My wife and I are both expatriates and our financial situation is complicated by having accounts in different currencies. A frequent topic between the two of us which accounts are the best for keeping our money and how to minimize risk of exchange rate changes. As a mathematical guy, I've always wondered if there's a systematic way to do this.
Imagine we have accounts in currency A, B and C. Currency A is stable, but the bank pays a very low interest rate. Currency B is more more volatile, but the bank pays a high interest rates on savings. We are living in the country with currency B. Currency C is moderately volatile and pays a moderate interest rate.
My questions are:
- What are some strategies to balance our money?
- Is there a way to measure the volatility of a currency?-
- Can we mathematically define or measure the trade-off between a "risky" currency and a higher rate of return?
- How do we account for the fact that most of our expenses are in currency B? (Even if this currency is more volatile, this matter less to us because we are not exchanging our money out of this currency.)
I'd appreciate any thoughts about what strategies to use our what other people have done in similar situations.
To be clear, my question isn't about how to open a foreign bank account--we've already done that. The question is how to balance our money between the different foreign currency accounts that we already have.