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What is the Best Foreign Currency to Keep Your Savings In?

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How holding money in a foreign currency can diversify your savings, but which currency is the best?

An important life lesson is learning how to save.

Your financial security is important, so you need to save and learn how to handle your finances. One way to diversify your savings is to invest in foreign currencies.

Piggy bank with money
Image by Damir Spanic on Unsplash

Why Save in a Foreign Currency

Saving your money in another currency is an option you can make if you’re willing to take some risk.

One good reason for saving your money in a foreign currency is the stability of certain currencies. For example, you may live and work in a country that has an unstable currency or its value is not that great. In this instance, it will be a good strategy to exchange your money and save it in a stronger, more steadily performing currency.

In fact, this is the primary reason many people put their money in another currency other than the currency of the country where they live or work.

Foreign Currency Savings

Before we dive into the question of the best foreign currencies to put your savings in, let’s talk about foreign savings accounts.

If you plan to put your money in another foreign currency you’ll most probably need to open a foreign savings account. This is a safe way to keep your money and it has the added benefit of earning interest.

Typically, a foreign savings account will enjoy higher interest rates compared to a savings account under your country’s currency. This makes the thought of saving your money in a foreign currency look quite attractive.

But you have to consider the fact that devaluation of a currency can also have an impact on your savings and sometimes any value you acquire from interest may be eaten by the currency exchange rates.

You also need to think about minimum deposits because most foreign currency savings accounts usually require a hefty minimum starting deposit.

Another factor that you need to know is that you’ll have to pay a currency exchange fee if you want to change between your original currency and your preferred foreign currency, and vice versa.

This could mean that you have to pay fees twice – once to convert from your currency to the foreign currency, and then when you convert the foreign currency back to your original currency.

The Best Foreign Currencies

So what are the best foreign currencies in the world that you should consider investing your money in?

US Dollar

Any list of attractive foreign currencies to invest in will never be complete without mentioning the US dollar. Typically, the US dollar is a safe bet if you want to invest in a foreign currency that you’ll be familiar with.

The US dollar is a good choice because it is a Federal Reserve note. With the USA enjoying almost $2.2 trillion in its Treasury debt and coupled with securities at $1.5 trillion, you can see why it is an attractive currency.

Norwegian Krone

Another safe and good-performing currency that you should consider is Norway’s currency, the krone.

Why is the Norwegian krone such a great currency to invest in? Well, for one, Norway is one of the few countries in the world with no net debt.

Another great quality of the krone is that it is not tied to another foreign currency. It stands on its own so it’s not going to be affected by the poor fiscal performance of another country’s currency.

Singaporean Dollar

Singapore’s national currency is also worth paying attention to. The country is one of the top economic performers in the world and is also one of the top global business centers in Asia.

The country’s performance economically contributes tremendously to the stability and great value of the Singaporean dollar.

Another reason many people are setting their sights on the Singaporean dollar is another significant reason. The country’s relaxed laws make it a good place to hide money and not have to pay taxes.

Euro

Another solid currency that should be on your shortlist of the best foreign currencies to put your savings in is the euro.

The European Union is performing quite well economically. It is even predicted to perform better than the United States in terms of recovery from the effects of the global pandemic. There is also a prediction that for the first half of this year, it will strengthen in value.

Currency analysts recommend that if you are going to put your money in a foreign currency then the euro should be at the top of your list.

Chinese Renminbi

It’s no secret that the People’s Republic of China is now a global economic powerhouse. The country is changing its tactics by lessening its reliance on exports to fuel its economy and focusing more on domestic consumption. Nevertheless, its economy remains to be one of the strongest in the world.

Another effect of changing its focus on domestic consumption is that it will only help to bolster the value of the renminbi. Couple this with a huge foreign reserve and an astounding trade surplus and the renminbi should be worth your consideration.

Korean Won

Talk about high-quality manufacturing, especially when it comes to tech goods and you’re bound to hear South Korea mentioned. The country has become synonymous with electronics and industrial keep its value goods that have gained a global appreciation and audience.

The strong performance of South Korean companies and their enviable position on the world stage means that the Korean won has become a strong currency.

Another factor that keeps the won strong is South Korea’s great fiscal standing. With a GDP growth of 3.3 percent, the country is strong enough to support its currency and.

New Zealand Dollar

The country of New Zealand has been in the news lately because of strong government leadership in facing the pandemic and for largely achieving what so few countries have done—win the war against COVID-19.

This confidence can also be transferred to its national currency. The New Zealand dollar is one of the strongest and safest in the world right now. The country is even planning to raise interest rates to further bolster its reserves. It also has instituted many reforms that will only help to strengthen the NZ dollar.

Summary

Putting your savings in a foreign currency is a wise option to take if you want the chance to further increase the value of your money in the long-term.

While this investment strategy—often called FOREX trading or investing—may have its pros and cons, it’s still worth considering as part of your overall investment portfolio.