Traveling internationally is a great way to explore other cultures, practice a new language, or get away from what you’re used to at home, but many people prefer a more immersive experience.
Studying or temporarily working abroad allows travelers to see what it would be like living in another country without becoming a permanent expat.
Now that summer is fast approaching, many individuals are gearing up for a summer abroad, and others may be getting ready to start at an international university in the fall. While today’s global society makes it easier to simply pack up some clothes and catch a plane, there are some vital steps travelers should take to financially prepare for time abroad.
Do your research
From a financial aspect, what country you choose for your immersive experience can have a big impact on how far your money will go.
Taking the time to research costs of living and exchange rates will not only help you become knowledgeable about your temporary home, but may also make a difference when you’re trying to budget in the cost of an extra weekend excursion during your time abroad.
The exchange rate can tell you how much your U.S. dollar will buy in a foreign currency. For example, if you are studying in Spain for the summer, you will pay in euros. The exchange rate for EUR/USD was around 1.20 on May 1. This means that 1 USD is equal to 0.83 EUR. A meal in Spain that costs you €40, really cost you $48. This should be taken into account when determining how much to budget while abroad.
If you want a Spanish language immersion experience where your USD stretches a little further, a summer in Mexico City could be more financially savvy. The exchange rate for USD/MXN was 18.98 on May 1. This means that 1 Mexican peso equals 0.053 USD. That $48 spent on a meal in Spain would get you Mex$911 worth of food.
Of course, the prices in Mexico are skewed to reflect the currency and cost of living. A meal out for two in Mexico City with appetizers, main courses, wine and dessert cost an average of about Mex$853 or $45. That same meal in Barcelona Spain costs €51 or $61, according to the cost of living comparison site Expatistan.com. In this case, you would spend an average of $6 more on a dinner out in Spain than in Mexico.
If you are looking for an immersive experience, but you aren’t picky about what the culture or language, traveling to some Asian cities could be more cost effective. In Vietnam, the U.S. dollar can last you even longer. That same meal in Ho Chi Minh City would cost $22 USD.
Paying for tuition and housing abroad
Exchange rates and costs of living can also come into play when paying for tuition or housing during your study abroad.
Many American universities allow students to pay their study abroad fees directly to them in USD. However, some programs like graduate positions, don’t often include room and board. If you are studying or doing graduate research at a university abroad, finding housing might be up to you.
This is also where some research comes into play. Housing costs in Barcelona are an average or 67% higher than Mexico City. Studying in a city where the cost of living is lower could determine your ability to do other activities during your stay.
Once you’ve decided what city you are going to study or work in and have found housing through a third party, there are some ways to pay that can be more cost effective than others.
If you are temporarily in the country, you likely won’t have a local bank account. You will either have to pay your foreign landlord with a credit card, with your American bank account, or by withdrawing cash at a foreign ATM. However, these methods can lead to unexpected fees.
Most credit cards charge an international transaction fee of roughly 3%, and transferring money from your U.S. bank account will usually mean you’ll pay more in wire transfer fees. Depending on your bank card, ATM withdrawals can have foreign transaction fees.
Beyond fees, these methods usually don’t allow as much visibility on the exchange rate being used. It is always important when abroad to pay in the local currency even if paying in USD is offered. Often foreign businesses will charge their own exchange-rate markup to allow for payment in USD.
One way to help minimize international fees and gain access to the exchange rate being used is by paying through an international payments specialist like WorldFirst.
The online service allows users to conveniently monitor exchange rates and make a payment from their U.S. bank account in USD to the landlord’s foreign bank account in local currency.
WorldFirst handles the conversion and international transfer on your behalf. This service can also offer rate alerts so you can pay tuition at a time when the exchange rate benefits you most.
If you are paying the foreign university directly, a slight change in the exchange rate will impact your USD cost. For example, if you are studying at the University of Salamanca west of Madrid and your tuition is €10,000 it would cost you $12,000 at a EUR/USD exchange rate of 1.20. If the exchange rate shifts to 1.23, you would pay the €10,000 tuition at a higher rate of $12,300.
As demonstrated throughout this blog, whether you are studying abroad at an international university or taking on an immersive work experience in another country, exchange rates are an important part of the research before you leave the country.
Picking a location for your adventure based on exchange rates and cost of living can be the difference in making the most out of your experience or spending most the trip trying to manage your money.