You’ve heard the old saying, “never keep all your eggs in one basket.” In fact, you probably diversify your assets across numerous asset classes, such as growth stocks, blue chip stocks, bonds, and real estate.
Yet few people diversify geographically. Having an offshore bank account reduces your risk and offers the potential benefit of high returns and access to new opportunities and foreign investments. Quite simply, having a bank account overseas is the first step to protecting your wealth and your freedom.
1. Political risks
Offshore bank accounts can’t be controlled by federal or local governments, which means that they simply can’t get their hands on your money. Funds kept offshore is harder to have frozen or seized. In many cases, offshore banking also allows for greater privacy and secrecy.
2. Asset protection
Chances are, your government is broke. Develped counties such as USA, UK or Europe have plenty of liabilities. It would not take too long until the “bubble of debts” will explode. Governments have a history of stealing your money to pay their bills. Asset confiscation has taken place in Cyprus, Ireland, Hungary, and Poland just recently.
Having an offshore bank account can protect your money from fat-fingered government agents and wealth confiscation as well as aggressive lawyers, creditors, and angry ex-spouses.
When you bank in your home country, any bureaucrat can freeze your account without having any proof or even charging you with a crime. Imagine what would happen if you couldn’t access your own money for weeks, months, or years. This is becoming increasingly common for average business owners and citizens in the west.
3. More stable banks
Would you believe banks in the United States are the 40th safest on earth? Or that banks in the United Kingdom are the 44th safest? Those are actual statistics from a recent audit of the world’s banking system. Do you really want your money in banks that are “just OK”? Or do you want your money in the safest banks on earth?
Some of the world’s safest banks are in Germany, Singapore, and even Australia. Banks in the US and much of Europe are nowhere to be found. That’s because most of those banks only keep one or two cents per dollar of your money on hand. Compare that to 20, 25, or even 30 cents per dollar in some offshore banks.
Just because a bank is in a wealthy country does not mean it is more safe. In fact, if you’ve ever wondered what would happen in a modern day bank run, just look at Europe: banks there have started limited customers’ access to their money. And when banks went under, not even deposit insurance protected them in some cases.
4. Deposit insurance fund insolvency
The truth is, the FDIC in the United States has well under one percent of deposits in its reserves. In fact, if every US bank were to fail at once, depositors would only see $1 for roughly every $300 on deposit returned to them.
For years, the US government has been saying the FDIC is insolvent. In fact, the FDIC has long operated in the red. Even President Obama has said that the FDIC is mired in red ink. Between 2009 and 2013, 464 US banks were closed by the FDIC. Meanwhile, countries like Singapore and Switzerland have never had a bank failure. Never.
Many foreign bank accounts also offer deposit insurance on their bank accounts. There are even a few places with unlimited deposit insurance. The most important thing to look for is bank stability, not which country the bank is in. Chances are the next round of “Too Big to Fail” will make your local bank account a target anyway.
5. Currency diversification
Chances are, the currency you hold is on the decline. The western world is in a “currency war” to has destroyed trillions of dollars of wealth held by everyday people like you. Just look at how much more expensive it is to purchase every day necessities like groceries than it was ten or twenty years ago.
In addition to holding hard assets like gold and silver, currency diversification is a good way to protect the value of your assets from central bankers. And offshore bank accounts are a great way to diversify into other currencies.
Banks in financial centers like Hong Kong, Singapore, and Andorra offer as many as 12-15 currencies… all in one account. You can easily sell your dollars and buy pounds, euros, or renminbi at any time. That’s why an offshore bank account is an excellent way to get exposure to emerging currencies and profit from global financial trends.
6. Higher interest rates
Currency diversification is an excellent way to protect your asset base from the destruction of one single fiat currency, but it is also a great way to obtain higher interest rates on your money. Many overseas banks offer interest rates that are 5X, 10X, or even 100X better than you can get at home. If you’re used to relying on interest income, this can be a game changer for you.
New Zealand bank accounts currently pay up to ten times the interest that American banks do. If you’re more adventurous, there are emerging market currencies that offer interest rates as high as 18%. The key is knowing which are a good and which to avoid. In some cases, you don’t even have to sell your US dollars or euros to profit. Several foreign banks pay 5-6% annual yields on US dollar accounts if you don’t want to invest in foreign currencies.