Currency Strategy: Managing NIS, USD, and EUR

Why Currency Management Matters for Olim

Most olim arrive in Israel with savings in a foreign currency (USD, GBP, EUR, CAD, AUD) and gradually need to convert to shekels for daily life. The decisions around when, how much, and through which channel to convert can save or cost you thousands of dollars over the course of your first few years.

Beyond the initial transition, many olim maintain ongoing foreign currency income (remote work, rental income, pensions, investments) that requires a long-term currency strategy. This guide covers both the immediate conversion decisions and the ongoing management.

The Cost of Getting It Wrong

Banks charge a spread on מטבע חוץ (Matbe'a Chutz) (foreign currency) conversions, typically 1.5-3% above the mid-market rate. On top of that, they charge a per-transaction עמלה (Amlah) (fee). Here is what that looks like in practice:

Over a typical Aliyah transition where a family moves $100,000-300,000, the difference between using a bank and a specialized service can easily be $1,500-7,500.

When to Convert: The Big Question

Nobody can predict exchange rates. The NIS/USD rate has fluctuated between 3.1 and 3.8 in recent years. Here are the approaches, from simplest to most sophisticated:

• Convert as needed (simplest): Convert each month only what you need for expenses. This naturally dollar-cost averages your conversion rate over time. This is the approach most financial advisors recommend for its simplicity.
• Convert in tranches: If you have a large sum to move, split it into 3-6 equal transfers over as many months. This reduces the risk of converting everything at a poor rate.
• Set a target rate: Decide on a rate you are comfortable with (based on the 5-year average or your personal break-even calculation) and convert when the rate hits that target. Services like Wise allow you to set rate alerts.
• Convert everything immediately: If you need the money soon for a down payment or large purchase, and you cannot afford to wait, just convert and move on. The peace of mind and certainty may be worth more than trying to time the market.

How Much to Keep Abroad

Even after settling in Israel, there are good reasons to maintain some foreign currency holdings:

• Ongoing obligations: Student loans, credit card payments, subscriptions, or family support in your home country.
• Emergency diversification: In times of regional instability or currency crisis, having funds outside Israel provides a safety net. A common recommendation is to keep 3-6 months of expenses in a foreign currency account.
• Investment diversification: If you invest in foreign markets (through a foreign brokerage), keeping investment funds in the original currency avoids unnecessary conversion costs.
• Travel: If you visit your home country regularly, keeping a foreign credit card and bank account avoids double conversion (NIS to USD and back).

A practical split for most olim: Keep 20-30% of liquid savings in your strongest foreign currency (USD, GBP, EUR). Convert the rest to NIS as needed for Israeli expenses. Adjust this ratio over time as your life becomes more Israel-centered.

Multi-Currency Tools Comparison

Pro tip: For amounts over $50,000, Interactive Brokers offers the best rates because you are converting at the actual interbank rate. The process is less intuitive than Wise, but the savings on large transfers are substantial. You deposit USD into your IBKR account, convert to NIS on the forex market, and withdraw to your Israeli bank.

Your Emergency Fund: Which Currency?

Your emergency fund (3-6 months of expenses) should primarily be in the currency of your expenses. For most olim, that means NIS. However, consider keeping a portion in foreign currency:

• If your income is in NIS: Keep 80-100% of your emergency fund in NIS. You need it to be immediately available in the currency you spend.
• If your income is in foreign currency (remote work): Keep 50% in NIS (for immediate Israeli expenses) and 50% in your income currency.
• If you have significant foreign assets: A small allocation (20-30%) in a foreign currency savings account provides diversification against NIS devaluation.

For NIS savings, consider a short-term פיקדון (Pikadon) (bank deposit) or a money market fund. For foreign currency, a Wise or Revolut account offers easy access and decent ריבית (Ribit) (interest) on some currency balances.

Avoiding Bank Conversion Fees

If you must use an Israeli bank for conversions (some mortgage payments or large transactions require it), here is how to minimize the damage:

• Negotiate the spread: For transfers over $10,000, call the bank's foreign currency desk (Machleket Matach) and negotiate. They can often reduce the spread to 0.5-1% for large amounts.
• Use the foreign currency desk, not the branch: Branch staff use the standard retail rate. The forex desk has authority to offer better rates.
• Time it right: Convert during Israeli banking hours when markets are open (Sunday-Thursday, 9 AM - 5 PM). Friday and pre-holiday conversions often carry wider spreads.
• Maintain a foreign currency account: Open a foreign currency account at your Israeli bank. Deposit dollars into it (via wire from abroad), then convert to NIS when the rate is favorable, rather than converting automatically upon receipt.

Ongoing Currency Management

For olim with ongoing foreign income, establish a system:

• Monthly conversion: Set a regular day each month to convert your foreign income to NIS. This automates the process and averages your rate over time.
• Maintain buffers: Keep a 2-month buffer in both currencies so you never need to convert urgently at a bad rate.
• Track your average rate: Keep a simple spreadsheet of your conversions. Over 12 months, you will see your effective average rate and can assess whether your strategy is working.
• Review annually: As your financial life becomes more Israel-centered, you may need less foreign currency. Reduce foreign holdings gradually as your Israeli expenses and income stabilize.

Action Checklist

• Open a Wise or Revolut account before or immediately after Aliyah
• Open a foreign currency account at your Israeli bank
• Set up rate alerts for your target conversion rate (Wise and XE.com both offer this)
• Establish a monthly conversion routine for ongoing foreign income
• Keep 20-30% of liquid savings in foreign currency as a buffer
• Never convert large sums (>$10,000) at the bank branch counter without negotiating