An Offshore or overseas bank account is one that you have outside your country of residence. In the past offshore accounts were shrouded in mystery and were associated with money launderers, tax evaders, black market, and drug lords. They were less regulated and transparent and sounded like financial institutions with complex and sophisticated banking activities. Today, they operate under an international banking license. Clients are required to share their account details with their country of residence, albeit under strict confidentiality.  

Did you know that anyone can open and operate an offshore account? An offshore account is an effective and convenient way to handle your business and personal finances. An offshore account will open you up to more and better investment options while ensuring that your money is safe. 

That said, here are some reasons to open an offshore account: 

Currency Diversification  

You must be familiar with the term portfolio diversification. It loosely translates to spreading your investments in different vehicles to minimize risk. While there are many ways to diversify your investment, holding a foreign currency account is one of the best. Having a portion of your money in a foreign currency will protect your money if your local currency drops. You are also able to participate in various financial markets. 

However, even though domestic banks offer investments in foreign currencies, the options are usually limited. And with offshore banks primarily dealing in foreign currency, they’ll actively help you invest your money while keeping it safe from market risks. Moreover, most offshore banks allow their customers to invest in a wide selection of foreign currencies.  

Asset Protection  

Having an offshore account is one of the smartest moves you can ever make financially. Even though it will not guarantee total asset protection, it’s still your best option. For instance, if you’re ever in a situation where creditors come after your assets to satisfy a debt or court judgment, your offshore account will be safe. This is because your country’s laws do not govern offshore accounts.  

Security  

Limiting your money to one currency is risky, especially with the current economic instability in many regions. It can mess you up financially and make you shelve your retirement plans. An offshore account will allow you to diversify your financial risks. Your money will be safe from the direct economic impact of political instability, war, or economic collapse. You’ll become financially insulated from issues arising from unfavorable and uncertain economic climates in your country of residence. Having an offshore account will allow you to hedge against unforeseen financial crises.  

Better Banking Infrastructure  

You will likely face a liquidity problem with your local bank, especially if you want to make a large withdrawal to meet your financial obligations. This is because local banks can only keep a certain amount of money at one given time in their cash reserves. While this is a practical solution for the banks, it can be a stumbling block for a depositor like you.  

On the other hand, offshore accounts are run more conservatively and hold more cash reserves. They are better positioned and more likely to meet your withdrawal requirements.  

Higher Interest Rates

Like many people, the return on your savings in the bank doesn’t make sense. It doesn’t seem to keep up with the rate of inflation. No wonder many financial advisors tell people to invest their money elsewhere rather than keep it in the bank.  

But did you know that offshore accounts attract competitive interest rates compared to local banks? Even modest offshore accounts produce better returns than banks at home. Hence, opening an offshore account will guarantee higher interest rates, with more significant deposit amounts translating to higher returns. Think of it as a way to build wealth.  

Financial Freedom 

Sometimes, some countries put capital controls into effect due to hard economic times. This makes it very difficult for people to transfer money out of the country. Those who manage to do so face long, nightmarish processes full of bureaucracy. You can imagine being caught up in such a situation if your child in a university abroad needs school fees urgently or if your loved one is racing against time to have specialized medical treatment abroad.

Because local governments do not regulate offshore accounts, they’re not affected by laws passed by individual countries. Therefore, having an offshore account will enable you to transact without your government’s intervention or interference. You’ll still have unlimited choices to transact internationally even when your local government puts stringent financial measures in place. 

Conclusion  

Having an offshore bank account is no longer only for the rich.  You can now open one and enjoy its benefits even with a modest investment. Offshore banks provide greater financial flexibility and freedom, increased privacy, and greater security than local banks. However, when researching where you want to open an offshore account, be sure that your choice of country is stable politically. Countries with neutral political stands are the best. 

This article 6 Reasons Why You Might Need An Offshore Bank Account originally appeared on Rick Orford - Invest, Earn More Income & Save Money.