When the restrictions are lifted, and people can again move freely after the COVID-19 pandemic, some young professionals and graduates will be seeking experience in foreign cities, hoping to fire up their careers and see the world.
“A number of young professionals in their early 20s are looking at working overseas, particularly those leaving university,” says Citadel Risk Advisor, Shane Murphy. “The likes of Deloitte and PwC, for example, are offering accountancy articles in London for South African graduates.”
If you are among this cohort of young, mobile and globally-aspirant professionals, what financial considerations should you bear in mind when heading abroad to gain work and life experience?
First and foremost, says Murphy, make sure you have a working South African bank account with sufficient money in to cover any existing debit orders. “Even if it’s a case of making sure that you’re paying R200 per month in order to insure a portion of your income through income protection, make sure you can cover that debit order and keep it in place. The same goes for your medical aid. Remember these are insurance products, and if you don’t pay you lose the coverage.”
This also applies to insurances like life cover, which should be kept active as an additional protection. “For the most part, South African life insurers will pay out claims anywhere around the world, except for high-risk jurisdictions and certain other exclusions,” explains Murphy. “Granted you are insuring your income in rands, but it will pay out in London or New York if an unexpected event prevents you from working and earning your normal income.”
This is an important peace-of-mind consideration, he says, noting: “It is important to make sure that this cover continues, even if you move abroad for a while, as you never know how your health might change. Ideally don’t cancel the cover, since when you return home you’ll have to go through the underwriting process again. Even if you reduce your premiums to the bear minimum, it pays to keep the cover going.”
When in doubt, Murphy suggests speaking to an expert about what you should be doing and specifically seeking guidance about the tax implications.
Here are a few financial considerations for young professionals heading abroad to gain work experience:
- Appreciate that you’ll pay around R2000 a month just on transport and tube fares in a city like London. Budget accordingly. You never want to be caught short at the end of the month.
- Things are more expensive in big cities, with the Economist Intelligence Unit ranking Singapore, Hong Kong, Osaka, New York and Paris as the priciest. “So, again, you need to budget carefully to ensure that you can still put money away each month,” says Murphy.
- Savings accounts abroad offer very little interest, but you should have one in place for your emergency savings. When it comes to savings, however, you could consider a pound or dollar-based exchange traded fund (ETF) portfolio for the excess.
- Working abroad is a wonderful opportunity to save in international currencies like pounds or US dollars. “If you can, save. This will give you a significant head start over your peers if you convert it back to rands,” says Murphy.
- When you return to South Africa, keep your savings abroad. The money you are earning in a country like the United Kingdom (UK) will be taxed there, says Murphy, so any post-tax pounds are yours to do with as you want. “You can leave these funds in the UK, for example if you chose to do so. And these funds will be great for future travelling, as well as hedging against the rand, providing you with global diversification and options later in life. So ensure that you keep this account open,” says Murphy.
Finally, Murphy suggests speaking to a financial expert about considerations such as tax and, if you decide to make your life oversees, the technicalities of emigration. When in doubt, he says, ask – you have nothing to lose and everything to gain.