Review these remittance tips before sending money.
Fidelity Smart Money
Key takeaways
- Americans send more remittances, aka money transfers to people in other countries, than residents of any other country in the world.
- If you're considering supporting family, whether abroad or here, consider following these tips on sending money internationally, including planning for that expense in your budget.
People in the US—the destination for the most international migrants—send the most remittances, or money transfers, in the world, totaling nearly $73 billion a year, according to a report by the Congressional Research Service.1 That's because in many cultures it's customary for immigrants and the next generation to send money to family abroad. These 3 Americans are doing just that while simultaneously trying to secure their own financial futures. Here's why they lend support—and their advice for sending money home to help family.
Feed your brain. Fund your future.
Subscribe now
Helping relatives help themselves in Liberia
Maleika Cole, a 38-year-old fine jewelry designer in New York City, began regularly sending money to Liberia via a money transfer company in 2019. It's all to help support about 10 relatives in the African country. So far, along with her aunt and brothers, she's contributed to building homes with electricity for family, putting 3 cousins through college, and even building an elementary school. She now has plans to build a community garden to help ease expensive grocery bills, since most food in Liberia is imported.
"My mom sacrificed a lot by emigrating to the US to give us the best chance for success," says Cole. "My siblings and I never took this for granted and have worked hard to realize all the dreams my mother had for us, financially and otherwise."
But Cole wants to do more than send cash. "Our goal is to empower our family members to build businesses so that they can become self-sufficient and create jobs within their communities," she explains. "Then, they can replicate this process to help others."
International money transfers to meet cultural expectations in India
In India, the country that receives the most remittances in the world according to the World Bank, there's an unspoken cultural expectation. If there's an eldest son in the family, he will take care of the parents. (If not, the eldest daughter or another close relative is responsible.) That's why Rajesh Panthri, 40, who works in data analytics at Fidelity in Boston, has been allotting about 10% of his family's household budget for his parents. That money pays for rent, utilities, travel, and any health care their government doesn't cover.
But Panthri and his wife (who also works at Fidelity) are now new parents. "Having a kid onboard calls for planning for additional expenses—daycare to start with," he says. And he's already starting to think about saving for college. "I will keep supporting my parents as usual. For people with extra expenses, it might be helpful to think about additional sources of income, like a side hustle or rental income."
Funding the present and future in the Philippines
Meg Saldana arrived in San Diego in 2019 to work as a nurse and send money to her mother and 2 younger siblings in the Philippines, the country that receives the fourth-most remittances. (The country to receive the second-most remittances is Mexico, followed by China.) As the eldest daughter, there's also a cultural expectation of providing for them.
Another sister lives with Saldana and sometimes watches Saldana's 3 small children for no charge. Saldana, 31, estimates she sends home 2% to 3% of her monthly budget via a payment app. That goes toward rent, medicine, a sibling's college tuition fees, and, until recently, her single mother's pizza shop business, which didn't bring in enough to support the family and has since shuttered. Saldana splits most expenses with her boyfriend, but they handle their remittances separately. (Saldana's partner helps support his mother in the Philippines too.)
"It's tough, especially having kids," Saldana says. "Sometimes I think I could have put this money in a fund for their college or my retirement or pay down my credit card. But it's not a good use of my energy to think like that because there's an understanding if you go to the States, you're going to provide. I'm going to help my siblings until they have their own jobs."
How to send money internationally
If you're sending money internationally, consider these tips to make the experience as helpful to your family—and as smooth for you—as possible.
1. Budget aid as you would any other expense
Cole, Panthri, and Saldana all suggest budgeting for remittance like any other line item. "Remittance is part of my core expenses like rent or my cellphone," says Cole. Cole does auto transfers and worked with a financial planner so she'd "know the number I needed to hit to be able to also do things like fund my whole life insurance policy and add money to my puppy fund."
2. Keep a cash cushion
Panthri says being appropriately insured and having emergency savings are key to his plan. "Have at least 2 to 6 months of nondiscretionary expenses—mortgage, utilities, food—in case something happens," he says. "Put it in a safe location you don't touch at any cost." And if you can set aside a portion of each paycheck for savings before spending, Panthri suggests doing so. Panthri sees people save whatever is left over after spending, instead of saving first.
3. Manage expectations
Cole, Panthri, and Saldana all agree there's a misconception that money coming from the US is an endless resource and that people working and living in the US are rich. But obviously, that's not the case, and you might need to make that clear—and say whether self-sufficiency is the goal. "When you live in a country that's been ravaged by decades of war, the only way some family expect to earn an income is through aid," Cole explains. "We're getting our family to understand the value in financial independence and providing them with the roadmap and support to achieve that." To keep everyone on the same page, set an amount you'll send each month and circ*mstances that might warrant family asking for more—with the caveat that it may not always be possible.
4. Establish ground rules
If you don't, you may be upset if recipients spend money in ways you hadn't intended. "Social media's influence sometimes has our younger cousins wanting money to buy designer belts and the latest cellphones. I'm not saying people aren't allowed to have nice things. We just want to make sure it's not at the expense of tuition or other necessities," says Cole. With Panthri's parents, "I say, ‘This is a decent part of our monthly budget. We want to make sure you have money to cover all essential expenses, or needs vs. wants.'"
5. Work with a middle person in the recipient country
To help oversee payments, have local help. Panthri has his sister, Cole has an aunt, and they and Saldana all send money directly to a landlord or school if they're covering rent or tuition. With older relatives, it's less about micromanaging and more about working with someone who's digitally savvy. Panthri's parents are less comfortable using financial technology than his sister is, which is why his sister is the point person for receiving payments.
6. Revisit your budget when your circ*mstances change
Cole, who had to adjust her spending when she left a corporate job to start her own business, notes, "It took about 6 months to get things up and running. During that time, I went out less and cooked more, learned how to give myself gel manis and pedis, replaced rideshare trips with an electric scooter, did ‘no spend' challenges, and used my stationary bike and my building's gym instead of paying for a fancy gym."
7. Remember your money likely goes further outside the US
Saldana's mother rents a small apartment for the equivalent of $70 a month. She's also paid that much for flights within the country that would cost at least double in the US. Labor is less costly in all 3 countries too. Panthri says in India you could hire daily cooking and cleaning help for the same amount as a once-a-month housecleaner in the US. However you feel about cultural obligations, let this be a reminder of how much harder your money might work where your family lives.
8. Consider donating goods beyond money
"Support doesn't always have to be financial," Cole says. "Time spent giving advice or sending clothes you don't wear anymore or household items and hygiene products are also wonderful ways to give."
9. Don't give up your own dreams
"Don't forget about yourself or the things that are important to you," Saldana suggests. "You can't keep pouring money into helping" beyond what you've agreed to offer. If she needs to, she tells her siblings to stretch an allowance they get from their father, so she doesn't get behind on her own credit card payments.
While Panthri understands helping his parents now might impact his own finances later, he doesn't think contributing to parents' golden years "means you should stop living your life." He also sees a silver lining: Had he stayed in India, financial support could be almost half his budget vs. the 10% it is living in the US. And the extra cash he's earning here could help everyone—including him.
