SEOUL, South Korea – Maybe you’re a short-timer, thinking that you will only be here for “one more year” and that your best option is to just send as much money home each month as you can. But how about keeping your money tucked away in an interest-earning account in Korea until the exchange rate improves instead? Interest rates in Korea are currently some of the highest in the world. This is an easy opportunity to let your money work for you.
Or maybe you’re a long-timer, married to a Korean, settling down for the long haul in Korea, and thinking your only option is to leave all your money in key money or “chon-sae” (??) to avoid paying rent. But then your life savings is just paying someone else’s mortgage instead of helping you accumulate wealth. They say it “takes money to make money” so take whatever money you’ve got to the bank and make it make some more!
The length of time you plan to spend in Korea and the length of time you will keep your money invested are two important considerations, but the type of investments you should make depend mostly on your appetite for risk. No matter how tiny or how huge your appetite for risk, you should always be sure to diversify your investment portfolio.
Low-Risk / Short-Term:
If you prefer a low-risk investment or only have funds available to deposit for a limited amount of time, you may want to invest in products with a fixed interest rate that are KDIC Insured (KDIC insured means that the investment is insured by the Korea Deposit Insurance Corporation under the Depositor Protection Act for up to and including 50 million KRW, including principal and interest, per person, per bank).
Two types of low-risk investments are time deposits or installment accounts. Time deposits are recommended if you have a lump sum to deposit and a specific amount of time before you will need to withdraw it. Installment accounts are recommended if you would like to put a little away each month. There are several types of each of these available at any bank. The longer you invest, the higher the interest rate you can receive.
Higher-Risk / Longer-Term
If you prefer a higher-risk investment (with the possibility of higher returns) you may be interested in investment products with a floating interest rate. These options may include domestic and foreign mutual funds, money market funds, corporate bonds, trusts, commodities, equity-linked products, or investing indirectly in domestic companies that are listed on the KOSPI or KOSDAQ.
Please note that Korea’s Central Bank (The Bank of Korea) does not allow foreigners living here to purchase individual company shares internationally. To get around this, you can open an account in your home country and conduct online trades from that account while you are in Korea. Alternatively, you can invest indirectly in Korean won-denominated mutual funds that invest in the country and industry that are of interest to you.
Here’s the biggest secret to all of this complicated-sounding investment stuff: it’s actually really easy. These investment options are available right at your local Korean bank. If your teller doesn’t speak your language and can’t explain your options and the specific terms and conditions of each product, find another bank with a more competent teller who can help you take control of your finances. It’s your money; it is too important to leave it to chance. Take the time to inform yourself and organize your finances. Your next trip to Thailand, your retirement, your unexpected surprise, your at-ease mind, and your wallet will all thank you.
Michelle Farnsworth is an 8-year resident of Korea who is currently the Foreign Client Relationship Manager at the Shinhan Bank Seoul Global Center – the first and only bank branch in Korea that is exclusively dedicated to serving foreigners and foreign companies. Please visit the “Shinhan Bank Seoul Global Center” on Facebook for more information or contact Michelle directly at email@example.com. You can also check out her “Ask Michelle” column in Seoul’s Groove Magazine.
Please note that the banking information provided in this article is based on Shinhan Bank policies and may not be applicable to all banks in Korea.