Category archives on : Expat
Education Planning for Expats
If you have decided to work abroad and become an expat, you are probably looking forward to the many adventures ahead. But one thing you might have to consider with all seriousness is your children’s education. While children will undoubtedly benefit from the experience of being entrenched in a new culture, it can be a difficult decision-making process when it comes to their formal education.
There are many variables to consider when planning your children’s education as an expat, and the opportunities available will depend on what your priorities are and how well you plan ahead.
DECIDE ON WHAT’S IMPORTANT
Different families have different priorities, which will be reflected in the choices made in regards to a child’s education.
Expats in China have several options. For one, they can choose to send their kids to a local school. If this is the front-running option, it might be because an expat feels that children should become fully immersed in the surrounding culture. While this can be daunting for some children, others thrive in this “sink or swim” scenario. Usually, a child’s age makes a difference, and the younger they are, the easier it will be for them to adapt.
Another option is to send children to an English-speaking, international school if the city offers one. There are some unique benefits to international schools, and the main one is that children will be introduced to students from all around the world while being taught in their native tongue, which can ease some of the anxiety that might come with a new school in a new country. In addition, these schools often attract bright teachers and offer unique programming.
Expats can also consider sending children to a boarding school abroad, either back to their home country or elsewhere. If children are sent back to the country from whence they came, they will not need to go through as much of an adjustment period.
Finally, homeschooling is another option. As long as proper resources are available, some children thrive in the extraordinary opportunities of home schooling.
PLAN YOUR FINANCES
Education Fee planning is one of the reasons why it can be difficult to decide what to do about children’s education. The financial responsibilities associated with the different options can be daunting. But if you plan ahead, you can ensure that the costs will be covered.
There are often higher fees attached to international students with any option that you choose (except home schooling, of course), but fees also tend to vary greatly. For example, an international, English-speaking school in your new home country might have much higher tuition fees than a boarding school in your previous country, but boarding school comes with the costs of travel and housing. And just because the cost of living might be lower in your new country of residence, like China or somewhere in the Middle East, choosing an international school might prove to be rather costly as tuition fees can run high.
Local schools and homeschooling are generally the most affordable option but should be weighed against how your children will fare in those environments and the quality of education they will receive.
It’s important to take the time to research and plan ahead financially so that you are not caught off guard once you settle into your new home.
If the costs of sending your children to school at a top international school or boarding school are proving difficult to manage, there are ways to lessen the burden. You might consider sending your child to a school with high fees for only a few years, like the last three years of high school, for example. Or some parents find that the first few years of adolescence are an important time for the best quality of learning and might consider sending a child to an international or boarding school from the ages of 13 to 17.
Another thing to consider is that there are often scholarships and bursaries available for international students who excel in a particular sport or a subject. If your child has a passion or natural talent, it might be worth investing in lessons early on.
PREPARE YOUR CHILDREN
A new school is tough for a child of any age, especially in a new country, so it’s a good idea to help ease their nerves before the first day. For example, you can see if there is a meet-and-greet day so your children can become familiar with the school, other students and teachers. If there isn’t, you might consider arranging one yourself.
You can also discuss the potential ups and downs of the school year with your children to prepare them for the difficult times but to also get them excited. Or you can have a celebration before the first day to emphasize the exciting opportunities ahead.
It can also be important for children to feel involved in the decisions about their lives, so you might consider allowing them to help shop for supplies or letting them make a choice about which extracurricular activities or clubs they’d like to join.
All in all, the benefits of an expat life, especially for children, will pay off in the long run, even if there are a few bumps along the road. There is no replacement for the lessons learned while traveling and being exposed to new cultures and adventures. While there are some tough decisions to make regarding your children’s education, with the proper research and preparation, you can rest assured that you will be setting your children on an incredible path in life.
Distribution of International Schools in China – Infographic
Distribution of International Schools in China
A look at the distribution of International schools in China.
Expats In China Infographic
Bluestar AMG explaining Expats in China.
Why Does The US Tax Expats?
We live in a time when globalization defines the world in ways we’ve never seen before, and there has never before been an era when the economy has been more interconnected. With this new configuration comes new opportunities, such as chances to work abroad and advance one’s career in other countries. Some will ask the question ‘Why does the US tax Expats?’.
Becoming an expatriate, or expat, is a choice that many Americans make. While parts of the process of packing up your life and moving around the world are exciting and easy, there are several tough decisions to make as well. The key to a successful transition that works for you financially is to ensure you are informed about the unique financial and tax laws that American citizens living abroad must adhere to.
