Why Do You Need A Bank Account Offshore?
I recommend regularly that you have at least one bank account offshore…and that opening a bank account offshore can be the easiest first step to diversifying and internationalizing your life. But why? Why is a bank account in another jurisdiction such an important thing?
First, a clarification. When I speak about having a bank account “offshore,” I’m talking about a private banking or investment account. This isn’t the same thing as a local bank account, which you also need if you’re planning to live or retire in a new country. You’ll use this local account for paying local bills and covering local expenses. Plan on living in Panama? Then you need a bank account in Panama, out of which you can write checks to cover your electric and phone bills, for example.
Living in another country, you could get away without this kind of local account. You could pay your utility bills in person, in cash, to the phone or electric company directly or at the little kiosks set up around town to accept these payments. You could pay your rent in cash delivered to your landlord. You could run your entire life out of an ATM. That’d be possible but not very efficient. Hassle-factor aside, the ATM fees would add up.
You’ll also need a local bank account to deposit any local check–from the buyer of a piece of furniture you decide you no longer want and sell locally, for example, or, say, for consulting work you do locally. Again, you could simply cash any local checks you receive and use the cash to cover expenses out of pocket, but, again, that wouldn’t be the most efficient approach.
In addition, you’ll need a local bank account in any place where you hold property, whether you’re living there or not. As a property owner, you’ll have local bills to pay, and, if you’re renting the place out, you’ll have revenue to deposit.
Those are practical reasons for having a local bank account in another country. However, when I recommend that you think about opening a bank account offshore, this is not necessarily what I’m talking about.
Big Picture Thinking
Thinking bigger picture, having a bank account offshore allows you to get some of your money out of your home country and out of your home currency. If you’re worried about the direction of the U.S. dollar, for example, then having a bank account in Uruguay where you could hold Uruguayan pesos, Brazilian reais, or euro could be a good idea. Or an account in Belize, Panama, Singapore, Hong Kong…
You can also use a personal offshore bank account to invest in stocks outside your home country (specifically, for Americans, outside the U.S. stock markets), giving yourself greater investment options and diversity. Set up your investments to provide some income outside your home currency, and you hedge against possible negative currency fluctuations.
If you have an offshore corporation, it’s even more important to have not only one offshore bank account but at least two, in the name of the corporation. I recommend, in fact, that you have two accounts with two different banks in each jurisdiction where your corporation is banking, especially if you’re an American. Should one of the banks decide to drop your corporation as a client, you’ll have another to fall back on.
But that’s getting ahead of ourselves. Maybe you don’t need an offshore corporation. Not everyone does.
But I maintain that, in the current climate, everyone does need a place to diversify capital and assets beyond a single jurisdiction and beyond a single currency.
Having an offshore bank account provides for this diversification. It allows you to move a bit of cash out of your home country, to set it aside, perhaps in a different currency, in case of emergency.