Why personal finance is harder when you’re a migrant

Skilled migrants^[1] play an important role^[2] in the UK economy. But while the UK celebrates the skills they bring, it doesn’t always make it easy for them to thrive financially.

Migrants tend to arrive^[3] with a good work ethic, qualifications, professional experience and a drive to succeed. But unlike UK natives who grow up with the country’s financial system, they have to navigate unfamiliar banks and financial products. They might also come up against unwritten rules, such as needing a good credit score to access mortgages, loans and even mobile phone contracts.

The UK has relatively high levels of financial literacy^[4] compared to other countries. However, financial literacy and financial behaviour tend to vary between natives and migrants. Additionally, migrants may face other disadvantages^[5] such as unrecognised qualifications or pay gaps.

The UK government has made banking easier^[6] in recent years, but opening an account can be a challenge for newly arrived migrants. They may not be able to meet stringent identity document requirements^[7], for example.

Most skilled migrants arrive with no knowledge of the credit score^[8] system. Those who do are sometimes still surprised that they cannot bring^[9] their overseas credit score and need to start again from scratch.

A lack of UK credit history isn’t a reflection of migrants’ financial irresponsibility. Rather, it is a consequence of coming from a different financial system. But without a UK credit record, lenders cannot assess reliability, often restricting migrants’ access to credit. This has short and long-term financial consequences. Migrants are not “poor”, but they are financially invisible and may end up paying more for credit.

Migrants also often face distinct challenges in terms of their financial priorities (things like cost of visas, supporting family or investing in their home country, for example). These may delay or limit their engagement with the UK financial system.

These differing priorities are shaped by cultural norms, attitudes towards debt and risk, and varying levels of trust in financial institutions. Skilled migrants often arrive with debt from their move and may take on more while settling in the UK.

But unfamiliarity with the UK financial system can then make it hard to distinguish between good and bad debt^[11] –in other words, the kind of debt that might ultimately make them wealthier like a mortgage or loan to pay for education, as opposed to high-interest borrowing, for example.

Though skilled migrants may have budgeting and saving skills^[12], their struggle to find appropriate financial products can mean resorting to risky and unregulated ways of accessing credit such as rotating credit and saving associations^[13]. These schemes are typical in developing countries and involve a group pooling their money, with one member periodically receiving a lump sum.

Skilled migrants can also face restrictions when it comes to accessing public funds such as welfare benefits. This underscores the importance of maintaining emergency funds^[14], perhaps covering three to six months of living expenses but which migrants tend not to have.

This financial preparedness becomes even more important given the tightening in the job market, changing immigration rules^[15] and rising visa costs^[16]. These bring uncertainty, which can affect long-term financial planning for things like retirement and pensions.

Our research^[17] has also uncovered gender-based differences in skilled migrants’ financial behaviour. Unfortunately, female migrants^[18] seem to be more financially vulnerable than their male counterparts – often because of lower levels of education as well as remaining reliant on male partners, who may have arrived in the UK before they did.

Ultimately, though, the longer someone has stayed in the UK^[19] the better from a financial point of view. They tend to become familiar with the system, and their financial literacy improves.

Services like the Money and Pensions Service^[20] offer financial guidance, including debt advice. Citizens Advice^[21] and MoneyHelper^[22] also play an important role in supporting migrants to improve their understanding of budgeting, debt and access to financial services.

But these services may still lack understanding of the cultural diversity and dual lives of migrants^[23]. Tailored financial advice is essential to help these people make informed decisions and achieve long-term stability. This advice could come from ethnic-minority financial wellness coaches who take into account migrants’ diverse values, lifestyles and opportunities.

The journey of a skilled migrant to the UK is a testament to their ambition. It is vital that banks and policymakers invest in education, products and services that are tailored to migrants’ specific financial needs.

References

1. ^{^} Skilled migrants (www.gov.uk)
2. ^{^} important role (niesr.ac.uk)
3. ^{^} Migrants tend to arrive (www.bath.ac.uk)
4. ^{^} financial literacy (gflec.org)
5. ^{^} other disadvantages (link.springer.com)
6. ^{^} banking easier (www.gov.uk)
7. ^{^} identity document requirements (www.oecd.org)
8. ^{^} credit score (www.hsbc.co.uk)
9. ^{^} cannot bring (bloommoney.co)
10. ^{^} Ascannio/Shutterstock (www.shutterstock.com)
11. ^{^} good and bad debt (www.investopedia.com)
12. ^{^} budgeting and saving skills (www.bristol.ac.uk)
13. ^{^} rotating credit and saving associations (www.sciencedirect.com)
14. ^{^} emergency funds (www.moneyhelper.org.uk)
15. ^{^} changing immigration rules (www.gov.uk)
16. ^{^} visa costs (www.gov.uk)
17. ^{^} Our research (www.research.ed.ac.uk)
18. ^{^} female migrants (committees.parliament.uk)
19. ^{^} stayed in the UK (ojs.acad-pub.com)
20. ^{^} Money and Pensions Service (maps.org.uk)
21. ^{^} Citizens Advice (www.citizensadvice.org.uk)
22. ^{^} MoneyHelper (www.moneyhelper.org.uk)
23. ^{^} dual lives of migrants (migrantsrights.org.uk)