The young family
Mike and Kristine moved from the US to the Lake Geneva region three years ago after Mike was offered a transfer by his employer, a multinational company. They are both in their mid-30s and have two children in pre-school. Their intention is to return to the US in two years’ time. Kristine has decided not to seek employment, partly due to the difficulty and expense of finding childcare to suit the Swiss pre-school hours. The Swiss government in 2006 agreed to spend CHF120 million over the next four years to increase daycare options, but the solutions won’t arrive fast enough for Kristine. Mike’s salary is reasonably high so they can afford to live on one salary for the short term.
“Financial protection should be their main priority,” says Christopher Marriott, managing director of Blackden Financial. “Life insurance and income protection may be boring, but they are absolutely essential, particularly if you have young children and other major financial responsibilities. There’s no point having the best investment plan in the world if the primary income earner drops dead without life insurance.”
Health insurance should be adequate for the family’s needs, particularly in Switzerland where it is required for most people. Shop around for a policy that suits best or use an independent insurance broker.
Tip: AngloInfo lists several brokers, a good starting point, but note that these are paid advertisements; also check with people around you for referrals.
Mike and Kristine should also make sure that their wills are up to date. They should investigate the legal and tax implications in Switzerland and in the US in case one of them dies here. The Swiss federal government publishes a booklet, in French, on marriage laws and inheritance, which they should read.
Tip: The US Embassy in Bern provides a list of English-speaking lawyers in Switzerland, useful since they cannot legally advertise. Consider asking a financial manager or lawyer to recommend tax specialists.
The couple’s next consideration should be to accumulate some contingency savings to cover sudden, unexpected costs like major car repairs or a new washing machine. It is important to have a readily available cash reserve. This may be as simple as setting up a separate interest-bearing bank account and then making a regular monthly deposit into it.
Tip: Women beware, a bank account in your husband’s name may be frozen immediately when he dies and you can find yourself with no access to cash. Be sure you have a joint bank account or if appropriate, separate accounts.
Mike and Kristine should decide how much they can afford to set aside regularly to achieve medium-term goals such as establishing a stock portfolio. Since they plan to return to the US relatively soon, they would not be advised to invest in property here in Europe.
They might also want to set some goals for the long term including saving for their children’s post-high school education. Switzerland does not have the kind of tax-reduction funds for this purpose that are common in the US, so a separate US savings plan might be in order. Although it seems a long way off, it would be wise for them to form some initial plans to finance their retirement.
Mike is paid in US dollars. He might consider renegotiating his salary if the couple eventually decide to stay on in Europe. As the US dollar has fallen, their purchasing power has declined commensurately.
The couple may also be affected by amendments to US tax laws that have increased the US tax paid on expat salaries, including living allowances. While there are tax treaties between most countries to avoid double taxation, the US taxes its citizens who earn more than a certain amount as if they were living in the US. Mike should seek advice, starting with his company’s human resources department, about the best way to structure his salary package in light of this. One option, for example, might be to contribute more than is required, under Swiss law, to the company pension fund to reduce his taxable income.
Tip: A good starting point is to read about Swiss tax requirements and deductions.