Is it financially advantageous to transfer my Canadian earnings to Europe monthly, on in a big lump at the end of my stay?

Question

I have my savings in Euros on a Dutch bank account, but my earnings are presently in Canadian dollars. I will likely live and work in Canada for three years. Connsidering the costs of transferring money, is it better to save my money here and transfer it all in one lump sum at the end of my stay, or are there cheaper methods for regular international money transfers?

If done regularly, it should preferably be (semi-)automated in some way. I cannot do an international wire transfer through my Canadian internet bank.

Answer 1

There are three clear benefits of waiting. First, generally exchange rates improve as the size of the transaction increases. Second, once you pay the exchange fee, you lose all future earning on that portion of the money. Finally, if you miscalculate your expenses or have an emergency it will be cheaper (and easer) to handle it if you savings are in the native currency.

A drawback of waiting is that it is generally easier to get a better return on investment for larger investments. By combining your Canadian and European savings you might be able to better manage your investments.

The final issue is that the relative values of currencies fluctuate. If you wait and the value of the Canadian dollar drops (or Euro increase), you could easily lose all the benefits of future earnings and better exchange rates. Then again, the value of the Canadian dollar could improve.

Answer 2

It's a gamble either way, since you can't predict which way the exchange rate will move over the next three years, nor the interest rates in each country.

By transferring the money at regular intervals, you get an exchange rate which averages out, whichever way it changes. If you transfer at the end of the stay, you get the exchange rate at that time, which could be better or worse than the average.

The exchange rate doesn't vary much by size of transaction if you use a third party exchange specialist like Currencyfair, or CurrencyOnline. Many Canadians use Custom House (now part of Western Union, also at xe.com) for their international exchange because the payment to them can be made (free) with bill-pay from many Canadian banks. The Custom House rates are not the very best available, but the lower transaction costs help.

I would generally go with a quarterly exchange, except for one thing: you might not want or need Euros at the end of your stay. You might want to stay in Canada, go to the US, go to Australia (it's warmer...), or somewhere else. You'd then have to convert the Euros onwards to another currency, rather than just from CAD.

A compromise, if the figures are large enough, is to transfer half of the savings at regular intervals via a low-cost route, and keep half in Canada. The half in Canada would be your starter funds for another country, or to change in into Euros at the end if that where is you decide to go.