US expats can be found in all four corners of the globe, with Asia being an especially popular destination, where many settle in China (Beijing or Shenzhen), but also in Japan, South Korea, Malaysia, Vietnam or India, to name a few.
One interesting anomaly about being a US citizen living and working overseas is that they are still subject to very strict American tax laws. Namely, the United States is only one of two countries (the other is Eritrea in Africa) in the world that implement citizen-based taxation, rather than a residence-based system.
This law has several implications for American expats, some more serious than others. To understand citizen-based taxation, you have to go back 150 years in American history when Congress wanted to penalize Civil War draft dodgers living abroad. The law went through several changes and in 1916, it was deemed that income taxes would be paid by “every citizen of the United States, whether residing at home or abroad.”
The US is Serious About Their Tax Law
Despite many American citizens facing double taxation — when they are paying taxes in their country of residence and their country of citizenship — the debate usually focuses on how much earnable income should be made before double taxation kicks in. Currently, Americans are technically allowed to earn up to $106,000 before paying taxes, but since 2012 when a law called the Foreign Account Tax Compliance Act, or FACTA, that sum also includes things like savings and pension. For many people, especially those nearing retirement, that is not money they can afford to be taxed twice on.
No matter what you earn abroad, even if it is well below the granted $106,000 amount, American citizens must file their tax returns in the US every single year. On top of that, the US government puts the onus on banks abroad to identify and report which of their clients are American to US tax authorities or else face hefty fines. The penalty for failing to report American clients can be as high as 30% of all a bank’s dealings with the USA. As a result, many Americans living abroad are being denied bank accounts so that the bank doesn’t have to deal with the hassle, which creates a serious conundrum for people who simply want to live and access their money to do things like pay their bills.
Why The US Tax Expats
Many US citizens ask why they should be paying taxes to a country in which they are not using any of the goods or services that taxes provide like roads and schools. While the law was originally meant to deal with wealthy citizens hiding their money in offshore accounts and avoiding taxes altogether, the consequences of FACTA affect regular US citizens who are living and earning, and paying taxes, in other countries.
Since the stricter FACTA laws have come into place, there has been a rather dramatic increase in American citizens renouncing their citizenship as they feel forced into a position where they have no choice but to do so. But even that route is wrought with difficulty — since there is such a backlog of paperwork for renunciation, the fees to complete the process have gone up nearly 40 percent to over $2,000. Not only that, but everyone who renounces has their name published on the Federal Register, a move that many Americans feel shame over. The USA is arguably one of most patriotic nations in the world and renouncing one’s citizenship is a choice few make lightly, and it can come with a heavy emotional consequence.
Therefore, it’s important to take control of one’s finances and to make smart and informed decisions about where one’s income is going. Financial planning for expats is now a necessity more than ever, in order to learn what kind of investments can work for you and which can give you more autonomy over your income and your taxes.
Taking control of your finances by making informed decisions about things like offshore investing is one of the most important steps any expat can take. If you are looking for advice or information on the best investment opportunities, a financial planner for expats can help.
BlueStar AMG makes it their mission to help American expats find the path that is right for them and their particular financial situation. Contact Bluestar AMG right now for more information.
Busting money misconceptions for expats
When you decided to become an expat, your finances were probably one of the main priorities for your attention. You had to weigh up whether you’d be better off financially abroad or back at home, and consider factors like medical insurance and school fees in your deliberations. But BlueStar AMG has found that many people who’ve started a new life in a foreign country allow money misconceptions to lull them into a false sense of financial security.
Lots of expats are paid substantially higher salaries than they would have received at home, while they may be getting an attractive package including health insurance or school fee subsidies. However, while things may look bright financially, it’s always vital not to rest on one’s laurels. No job is ever guaranteed in the long term and incentive packages can come with a shelf life. So it’s important to have a contingency plan for the future. This may include paying into a savings fund, investing in the stock market or putting your expendable income in other assets like property.
Think smart when it comes to saving money
Canny expats also know that they should live to their means. Many people rightly take advantage of being on a new continent, using their spare time eating out, visiting tourist hotspots and travelling to exotic locations. But it’s really important to make sure that you’re not being too frivolous with your money. We suggest saving some cash every month and considering other ways you can invest a portion of your income on a regular basis. Getting professional financial advice from the experts at BlueStar AMG will help you choose the right savings plan and investments for you. Once this is done, you can enjoy your hard-earned money with abandon!
