Last Updated on 15th November 2024
We often speak with expatriates or those getting ready for a much-anticipated global relocation who have put a great deal of thought into managing their finances, applying for visas, finding accommodation and getting the logistics together – but who haven’t received any support with managing the costs of ongoing life in an overseas destination with children.
For most, this is because generalised information and advice are targeted towards retirees or professionals, overlooking the crucial importance of in-depth planning around areas such as education or childcare costs, which, as all parents will know, can have a significant budgetary impact.
Let’s look at some of the many aspects of life in your chosen destination that may be impacted by the age of your children, or future children if you plan to start a family, and share some tips about how this can be factored into your plans.
Budgeting for the Costs of Life Abroad as an Expat With Children
We’ll start by recapping some of the financial considerations because, whether you currently have children or not, many families need to build this into their planning in terms of tax exposure, investment risk and the returns they expect to rely on from their savings and wealth.
While expatriate retirees might be primarily concerned with security and having a long-term stable income to provide a comfortable lifestyle over the next few decades, parents tend to require more agile investment advice and ongoing financial planning with the flexibility to adjust accordingly.
Every client we speak with has different requirements and objectives, but you might need to think about the following:
- Investment products and savings, and how to optimise returns or wealth accumulation.
- Risk avoidance and ensuring the returns you receive will more than cover the projected costs of private education or university fees.
- Contingency planning, how you will deal with illnesses and the potentially high healthcare costs abroad – and whether your insurance coverage can easily cover those outgoings in most circumstances, however unlikely.
- Inheritance planning, the impacts of international variances in succession or inheritance tax, forced heirship rules that apply in many jurisdictions, and how you will preserve wealth for your children once they become adults.
Retirement and inheritances may be some way off, but giving thought to these areas now could put you in a much better position over the long term. There are often options to structure assets, place certain accounts or assets into trusts or configure your investments to ensure they align with your financial needs and income expectations as a family at every stage of life.
Tax Planning for Expatriate Families
The link between children and taxation might not be immediately obvious, but there are considerations here, too. For instance, many countries have progressive tax tables or allowances, with exemptions or varied thresholds that apply to civil partners, married couples, and those with children.
Many European countries also provide generous child benefits or family tax benefits, but these may only be claimable if you are a permanent resident or have established tax residency.
These decisions can be complex, particularly if you have foreign-sourced income or need to manage cross-border transactions since becoming an overseas tax resident can have distinct advantages and drawbacks.
Costs of International Childcare or Early Years Tuition
Depending on where you intend to relocate, you may find that there are excellent free or low-cost nursery or kindergarten places. Some countries already do, or have pledged to, offer free childcare to all children below school age.
However, access to fixed-cost placements may also rely on your residency status or be available only to registered taxpayers for whom their country of residence is also their primary home.
Expats may need to consider private rather than state-subsidised nurseries if there are language barriers. Establishments that offer bilingual early-years play and education may be ideal for children who don’t yet know the language but would benefit from being as fluent as possible before they reach school age.
As a rough idea, the average monthly cost of nursery-based childcare is below for a small selection of locations, although these are national averages and may differ between cities or regions.
Planning for Education Fees in an Overseas Country of Residence
Finally, the costs of education cannot be overlooked, and even if you are yet to start a family or have very young infants, putting the financial structures in place now to prepare for the longer-term costs of schooling may be beneficial.
You might also need to consider whether older children are likely to qualify for a school place, often depending on their language abilities, or whether you would prefer an independent, international, or private school that offers bilingual tuition or classes in both languages to smooth the transition.
Education costs are not insignificant and can become high if you need to fund university placements overseas, particularly for more than one child. This might mean setting aside a low-risk investment plan, creating high-return savings, or revisiting your risk profile to ensure there is a minimal chance of dipping into other savings in the future.
International primary school fees, for example, are on average as below for the same locations as featured previously.
Independent Support With Family Financial Planning for International Expats
We’ve covered the costs of living overseas as an expat with children in very general terms, since the tax implications, allowances and educational costs naturally vary considerably between countries, but hopefully have provided some pointers about the areas of financial planning you may need to consider.
For more tailored advice and support at any stage, please contact your nearest Chase Buchanan Wealth Management team, and we will be happy to organise a good time to talk.
*Information correct as at November 2024