Most avid travelers know one of the most important things to have on hand while traveling is an emergency fund. But when you’re living abroad, the definition of “emergency” changes significantly. While it’s typically recommended that you have 3-6 months of expenses in a local savings account, living abroad it make it difficult to reach a local bank account. It might be in your best interest to have an emergency fund internationally to ensure you have a safety net when things go wrong.
What is an Emergency Fund for Expats?
Essentially, it follows the same concept of a typical emergency fund, however in this case it’s in a foreign bank account rather than a local one. Having a financial safety net can greatly reduce any financial strain you encounter, especially if you’re relying on freelance work or local contracts.
Similarly in the states where you might use your emergency fund in the case of a car breakdown, job layoff, or unexpected expense, it can be a little different for expats. Expats may experience last-minute flights home, visa renewals/fees, unexpected medical bills, stolen cards or passports, and currency fluctuations. Establishing an emergency fund abroad can reduce the stress and headache significantly.
Why a Local Emergency Fund Isn’t Enough
Having a savings account back home is useful, but there are risks relying on an account in the states.
- Currency risks: If all of your savings are in U.S. dollars, but you’re living in Europe or Spain, exchange rates can reduce your money’s value quickly.
- Accessibility: Transferring funds internationally often takes several days, and in an emergency, that delay makes a difference.
- Fees and restrictions: Many banks add on heavy wire fees, foreign transactions fees, and can limit how much you move between borders at once.
- Expat-specific emergencies: As discussed above, expats experience situations in which a typical resident might not experience such as: sudden flights home, visa renewals/fees, stolen passports, and currency fluctuations.
Maintaining a foreign fund can expedite the process of requiring funds sooner than trying to pull money from a local account in the states.
How Much Should You Save?
The general rule of thumb is to save 3 to 6 months of living expenses, but those living abroad require more. It’s possible that the savings may need to cover the cost of returning home on short notice, which could mean several thousand dollars for last-minute airfare and temporary housing. Whether you’re expecting medical costs or not, having enough to cover any deductibles or out of pocket expenses are crucial. And because exchange rates fluctuate, having a small buffer beyond the usual 3–6 months can protect you from sudden drops in currency value. The key is to save enough not just for daily life, but also for those “expat-specific” emergencies that you wouldn’t face at home.
Where Should You Keep Your International Emergency Fund?
Choosing where to store your emergency savings is just as important as how much you save. Multi-currency accounts offered by platforms like Wise or Revolut, allow you to hold and spend your money in different currencies without losing too much on conversion fees.
If you prefer traditional banking, some international banks like HSBC offer expat accounts, although they may require a higher minimum balance. The best approach is usually a hybrid strategy. Keeping part of your fund in a local account is still smart for long-term security, but having a foreign account in your host country gives you quick access to cash when you need it most.
To secure it further, consider spreading your funds across a few accounts to ensure you have flexibility no matter where you are.
Tips for Managing Your Fund Abroad
Once your emergency fund is set up, maintaining it takes extra TLC. Always look for low-fee transfer services when moving money across borders to avoid unnecessary expenses. Consider keeping at least a portion of your savings in a stable currency like USD, EUR, or GBP, since these are less likely to fluctuate dramatically compared to smaller or emerging currencies. Liquidity is also key to avoid locking your emergency fund into long-term investments, because you’ll need immediate access if something goes wrong. Finally, aim to revisit your fund at least once a year. If you’ve moved to a new country, taken on new expenses, or changed visa statuses, your safety net number may need to change.
Utilize the Peace of Mind
An emergency fund is peace of mind, but for expats or long-term travelers, it needs an extra layer of strategy. By saving a little more here and there, spreading your money across the best accounts, and planning for emergencies abroad, you’ll have a safety net to catch you no matter where you are. The sooner you put your international emergency fund into place, the less you’ll have to worry when the unexpected happens.
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