Top 5 Mistakes to Avoid When Transferring Money Abroad

Over the past 6 years, I have interacted with more than 8000 parents, from across the country, whose children are going abroad to study. And having helped more than 4000 families transfer money overseas towards tuition fees and living expenses, I can, with conviction, assist any family in India complete this process seamlessly and hassle-free.

Here are the top 5 mistakes made by families:

Mistake 1: Getting Anxious About “This Whole Money Transfer Thing"

Ajay, amongst the first few parents that I interacted with about 6 years ago, was very upfront in my first conversation with me and said, “Dev, I am sending my child overseas for the first time so I'm very anxious about transferring money abroad. It's a large sum of money and I cannot afford to risk it for anything in the world. I'm going to rely on you to guide me."

Choosing the right partner who is completely transparent about costs, charges and legalities is the key here. And that is exactly why RBI issues licenses to entities like FRR Forex who specialize in foreign exchange services to provide students and parents the correct guidance.

Mistake 2: Blindly Trusting the Bank

I recently interacted with Aditya, who is a C-suite level employee at a large MNC in India, who very casually told me that he transfers his daughter's fees to Stanford University through his net banking portal because he genuinely believed “who better than the bank to go to for all money matters."

Indians are mentally conditioned to trust the bank blindly, but most don't know that for a bank, foreign exchange is a value-added service. And for this reason, they generally don't bother on giving competitive rates or good customer service.

Families can save up to 1.5% on the exchange rate, translating to amounts up to Rs. 75,000 per annum by transferring through RBI-licensed entities like FRR Forex.

Mistake 3: Poor Planning

One of the biggest complaints I hear from parents is, "My kid just informed me that fees of USD 40,000 are due tomorrow. Does he not realize that this kind of money is not just lying around like that in my bank account?"

To solve this pain point, we have integrated a payment reminder system by tracking the university fee payment deadlines. Parents are so grateful and relieved that we have picked this burden of their plate because most of them cannot depend on their children.

We, at FRR Forex, not only assist parents in planning monthly remittances for living expenses to optimize transaction costs, but also guide parents on how to hedge their forex risk by transferring payments to their child's personal account when the rates are favourable (or at least seem favourable)

Mistake 4: Getting Intimidated by Abbreviations like LRS and FEMA

Parents shoot a barrage of questions at us very often: "This will be an LRS transfer, right?"

Yes, absolutely! Because LRS is the Liberalized Remittance Scheme under which every resident Indian is allowed to avail USD 250,000 worth of foreign exchange per FY. This limit includes all purchases towards physical currency, forex cards and even overseas transfers. "Can grandparents transfer money to the university?"

As per the Foreign Exchange Management Act (FEMA), only blood relatives can transfer money to the student for fees and living expenses. However, blood relatives are strictly defined as mother, father, sibling and spouse of the student.

Mistake 5: Speculating

Recently, I received a call from Yash on a Friday afternoon, an MBA student at an M7, and he said, “Dev, I've been a commodities trader, and I am certain crude prices are going to drop over the weekend and the INR will appreciate by 50p or so. Let's initiate the transfer on Monday.”

And the obviously – the INR depreciated by Rs. 1 over the weekend and he ended up paying an additional Rs. 52,000.

So, this is always my advice to student and parents – pay when the amount is due and forget about what happens later because we are tiny drops in the massive ocean. The currency market by far the largest market by volume at USD 4 trillion per day, given that it is 24x7 overseas.