Another misconception amongst expats is that there’s plenty of time to save up for children’s school and university fees. We all know that it can cost a small fortune to educate our children in Asia, but many people still don’t prepare for this in advance. It doesn’t matter if your child isn’t even walking yet – it’s never too early to start saving for their education. The sooner you start, the less you’ll need to find each month and the more you can save in the long run. You’ll thank yourself for it in years to come.
Meanwhile, some expats choose to gamble on their finances by not taking out life insurance or critical illness cover. They may think that, because they’ve never been seriously ill before, nothing will happen to them in the future. Indeed, they may look at people who’ve been struck by cancer or other life-threatening illnesses and think, “it’ll never happen to me”. But, unfortunately, none of us can say that with any certainty. And when you’re in a country without free healthcare, it’s absolutely imperative to make sure you’re covered by insurance. Without a detailed policy in place, you could be faced with the biggest bills of your life, right at a time when you need to focus on your health and nothing else.
For the very best advice when it comes to your finances, call on BlueStar AMG. We’ve got offices across Asia, with friendly teams waiting to take your call. For more information, visit www.bluestar-amg.com and follow us on Twitter for updates about the world of investments and savings.
Photo credits: SF Brit, 401kcalculator.org
Saving for Your Child’s Education? Look Offshore for the Best Investment Plans
Our years of experience in the industry and knowledge of the worldwide marketplace have given us a real insight into the benefits of both domestic and international policies. We would always recommend for expats to look beyond China when setting up savings plans, especially when it comes to something as important as their children’s university education.
Taking out an investment policy within China means you will have to use Chinese yuan (RMB) as your currency. That’s fine if you’re planning to stay in the country long-term, but as an expat it’s likely that you will return to your home country or move on at some point. If the latter is the case, taking your savings out of China could prove problematic, as you will have to contend with stringent banking controls and foreign exchange restrictions.
It is much more straightforward to hold your savings in a currency or currencies of your choice overseas; you’ll have a greater level of flexibility if your circumstances change. Most expat children choose to study at universities outside of China, so holding a policy using RMB could be extremely limiting down the line.
A young investment climate
While China is one of the world’s most rapidly-growing nations, its stock market and investment plan portfolio are both still relatively immature when compared to more established countries such as the UK and the US. Therefore, it’s advisable to choose savings plans outside China as you’ll benefit from greater stability for your money.
This is vital when you have a clear, long-term financial goal such as saving for your child’s education. Of course, all investment comes with some risk, but with careful research you can guard against some of this uncertainty to ensure you’re getting the most for your money.
Don’t put all your eggs in one basket
Choosing to keep your money in China will limit your investment options considerably, as domestic policies are heavily focused on the local market. By looking internationally, you’ll have access to an enormous range of products and services, ensuring that whatever your budget or savings needs, there will be a policy to suit you.
It’s a cliché, but when you do your research and get the right advice; the world really is your oyster when it comes to finding the best deals. As any savvy investor knows, diversification is the key to a successful savings strategy.
Offshore investments offer lots of benefits
There are a multitude of other benefits for expats who invest internationally, including increased levels of investor protection and greater tax efficiencies. Working with an international brokerage also means there are no language barriers to overcome, while having your paperwork completed in English will ensure transparency and peace of mind when it comes to control of your investments.
The importance of planning ahead
Wherever you decide to put your money, the most important thing is thinking long-term about your children’s future needs. Getting a degree is one of the most expensive endeavours a person can achieve – and the costs are likely to rise even further by the time your offspring head off to university.
Did you know that the average cost of a four-year course in the US is just under USD 125,000, as high as HKD 495,000 (around USD 64,285) in Hong Kong, and GBP 33,000 in the UK (around USD 54,780)? Factor in the very likely increase in fees, and you could be looking at close to USD 300,827 for a course in the US in 18 years’ time. What’s more, these staggering amounts are for course fees alone – meaning that costs like accommodation, textbooks, food, or spending money still need to be accounted for.
So pat yourself on the back for putting plans in place now. With the right advice, you’ll be safe in the knowledge that you’ve chosen the best offshore investment plan for your circumstances, giving you peace of mind that you can support your child as they work towards achieving their educational goals.
Mark Matlaszek has lived in China for over ten years and is the director of BlueStar AMG in Beijing. He has been helping expat families plan for their children’s future education costs for the last decade, as well helping parents plan for their retirement. For more information on the company, visit www.bluestar-amg.com. If you would like a free consultation, contact Matlaszek directly at [email protected]