What is a recession?
A recession is a period of slow economic growth, or even contraction. Recessions can last for months or years, depending on how deep the recession is. During this time, people have less money to spend and often cut back on their spending habits. This causes businesses to have less profit and sometimes even go out of business completely. This has a ripple effect on the economy because it affects how much money there is available to be spent in other sectors of the economy as well (like housing).
How does a recession affect my remittances?
One of the most important factors to consider when sending money during a recession is exchange rate. The international currency markets fluctuate, and with them, so do exchange rates. When you send money outside of your country, it’s likely that your currency will become stronger or weaker compared to other countries’ currencies. If you’re sending money from an advanced economy like the United States or Canada, you might find that your hard-earned cash isn’t worth as much abroad—particularly if it’s going to a developing country with a weak economy.
When considering sending money during a recession, keep in mind that there are more costs than just what’s involved in physically getting the cash where it needs to go (whether via direct deposit or some other method). You may also have additional fees associated with conversion and transfer fees depending on how much you’re sending and which service provider you use for this purpose; these fees can add up quickly depending on how often they occur throughout each year!
Always remember to check the foreign exchange rate before sending money to find the best option for you. You can use our SaverPacific Comparison Tool to help you find the best way to send money home.
Is it more beneficial to hold onto money or send it during a recession?
There are a few things you need to consider before making the decision.
- Do you need money? If yes, then send it.
- How much money do you have? If less than $1,000, hold onto it or spend it locally on essential goods and services.
- What is the exchange rate like? If good, spend/send as much as possible!
- Who will receive your funds and how often do they send money back home? If they send money regularly (e.g., monthly), then keep sending until that stops being feasible due to the cost of sending a large amount at once.
Who doesn’t benefit from a recession?
There are people who do not benefit from a recession. These include:
- Remittance senders. If your family member is overseas and you have to send money abroad, there could be trouble ahead for you. You may have to pay more in fees or exchange rates as the value of your currency decreases in relation to other currencies (as happened with the euro during the European debt crisis). This can make sending money much more expensive for you and your family if they depend on those funds for their livelihoods.
- Families with children studying abroad who depend on remittances from home for their tuition fees and living expenses. The devaluation of local currencies against foreign ones can increase their costs significantly because they must pay higher tuition fees in dollars or euros rather than pesos or rupees when studying abroad — which means they’ll need greater amounts of money sent from home just to cover these increased costs alone!
Recession or not, remittances will remain an important part of many migrant family’s financial situation. We hope this blog has helped you understand more about how a recession may affect you, so you can prepare to the best of your ability.