Search SaverAsia Financial Resources to find financial literacy resources and training in your country.

Bank cards are cards given to by your bank that allow you to make banking transactions electronically. There are different kinds of bank cards, including ATM cards, debit cards and credit cards.

A debit card card allows you to get cash from your account using a special machine called an Automated Teller Machine or ATM. In addition to withdrawing cash from your account, you can use an ATM to find out your account balance, transfer money from one account to another, and make deposits into your account. Each bank has its own network of ATMs but you can use your bank card to withdraw cash from any ATM whether the ATM belongs to your bank or not. However, your bank may charge you a fee each time you use an ATM that is part of another bank’s network.

Additionally, a debit card can be used to pay for goods you purchase in many stores. You must have the money in your account at the time of purchase. The amount of your purchase is deducted from your account immediately. You will receive a regular statement from the bank, showing the total amount deducted from your account and your remaining balance.

In some countries, some banks may only offer ATM services.

Borrowing means using someone else’s money instead of your own.

Borrowing comes with the responsibility to repay, and to repay on time. Decisions on borrowing should not be taken lightly and should be researched extensively before undertaken. Check carefully terms and conditions of the credit, loan or bank overdraft before committing to it.

Borrowing money can sometimes be a good decision, but can also lead to problems and harmful situations. Borrowing comes with the responsibility to repay, and to repay on time. You may also have to pay an additional fee to the lender for use of their money, known as interest. If you fail to repay, or even if you are late, you will likely face negative consequences, including additional costs and the possibility for legal trouble.

Before making the decision to borrow money, ask yourself these three questions:

1. Do I absolutely need to use debt to finance this purchase?

2. Can I easily repay or pay the monthly payments on this debt?

3. Am I comfortable with the proposed terms and conditions of the loan?

If the answers to those three questions are yes, then you should consider taking out debt. If not, it would be best to wait for a while and save your money so that you can finance the purchase without debt. To be clear, in nearly all situations, it is better to use your own money for a purchase and not take on any debt.

Shop around and ask questions about credits and loans to find the best deal and be informed. Try to avoid high interest loans and consider accredited financial institutions rather than local moneylenders.

In summation, debt is just like any other tool, extremely useful if used responsibly but very harmful if used irresponsibly.

Credit is borrowed money that can be used to pay for goods or services. This borrowed money needs to be paid back, with interest, at a later date. Credit comes in many forms including credit cards, store cards, bank overdrafts, and loans.

Credit card is a bank card that offers instant credit to the card holder. When you use a credit card to pay for goods, you are actually borrowing money from the bank which issued the card. Instead of deducting the amount of each purchase from your account at the time of purchase (as happens with ATM and debit cards), the bank will pay the vendors and send you a credit card bill every month showing all of the purchases you made with the credit card. If you do not pay this bill within 30 days, the credit card company will begin charging you interest on the unpaid balance.

Credit cards are a useful form of short-term finance that can be used for purchases. They can provide a useful means of finance for everyday purchases but if they are not paid on time and in full, using them can quickly result in the user getting into debt. It is very important when using credit cards to only spend what you know you can quickly repay.

Store cards are available in many countries. They may not be described as such, but store cards are effectively credit cards that can only be used in one store (or network of stores).

An overdraft is another form of short-term finance. An overdraft means that the bank allows the account holder to continue withdrawing money even when the account has no funds in it. Overdraft fees can be incurred when the bank needs to cover the difference between what you spent and what you have.

Your bank account may already include an overdraft facility, or you may be able to apply for an overdraft as and when you need it. These are arranged overdrafts. Unarranged or accidental overdrafts occur when you withdraw too much money from your account and end up with a negative balance.

Whether arranged or unarranged, an overdraft always means that you are in debt to your bank. To avoid high interest rates which can increase the size of the debt, you should pay back the money you borrow as quickly as you can so as not to be in debt and waste your money on interest.

Taking a loan means borrowing money from a financial institution, such as bank, microfinance institution or credit union, or a local money lender. Usually, a loan is a lump sum of money that is repaid over a fixed term. The borrower incurs a debt and usually has to pay interest (percentage of the amount borrowed) on the debt until it is repaid, as well as paying the principal (full initial amount) of the amount borrowed.

Loans can be provided for many different purposes, e.g. buying a car or home or for covering migration costs. Payday loans, short term cash advances that allow the borrower to cover expenses they might not otherwise be able to while they wait for payday, are increasingly popular but come with very high interest rates making it very difficult for the receiver to pay back.

The cost of a loan will vary depending on the type of loan you seek and the lender’s policies regarding interest rates, fees, savings requirements, guarantors and collaterals. Before you take a loan, compare the costs of the loan you need among several lenders.

Interest refers to the amount of money that the borrower pays to the lender, in addition to the loan amount, for use of the money of the lender.

When considering a credit or loan, shop around and ask questions about interest rates and other loan terms to be informed. Try to avoid high interest loans and consider accredited financial institutions rather than local moneylenders.

An item of value that the borrower will have to give to the lender in case the borrower is unable to repay the loan (could be land, vehicle, savings, etc.). Never use essential assets, such as your family home, as a loan collateral, as you may lose it in case you cannot repay your loan.

A person who will repay your loan in case you cannot pay; this person may be required to co-sign your loan agreement with the lender.

Tax is an amount of money that you must pay to the government so that they can provide public services. Taxes can vary and may be paid to different branches of government – this includes national, state/province and local taxes.

The most common tax that you will pay when you are working overseas is income tax. This will vary depending on your location and how much you earn.