If you have recently wondered if an online bank account is worth having, here are the TOP 8 reasons to open it right away.
Reason #1: Dilute Your Political Risk
Today, the biggest threat to your savings isn’t always the market risk. It might be your own government.
There’s no doubt government poses an increasing risk to your savings. Some governments are sinking hopelessly deeper into insolvency. Predictably, they are turning to the same desperate measures they’ve used throughout history.
It’s only prudent to expect more bail-ins (as we’ve seen in Cyprus), bank deposit taxes (as we’ve seen in Spain), retirement savings nationalizations (as we’ve seen in Poland, Hungary, Portugal, and Argentina), and capital controls (as we’ve seen in Cyprus and Iceland), among other destructive actions. And these are just a few recent examples.
According to Judge Andrew Napolitano:
…people who have more than $100,000 in the bank are targets for any government that is looking for money to shore up its own inability to manage its finances.
A big part of any strategy to reduce your political risk is to place some of your savings outside of the immediate reach of thieving bureaucrats in your home country. Setting up a foreign bank account in the right jurisdiction is a convenient way to do it.
In this way, your home government can’t easily confiscate, freeze, or devalue your money with a couple of taps on the keyboard. If your home government imposes capital controls, an offshore bank account would help to ensure an easy access to your funds whenever you need them.
Reason #2: Sounder Banking Systems and Banks
Most of the banking systems in Western countries are fundamentally unsound. They’ve leveraged themselves to the hilt. The promises of insolvent governments are all that back them. Worse, most of these banks only keep a tiny bit of cash on hand to meet customer withdrawal requests. This means, in the event of another Lehman-style financial shock, you could have trouble accessing your money.
There are banks in stable jurisdictions with low debt that don’t gamble with customer deposits (i.e. your money). Many of these banks are much better capitalized, keep more cash on hand, and are otherwise much more conservatively run.
These banks are almost always more responsible custodians of your savings.
Reason #3: Asset Protection
Maybe you think it’s just other people who live on the lawsuit firing line…and you live somewhere else. Think again.
The Legal Resource Network reports that 15 million lawsuits are filed in the U.S. every year. That works out to a new lawsuit for one out of every 12 adults each year…year after year. Unless you’re exceptionally lucky, sooner or later your turn will come and it probably will not be pleasant.
It’s no fluke that 80% of the world’s lawyers, work in the U.S. That’s where the action is. Your money is the trophy they’re competing for. While there is no such thing as 100% protection, a foreign bank account can help make you a less attractive target. A foreign bank account also protects you from overzealous government agencies armed with the summary power to freeze your assets.
If you ever find yourself in a wrestling match with a government agency or a frivolous lawsuit, a foreign bank account give you resources you can count on.
Reason #4: Currency Diversification
Holding foreign currencies is a great way to diversify your portfolio risk, protect your purchasing power, and internationalize some of your savings. Chances are, though, your domestic bank offers few, if any, options for holding foreign currencies. Offshore banks commonly offer convenient online platforms for holding foreign currencies.
Reason #5: Higher Interest Rates for Your Deposits
In what amounts to a war on savers, the European Central Bank and the Fed have manipulated interest rates to near historic lows. These artificially low interest rates effectively transfer wealth away from savers, who would otherwise enjoy higher returns on their deposits, to borrowers.
In fact, if you live in the West, there is a good chance the interest you’re earning on your savings isn’t even keeping pace with the real rate of inflation.
If you look abroad, you can find banks that pay significantly higher interest rates than what you’d find at home.
Reason #6: Ensure Access to Medical Care Abroad
If you are unable to receive timely treatment in your home country, you may want to access medical care abroad. Suppose that for whatever reason, you cannot get the medical care you need in your home country and you must go abroad. You would have to transfer money abroad to pay for it. However, if your home government has already imposed capital controls, it could be difficult or impossible to pay for the medical care you need.
This is where having a foreign bank account, which isn’t hostage to capital controls in your home country, can help ensure you can always pay for the medical care you need.
Reason #7: The Ability to Act Quickly
When it comes to international diversification, it is always better to be a year early than a minute too late. Once a government has imposed capital controls or levied bank accounts, it becomes too late to protect your money.
Just having one online bank account available, regardless of how much money you initially put in it, gives you meaningful benefits. It gives you the option to act quickly and transfer more money abroad in the future, should the situation warrant it.
Reason #8: Peace of Mind
An offshore bank account is like an insurance policy. It helps to protect you from unsound banks and banking systems and the destructive actions of a bankrupt government. It also makes you a hard target for frivolous lawsuits and ensures you can pay for medical care abroad. Knowing that you have taken a big step to protect yourself should give you more peace of mind.
Is Having an foreign Bank Account Legal?
Despite what you may hear, foreign banking is completely legal. It is not about tax evasion or other illegal activities. It is simply about legally diversifying your political risk by putting your liquid savings in sound, well-capitalized institutions where they are treated best.
Even if your home government doesn’t slap on capital controls or confiscate deposits, you’re no worse off for having moved some of your savings to a safer home. In fact, you’re far better off for the reasons described above.