As an expat, living far away from where you grew up changes your perspective on long-distance relationships. For millions of people living abroad, keeping in touch with family in India is an ongoing process that requires not only emotional involvement but also smart financial management.
This can involve sending money every month for day-to-day expenses or saving up for a big family occasion. Some invest in property in India while they are abroad. All of this requires careful planning and smart financial strategies to manage the cross-border finance involved.
It’s easy to get lost in wanting to do the best for your family. Ultimately, there is no easy way of getting your family to look after themselves while you’re away from home. And it is hard to deal with the feeling of your parents getting older and the fact that your siblings are growing up.
So for millions of people living abroad, sending money home every month for the living expenses of their parents or family members can be a strain on their finances.
Moving money overseas is a costly affair. And when you’re stuck in the middle of a transaction, you don’t want to find out that the service you’ve signed up with for transferring funds abroad is not giving you the best deal. We look at the cost of transferring funds abroad in relation to foreign exchange rates in the section below. In the meantime, have you ever been stuck at midnight, staring at your computer screen, frantically clicking the ‘confirm transaction’ button and wondering if you’ve got the best rate?
Understanding the Everyday Financial Realities
When you first move abroad, financial planning generally focuses on getting settled into your new life abroad. That generally involves opening local bank accounts, setting up housing payments, building an emergency fund in local currency, and so on. However, over time, the financial obligations towards family in India generally increase.
Recurring family expenses, such as support for aging parents or health care, need to be funded regularly. Having a routine for cross-border payments will help your family to plan their expenses and receive the necessary support when they need it most.
Long-term commitments to support family and other obligations back home in India can become onerous financial commitments. These could be helping to pay off a mortgage for a family member’s property in a city in India, funding higher education for a sibling or relative in India, or investing personally in Indian mutual funds or real estate.
While there are various ways to structure financial commitments to support family back home in India, several approaches are valuable in certain situations. For example, regular financial commitments of high value are best handled using services that charge low transfer fees and offer favorable exchange rates. On the other hand, sudden urgent financial needs, such as a family member’s medical emergency, require speed above all else.
Finding the Right Method to Send Funds Home
Now the issue of transferring money abroad comes up for consideration. This service used to be provided via bank branches, and such transfers used to be safe enough. At the same time, however, such transfers were very expensive. The fixed costs for such transfers were quite high. On top of this, the exchange rate used for such transfers was not always very favorable, and it was not always possible to find out the exact exchange rate. Last but not least, there was always a waiting period. As a result, the process of making such transfers was in itself quite complicated.
You also have the option of sending money using modern digital platforms that have revolutionized the way we handle international finances. Online transfer services, for example, enable customers to transfer money instantly from their laptops or even their smartphones from the comfort of their home offices, without having to visit a bank branch to complete a wire transfer physically. If you need to make a reliable money transfer to India, these modern platforms enable expats to set up transfers quickly and easily, ensuring their loved ones receive funds without unnecessary hassle or delay.
So, when looking for cross-border finance options for transferring money overseas, it is essential not just to compare transfer fees, but also the exchange rates in place for foreign currency transfers.
Some services that promote zero-fee transfers could actually charge higher exchange rates, which in turn can end up costing your family a lot of money in terms of lower value in local currency (INR) for each transfer. It’s essential to get the best value of your hard-earned cash.
Navigating Regulatory Rules and Taxes
These have to be managed in both countries. As we mentioned before, the Foreign Exchange Management Act (FEMA) is used by the Reserve Bank of India to regulate incoming foreign remittances to India. There are many rules and regulations regarding this. These can be broadly categorized into 2 types of accounts that can be opened by a foreign citizen in India: External Currency Accounts (also known as NRE accounts) and Ordinary Currency Accounts (also known as NRO accounts).
Financing family members abroad requires detailed knowledge of available banking products in both countries. Expatriates with family and bank accounts in India will benefit from having two types of bank accounts in India: Non-Resident External and Non-Resident Ordinary.
Transfer of funds to Non-Resident External (NRE) bank accounts in India is allowed 100% for repatriation and is also exempt from tax in India. These funds can thus be utilized for savings in foreign currency earned by the non-resident Indians, while Transfer of Funds to a Non-Resident Ordinary (NRO) account in India is for earning income in India by the Non-Resident Indians. This can be in the form of rent for properties in India, dividends from stocks held in India by non-resident Indians, etc.
Another aspect you need to take care of is keeping track of documents for all your transactions, particularly large sums of money transferred abroad for buying property or investing. Digital receipts for cross-border payments, bank statements as well as accounting documents for foreign transactions are fundamental proof for managing tax returns, either in your country of residence or in India.
Building Strategic Habits for Long-Term Success Supporting family abroad is a marathon, not a sprint.
Create your own financial safety net and give support to your relatives in India.
Set up a recurring transfer for your family’s routine expenses. This will help your family plan their finances every month. By setting up a recurring transfer, you can ensure that your family receives the necessary funds on time. Some platforms even allow you to lock in the exchange rate and transfer funds on a specific day of every month.
Have two to three months of living expenses pre-funded in an easily accessible Indian bank account to deal with unexpected events. The funds need to be in the local currency, so you are not forced to do a last-minute transfer at bad exchange rates. Even though it hurts to keep money idle, the alternative could cost you a lot more.
One should ensure that one’s financial generosity to support family does not deplete one’s savings, retirement corpus, and health insurance abroad, and is not at variance with one’s financial goals in the host country. Ultimately, one must manage to continue to support family back home while ensuring that one’s own finances are adequately protected and continue to grow abroad.
