Why Emergency Funds are more important for Expats

Situations where ex-pats might need to use emergency funds:

• Labor Laws: The labor laws in your new country will be different.  The hiring and firing process could be faster or slower. A unexpected lay off in your new country could have major financial implications. Having a backup plan or financial cushion to fall back on, creates enormous peace of mind.
  
  
  
• Unexpected or unspoken expenses: Regardless of how extensive our research, the number of informational interviews we perform, unexpected expenses can still pop up. Expenses that the more experienced ex-pat may have forgotten to warn you about.
  
  
  
• Expat taxes: In some countries, such as Ireland, it can time some time to sort out your tax details. In the interim, your first few paychecks are subjected to a much higher tax rate. This results, at least temporarily, in less than expected disposable income.
  
  
  
• Delays in finding permanent accommodation: Housing crises are not uncommon in the modern world. In cities like Amsterdam and Dublin, finding permanent accommodation may take longer than expected. You might also need to pay a company for assistance in finding a place to live. Or, you may need to pay rent a number of months in advance.
  
  
  
• Medical expenses: The country you are moving to may have different norms regarding medical expenses. Canada, for example, is known for its public healthcare, yet, some expenses are still paid for out of pocket.
  
  
  
• Work Visa situation: Are you tied to a sponsored role or a work visa? Some countries are not very lenient in the case of job loss of such roles. An emergency fund for this scenario may require some detailed disaster planning should you need to pack up and organize flights home. Having such funds available also creates peace of mind, should your sponsored role not be what you expected.
  
   
  
• Repayment of relocation expenses: A often forgotten overlooked detail. A relocation allowance from a company usually comes with conditions including a time commitment. Being able to repay any relocation costs should you need to, creates enormous peace of mind.
  
  
  
• Emergencies back home: The unspoken fear of many ex-pats. Bad news and a sudden, unexpected trip home. Not having the funds available for such an event, would only make a stressful situation more stressful.
  
  
  

How large should your emergency fund be?

This is a very personal decision and is unique to every individual household.  A common rule of thumb in most financial literature is about 3-6 months of living expenses. In reality, an emergency fund is a figure that you need to tailor to you. Only you can decide what is acceptable for your unique circumstances.

Suggested action point for those just starting out:

When opening your first bank account, open a separate, dedicated savings account at the same time. This account will serve as your emergency fund. Make it a habit to add to it from your very first paycheck.