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Mouthy Money contributor Amani Keynan has spent the past year abroad in Egypt studying Arabic. Here, she shares what she has learned about the pitfalls of spending in a foreign currency.
When moving abroad, temporarily or permanently, there are a few key things to consider. For instance, will I find my favourite snacks there? And how much is everything going to cost me?
When I decided to study abroad the first thing I did was check the exchange rate. Luckily for me UK pound sterling is ‘strong’ relative to the Egyptian pound. In theory my British pounds would go far there.
But what I quickly learned after arriving is having a ‘stronger’ currency is a bit of an illusion. It is easy to think everything is cheap but it also easy to overspend.
Before flying out I researched the cheapest ways to access my money. There were a few methods to avoid extra costs when making purchases or withdrawing money, but after exploring my options I decided to get a Starling card.
Starling has free overseas spending and cash withdrawals around the world.
But things got trickier once I arrived.
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My first underestimation of my new currency was realising I’d spent roughly £30 on a bag of nuts. As you can imagine that set alarm bells ringing when I discovered what I’d done.
I made a string of other mistakes till I realised I was spending a lot more than the average international student.
I think the misconception that affected me is thinking you come from a place with a ‘stronger’ currency in a more expensive country, so no matter how much you spend, you’re always getting it for way cheaper than what you would’ve bought it for at home. But that is often not the case.
In Egypt, for example, all the branded products we’re used to at home will, without a doubt, be double the retail price compared to the UK. Buying them is a really easy way to overspend!
Once that bubble bursts you’re pushed to think about ways to help you budget better – or at least be a bit smarter with your spending.
Top tips for overcoming currency differences
From my time here I thought it was just me being clueless, falling for overpriced things. But I came across others who fell for the illusion of the currency difference.
From their feedback and my own experience it takes about two to three months to realise your expenditure is exceeding your average amount at home on random things. I don’t include anything spent on experiences in this though, because I think that’s money well spent.
If I was to give myself advice before I arrived – or anyone else that thinks they are bound to spend way less than they anticipated – I would say you should live with a currency exchange app by your side.
Unless your mental maths skills are impeccable, it’s just easier to quickly use one to figure out what something costs in your own currency – a better benchmark for whether it is expensive or not.
Additionally, I would avoid telling myself: “It’s only £10 or its only £20” but rather ask yourself “is this a smart and needed purchase?”
For some (me) that’s goes beyond spending abroad and is just good adulting.
Also, make a budget for monthly spending and stick to it. Of course allow yourself some leeway for going over, especially if you’re spending on good experiences.
If you end up not going over it though, you’ll have a little left to roll over to the next month – which I always find satisfying.
Find a way to spend your money and enjoy your time abroad that is enjoyable but sustainable. It may be that all this overspending won’t hurt you but, it just might not be the smartest move.
Amani Keynan works in communications across the asset management and institutional investing industry, but has a personal interest in watching the sharia-complaint investing sector and its development as a viable way for the Muslim community to access better savings growth.