Whenever you send money back home, you play a major role in supporting your family and your local community.
In fact, money sent as a gift comprises one of the world’s largest economic drivers. Remittances play a vital role in sustaining the financial health of millions of people around the globe.
In this brief article, we’ll discuss the remarkable growth pattern of remittances, reveal its power in lifting people out of poverty, and offer advice to help you reduce costs whenever you send money to your loved ones.
Here are five fast facts to know about sending money back home:
1. Global Remittances Are Growing
In 2019, money sent overseas totaled $689 billion, the vast majority of which went to developing countries.
That’s a 10% increase from the previous year. While it’s a reality that COVID-19 has temporarily slowed this trend, experts predict the growth pattern will quickly continue its climb in 2021 and beyond.
Where does all of this money originate? Research shows about 200 million migrant workers support over 800 million family members globally. In other words, one-in-seven people around the world will either be involved in sending or receiving remittances. One-in-nine people will be receiving them.
Remittances are truly a lifeline for families around the world.
2. Remittances Are 3x Greater Than Foreign Aid
According to the United Nations, money sent home from migrant workers now triples foreign financial aid. As global remittances grow, they will only continue to outpace international aid programs.
Despite high transaction fees and shifting exchange rates, migrants continue to send far more money abroad than governments.
And which nations represent the leading remittance recipients? According to The World Bank Group, the top three beneficiaries are India, China, and Mexico.
3. Remittances Help Reduce Poverty for Millions
Remittances have a truly life-changing effect on families around the globe. According to Gilbert Houngbo, President of the International Fund for Agricultural Development (IFAD), even modest sums of money can make a tremendous difference:
“The small amounts of $200 or $300 that each migrant sends home make up about 60 percent of the family’s household income, and this makes an enormous difference in
their lives and the communities in which they live.”
Large or small, every dollar sent home furthers your commitment to helping your loved ones (and their communities) prosper.
4. You Won’t Be Taxed!
Don’t worry about getting taxed for sending money home. Most financial gifts sent abroad are tax-free, unless they exceed the following U.S. Internal Revenue Service (IRS) limitations:
- If your annual financial gifts to anyone other than your spouse exceed $15,000 (as of 2020)
- If your gifts to your spouse (who is not a U.S. citizen) total more than $157,000 (as of 2020)
- If you give gifts of future interests (for example, reserving an estate or funding a trust). Future interest gifts are taxable and must be reported to the IRS on Form 709, which you can download here.
All of these limitations fall under an even broader category of “lifetime exemptions.” As of 2017, the gift and estate tax exemption was doubled from $5 million to $10 million and will stay in effect until at least 2025.
So, how does this affect the money you send home?
The short answer is, it won’t! Even in the event your annual gifts exceed the $15,000 limit (or $157,000 cap for your spouse), you won’t pay taxes because the $11.4 million lifetime exemption covers you.
5. Avoid Using Banks to Send Money Home
With annual global remittances fast approaching $1 trillion over the next several years, you might expect the cost of money transfers to lessen. Unfortunately, most money transfer companies continue to charge unreasonably high fees.
Banks in particular have the most punitive costs.
According to The World Bank, financial institutions are by far the most expensive route to send money home. In 2019, banks charged an average fee of 11% to consumers. That’s an extra cost of over $21 on $200 sent home.
Fortunately, consumers are discovering new options beyond banks to send their money home.
At uLink, we help you send money home in the most affordable way possible.
With great exchange rates and fees starting as low as $0, uLink helps you support your loved ones while still protecting yourself.
Plus, after your 1st, 2nd, and 5th transactions, we’ll send you a $10 gift card to use at your favorite retailers. That’s $30 in gift cards after your first five transactions with uLink.
Miles from home — just moments away with uLink.