British families sending a child to study in the United States should plan their currency exchanges early – or risk paying substantially more for tuition fees and living costs. That is the opinion of Tony Redondo, founder of Cosmos Currency Exchange, who believes there is currently a greater chance of the pound weakening against the dollar than strengthening.
Studying in America can involve several large dollar payments, including university fees, accommodation deposits, rent, health insurance and everyday living expenses. Because exchange rates constantly move, the number of pounds required to meet those costs can change significantly between accepting a university place and making payments.
Advice for sending a child to study in USA
Tony said: “It's either British parents whose child is heading off to study in the US, Canada, Italy or elsewhere or overseas parents whose child is coming to the UK or another third country. Either way, they need to pay the university tuition fees or cover the child's living expenses while they study.”
His first recommendation is to establish exactly how many dollars will be needed and when each payment is due. Families should list tuition instalments, accommodation costs and expected living expenses, then decide how much money they can exchange immediately.
Tony said the right approach will depend on the family’s available cash and willingness to accept the risk of exchange rates moving against them. He said: “I would need to know their cash flow and their attitude to risk. Some people want to play safe, while other people are prepared to take more of a risk.
“You cannot have the same solution for both. You need to know when the funds are required and whether the money is available now or later.”
Exchange 'sooner'
Tony’s current opinion is that families who already have the necessary pounds should consider exchanging them into dollars “sooner rather than later”. He said: “Pound-dollar is pretty rubbish at the moment. It is a good rule of thumb that has worked throughout my working lifetime: the more trouble there is in the world, the stronger the dollar.”
The dollar is widely regarded as a safe-haven currency, meaning investors often move money into it during periods of geopolitical or economic uncertainty. This can make the dollar's movements especially difficult to predict – it may stay strong even when the US economy itself is performing poorly. Right now, that isn't an issue, thanks to American exceptionalism.
Dollar 'safe-haven'
Tony said: “The US dollar is the ultimate reserve currency and the ultimate safe-haven currency. You can have a rubbish US economy, but the dollar can still be super strong. It is the trickiest currency to guide people with because there is always that wild card: what is the world like and what is the geopolitical situation?”
Families who are uncomfortable exchanging the entire amount at once could instead split the transaction. Converting part of the money now would provide certainty over some costs, while leaving the remainder in pounds would allow the family to benefit if the exchange rate later improved. They would also face paying more if Sterling weakened.
Tony said: “Exchange rates change every three seconds. I am not clairvoyant and do not pretend to be, but I certainly think there is probably a much better chance of it getting worse than better. If you do not want to lock in the whole lot sooner rather than later, at least hedge your bets and do half of it straight away, then take a calculated risk on the other half.”
Families should also avoid looking at an exchange rate without considering the wider circumstances. A rate displayed by an app does not know when a university payment is due, whether the family has all the money available or how much uncertainty it can tolerate. Tony added: “An app gives you a rate in isolation. It does not tell you the trend, why it is where it is or where it is likely to go next.”
