Remittances: How Immigrants Can Stretch Family Support

immigrants remittances

Immigrants are a major part of the U.S. economy, comprising more than 15% of the U.S. labor force. This includes 23% of STEM workers and over 3 million business owners. Even after immigrants come to the U.S., many continue supporting families back home with remittances.

In fact, migrant workers send more money to developing economies than those countries receive from official aid or foreign investment. This can be crucial to loved ones in parts of the world like Nigeria or Pakistan where people endure chronic upheaval.

But for immigrants living and working in the U.S., supporting family abroad makes things difficult. Immigrants are overrepresented in occupations like agriculture, construction, transportation, and personal care services where pay is often lower and work fluctuates throughout the year.

How can immigrants balance their living costs in the U.S. with their desire to send remittances home?

These tips, courtesy of the DoughMain Financial Literacy Foundation, can help immigrants stretch their dollars further, both here and abroad.

Know What You Can Afford

One big mistake immigrant workers make is sending too much home, then relying on high-interest debt to cover their own bills. Taking on debt for everyday expenses is a costly tactic. This is especially true for undocumented immigrants who are more likely to be unbanked and rely on predatory payday lenders.

Before sending remittances, these immigrant workers need a monthly budget that covers taxes, housing, healthcare, and other non-discretionary expenses. The budget should also include savings for an emergency fund, travel, and other long-term goals.

Once essential costs are paid for; the excess may be allocated to remittances and other discretionary spending.

Adjust Your Budget

When a budget doesn’t leave much room for remittances, immigrants have one of two options: spend less or earn more. Cutting expenses tends to be the easier path for immigrants with a strong support network. Many pool resources to save money or raise funds for their goals.

Immigrants are an incredibly entrepreneurial bunch. Starting a business can improve an immigrant’s earning potential. Many make extra money in the gig economy, providing one-off services for quick cash.

Small businesses owners often choose to set up as a limited liability company (LLC) due to this entity’s asset protection and simplified tax filing and paperwork. It’s an affordable option as well for new businesses with simple structures. Instead of hiring a lawyer, a formation service like Incfile or Northwest Registered Agent can help new business owners register as an LLC.

Save Money on Remittance Transfer Fees

Immigrants tend to remit small sums frequently. This provides stable cash flow for relatives back home. But it also eats into earnings and what the family receives. Remittance fees average over 6% in the U.S., with the highest rates found at traditional banks.

Immigrants can save money on these fees with digital payment services from financial tech firms. These new services offer a cheaper alternative to banks and traditional money transfer firms.

For example, with a service like Remitly, first-time users can also get a deal on secure wire transfers to places throughout the world. This includes countries like the Dominican Republic, where they can transfer money to loved ones for as low as $4.99. Beyond cost, users should also look for services offering guarantees on the time and date the funds are delivered.

Become Familiar with International Exchange Rates

The exchange rate is the other primary factor influencing how much of an immigrant’s remittance actually gets to their family. By sending money when exchange rates are high, the family receives more funds compared to when rates are low.

Identifying favorable exchange rates starts with knowing the mid-market rate for a given currency. Then, customers can compare exchange rates and fees from different service providers. As with remittances, the best rates tend to be found through digital payment services, as opposed to traditional banks.

Immigrants live a delicate balancing act in many ways. They straddle two cultures at once and must also learn to survive in the U.S. while supporting family abroad. This comes with significant financial sacrifice for workers in the U.S. But it’s all worthwhile for the immigrants who know they’re building a better life for loved ones at home.

Guest post courtesy of Katie Conroy of Advice Mine.

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