Planning is everything, as you well know. If you are smart with the money planning, you can save yourself money and worry before the big OE. Specifically:
- Spending money- Foreign currency- Buying a ticket- Visa application fees- Acess to moneySpending MoneyThe best thing to do is to call your bank (push '0' until you get the operator) and ask them if they have an account that 'rewards regular deposits' or 'the best account for regular deposits' (if you prefer not to deal in their language) and the chances are they will have one. You'll be looking at large withdrawal fees, but provided you put in a certain amount each month (generally around $20) you should be able to get an account with a little bit of interest.
Check out your bank's website, call them and if you get nowhere, check out
interest.co.nz for some pretty handy comparisons of the financial institutions offering deposit rates. Newcomers like
RaboBank and
Superbank will be keen to obtain market share so you can expect them to offer some pretty competitive rates in the short term.
With all the banks, you can set up an automatic payment so that when your pay (or benefit) comes in, you can divert a good portion of that to an interest bearing account that you can't withdraw from very easily (although if you can save up for a decent OE off the dole in anything less than 2 years I'd take my hat off).
The key is to have a goal in mind. Work out how much you will need for each day or week (be generous with this figure) and then work out how much you will need for how long you intend to be travelling, and not working. Work out how much you need in total and divide that amount by how much you can put aside each month. The answer will be how many months it will take before you are ready to resign.
Obviously, this is going to be hard if you haven't done a lot of travelling before, so get advice from people you know overseas, or who have travelled overseas before. Bear in mind that a stint in
Hannover is going to cost a wee bit more than a stint in
Hanoi.
Foreign CurrencyForeign Currency, or Foreign Exchange or FX is a tricky business that involves a lot of risk and luck. There is no science to FX, only a few basic concepts that you can use to keep out of trouble. No one will 'advise' you on FX and any financial institution that offers foreign exchange makes its money by commission on transactions involving FX (that is, buying or selling).
Depending on where the NZD 'is', you may or may not want to think about purchasing your Foreign Currency early and in instalments. Using the
National Bank's graphs as an example, you can track what the NZD is doing relative to the major foreign currencies, daily, monthly, annually and since the float of the NZD currency (1985). If the NZ dollar is high against these currencies (that is, that $1 NZD will buy more of the specific currency), then that is good for you. If it is low, that means that you get less foreign cash for your moolah.
What you want to look at are the trends, so what has the specific currency been doing in the last month, the last year, the last 10 years?
If at the moment the dollar is climbing, then buying foreign cash early is only going to limit what gains you may make by buying later when the Kiwi is stronger. However, the key to remember with FX is that
you must protect yourself against possible losses rather than try to make possible gains.
This is a vital thing to remember, because with FX you can lose money very, very easily if you buy and sell to try and make a profit. Buying the currency before you need it protects you against adverse FX movements, that is, if the bottom drops out of the Kiwi, you will be able to buy less cash than before. So if you have already bought your cash, you are in a better position.
If the Kiwi is going down, you want to buy your cash as soon as you can,
unless you think the dollar is going to rise very soon. I was extremely lucky in that I purchased a wad of Euros just after the peak in December 2005 and I have protected myself from having to pay about NZD $600-700 more for the same amount of currency five months later.
Having a foreign currency account makes it a lot easier to store the cash (rather than have USD bills under your mattress, liable to be stolen or lost in a fire), and you can also transmit those funds directly overseas into your overseas bank account.
Of course, all this information is not intended to be a guide to purchasing foreign currency. Any transactions that you enter into are your entire responsibility and you should seek independent financial advice before making such transactions.
Buying a ticketThis is the one thing that will set everything else in motion. Without a travel date, you can't apply for a visa, get travel insurance, budget, plan a farewell party or pretty much do anything, so it's important that you do it carefully but quickly.
Talk to at least two travel agents to get an idea of the best time to fly to your destination, ask about deals, and ask about discount packages. Browse through the airlines directly on their websites and compare prices.
Talk to other people who have travelled.
Save up so you can actually buy the ticket.
Visa application feesComes out of your spending money. An important thing to factor in, expect at least $200 up to $500 if you are travelling to different countries and want to stay longer than a standard visitors' timeframe.
Access to moneyThis is a biggie.
1) Register for Internet Banking with your bank.
2) Register for Phone Banking with your bank. Write the international number down.
3) Ask your bank about a discounted fee option for while you are travelling, and aim to have just one account open while you are overseas, so as to avoid paying monthly account fees.
4) If you have a credit card, think long and hard about cancelling it before you go. If you leave it open, you need to leave enough money at home in your bank account to pay the bill each month, but it does give you that flexibility until you are sorted and settled at your destination.
5) Cancel your cheque book if you have one.
6) Open a bank account in your destination country if you can, before you go. If going to the UK, check out
1stcontact.co.uk/nz or HSBC's
website. If going elsewhere, check with that country's consulate services, via the
Ministry of Foreign Affairs and Trade.
7) Wire money across to your new bank and ask them for 'debit cards' (which are similar to Eftpos cards) and a cheque book.
Think about buying travellers' cheques before you go. These are personalised and can be insured by travel insurance, and can be stopped if lost or stolen. If going to a 'Western' country (use your imagination here), you will have very little trouble getting them cashed. Take some cash in your wallet or purse as well, but not a lot if you can help it. The safest place for your money is in a bank account, not in your wallet. No one plans to get mugged, but if it happens to you then at least you'll still have some money to survive on afterwards.
Think about taking a backup wallet that you can use as your 'real' wallet if you do get mugged, maybe take an old Eftpos card or credit card that no longer is valid or works, that you can hand over with some cash to satisfy any robbers. Note down somewhere in your records the number to get hold of your bank from overseas. Most banks should let you call collect if your card is lost or stolen.
Again, this info is provided for information only. For best results, talk to your bank and one of their competitors.
UPDATE: A very important point which I have just realised (that I should have realised ages ago): you get different rates when you sell foreign currency depending on the type you have. Note this really only applies if you have excess currency.
Cash costs the most (ie. has the worst rate for you) because of the associated costs with storing, counting, securing and transporting it. It is the most unwieldy form of FX for a bureau to hold.
Cheques (also known as
AM Buy or
Draft Buy) are less of a hassle and therefore slightly better for you.
Telegraphic or
International Money or
Wire Transfer are the best: electronic and therefore much better for you. So that means, wire your money back to your NZD account, don't bring back a cheque or cash (that is, if you have enough money to wire back).
