Posted on: 31st December 2024

7 Common Financial Mistakes Expats Make in Saudi Arabia

Moving to Saudi Arabia as an expat is an exciting adventure. With tax-free income, a vibrant culture, and plenty of opportunities, it’s easy to see why so many professionals choose the Kingdom as their new home.

But while the financial perks are tempting, navigating the financial landscape as an expat can be tricky. Here are seven common financial mistakes expats make in Saudi Arabia and how to avoid them.

1. Neglecting Tax Obligations in Your Home Country

One of the biggest draws of working in Saudi Arabia is the absence of income tax.

However, this doesn’t mean you can forget about taxes altogether. Many expats are still required to pay taxes in their home countries, depending on their residency status and local laws.

For instance, UK residents may need to report global income, while US citizens are taxed regardless of where they live. Ignoring these obligations can lead to hefty penalties.

To stay compliant, consult a tax professional who specialises in expat taxes and ensure you’re up to date with your home country’s requirements.

2. Failing to Diversify Investments

While saving your earnings in a Saudi bank account is convenient, it’s not the most effective way to grow your wealth. Many expats miss out on better returns by failing to diversify their investments .

Instead, consider building a portfolio that includes a mix of assets like stocks, bonds, and mutual funds. Diversification reduces risk and offers better potential for long-term growth.

If you’re unsure where to start, seek advice from a financial advisor who understands the needs of expats.

3. Overlooking Currency Exchange Risks

The Saudi Riyal is pegged to the US Dollar, offering some stability.

However, expats who regularly transfer money to other countries may still face challenges with fluctuating exchange rates.

These fluctuations can significantly impact your savings and remittances. To mitigate this risk, use currency exchange tools or services that lock in favourable rates. Planning your transfers strategically can save you a substantial amount over time.

4. Ignoring Retirement Planning

With tax-free salaries and lower living costs, it’s tempting to focus on the present and assume you’ll sort out retirement later. Unfortunately, this is a common mistake that can leave expats financially unprepared for the future.

In Saudi Arabia, there are no mandatory pension schemes for expats. It’s up to you to set aside money for retirement .

Options include contributing voluntarily to a home-country pension plan, investing in retirement accounts, or setting up a personal savings plan. The earlier you start, the easier it will be to build a comfortable nest egg.

5. Falling for High-Fee Financial Products

Not all financial products are created equal, and some come with hidden fees and unfavourable terms. For example, certain investment plans or insurance products may lock you in for years while charging high management fees.

These fees can eat into your returns, leaving you with less than expected.

Before committing to any financial product, read the fine print and compare options. Transparent, low-cost investment products are often the better choice. A trusted financial advisor can help you make an informed decision.

6. Overlooking Legal and Regulatory Differences

Saudi Arabia’s legal system is unique, and expats must understand how it differs from their home countries. Ignorance in areas such as property ownership, inheritance laws, or business operations can lead to complications.

For instance, expats may not have the same property rights as Saudi citizens, and local inheritance laws might differ significantly from those back home. To avoid any surprises, consult a legal expert familiar with Saudi regulations. This will ensure your assets are protected and your plans align with local laws.

7. Not Having an Emergency Fund

Living abroad comes with its share of uncertainties, from unexpected medical expenses to sudden job losses. Yet, many expats overlook the importance of an emergency fund.

An emergency fund acts as a financial safety net, providing peace of mind during challenging times.

Ideally, you should aim to save three to six months’ worth of living expenses in an easily accessible account. This fund can be a lifesaver when the unexpected happens.

Final Thoughts

Saudi Arabia offers a wealth of opportunities for expats, but making the most of your time here requires careful financial planning .

By avoiding these seven common mistakes, you can secure your financial future and enjoy a rewarding experience in the Kingdom.

If you’re feeling unsure about your financial strategy, don’t hesitate to seek professional advice. A trusted financial advisor can provide personalised guidance tailored to your unique situation.

With the right planning, you can achieve your financial goals and make the most of your expat journey.