By Erdenetungalag Erdenekhuyag
This is my second year at University of Missouri (MU) and I am from Mongolia where one US dollar equals to 2500 tugrug, the Mongolian national currency. Since I came to the US, just in a year, the Mongolian Tugrug depreciated in value by 17 percent relative to the US dollar. This means all my costs here increased while my parent’s income remains unchanged in Mongolian currency.
That translates into a shortfall of an additional US $5,800 or 15 million tugrug to finance my second year study considering annual international student cost at MU is estimated to be around $40,000. This is not only the Mongolian case. Many international students experience the same problem, which I heard from many of my friends. For example, the Japanese Yen and British pound have also dropped against the dollar in recent months.
Before coming to the US, I wish all the international students knew the volatility in currency markets could have far-reaching consequences for them. They may suddenly find themselves facing a funding shortfall. I think every university should offer its international students some form of exchange-rate insurance or guarantee as part of their admissions package. This way, international students are possible to be prevented from the market risk.
Regardless of the school’s policy and plan, we can prevent ourselves with some simple steps. I would like to share my own experience and approaches on how I avoided from the exchange rate risk and market volatilities.
Save for the potential exchange rate risk. Saving is always good! Most of the time, people save money in case of future emergencies. For international students, exchange rate risk has to be in the list of future emergencies. This is like our own insurance plan. The question is how much to save. There are many international agencies that forecast exchange rates of most of the countries, such as IMF, World Bank and ADB with a full of professional economists and analysts. I follow them and check their outlook to gain some sense of the tugrug’s trend. For example, IMF expects Mongolian tugrug to be depreciated against the US dollar by 5% in 2018.
Ask your parents to save the money for you in the US dollar. My parents have US dollar accounts in a bank in Mongolia. If you receive wire transfers from your home frequently, the best way to prevent from the exchange rate risk might be asking your parents to save the money for your tuition and other expenses in the US dollar. This approach especially works for countries with depreciating currencies against the US dollar, like Mongolia. If one’s local currency is appreciating against the US dollar, this is obviously not a good idea. In order to understand which direction Mongolian tugrug is going, I check the currency’s future trend as I mentioned above in my first approach.
Stop converting every expenses to the local currency: I decided not to convert my every single purchases to Mongolia’s tugrug just to avoid the mental stress. I heard many of my international friends saying that when they convert the grocery prices into their local currency, this made them want not to buy what they needed. Instead converting to the local currency, it was better for me to compare the costs to how much dollar is in my account. I budget my expenses within the dollar income sources.
Follow business and financial news to foresee any major fluctuation. Lastly, I stay informed. To follow the business and market news, students do not have to be majored in finance or economy. There are many good journalists, media outlets and podcasts which publish the timely market news with simple and interesting ways. Find your financial advisor in media which tells market stories in your style.
Erdenekhuyag is a master’s student at the University of Missouri School of Journalism.