Why does currency management matter 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:
| Transfer Amount | Bank Spread (2%) | Wise/Revolut (~0.5%) | Savings |
|---|---|---|---|
| $10,000 | $200 | $50 | $150 |
| $50,000 | $1,000 | $250 | $750 |
| $100,000 | $2,000 | $500 | $1,500 |
| $250,000 | $5,000 | $1,250 | $3,750 |
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 should you convert your money to shekels?
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 money should you keep abroad after aliyah?
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
| Service | Best For | Typical Spread | Transfer Speed | Israeli Presence |
|---|---|---|---|---|
| Wise (TransferWise) | Regular transfers, transparency | 0.3-0.7% | 1-2 business days | Fully available in Israel |
| Revolut | Multi-currency account, spending | 0-0.5% (varies by plan) | Instant to 1 day | Available but limited features |
| Interactive Brokers (IBKR) | Large amounts, investors | 0.002-0.02% (interbank rate) | 1-3 business days | Accepts Israeli residents |
| GMT (Israeli service) | Large transfers, Hebrew support | 0.3-0.8% | 1-2 business days | Israeli company, full support |
| Israeli banks | Convenience, small amounts | 1.5-3% | Instant for deposits | Full presence |
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.
How do you avoid bank conversion fees in Israel?
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.
US-specific currency considerations:
- FATCA compliance: Israeli banks report US person accounts to the IRS via FATCA. This means the IRS knows about your Israeli accounts. Keep this in mind when deciding how much to keep in Israel vs. the US.
- Tax on forex gains: The US taxes foreign currency gains. If you hold NIS and the NIS appreciates against the USD, the gain is taxable income on your US return. For amounts under $200 in gain, the personal-use exception may apply, but larger conversions may trigger reporting obligations.
- US retirement accounts: Do NOT convert or transfer funds in US retirement accounts (401k, IRA, Roth IRA) to NIS. Keep them in USD in their US accounts. The 10-year exemption covers the gains and distributions from these accounts anyway.
- FBAR reminder: If your combined foreign accounts (including Israeli bank, pension, and Keren Hishtalmut) exceed $10,000 at any point during the year, file your FBAR by April 15.
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
After Aliyah, the biggest currency cost is how you convert, not just when. Israeli banks charge a spread of roughly 1.5-3% above the mid-market rate plus a per-transaction fee, while specialized services like Wise and Revolut typically charge about 0.3-0.7%. On a $100,000 transfer that gap is around $1,500, and across a typical $100,000-300,000 Aliyah move it can reach $1,500-7,500. To manage timing risk, most people convert each month only what they need (which naturally dollar-cost averages) or split a large sum into 3-6 tranches over several months. A practical split is to convert most savings to NIS as needed while keeping roughly 20-30% in your strongest foreign currency as a buffer. For amounts over $50,000, Interactive Brokers offers near-interbank rates. US olim should note FATCA reporting, taxable forex gains, and FBAR; UK olim should weigh wider GBP/NIS spreads and avoid moving UK pensions without expert advice.
Israeli banks charge a spread of typically 1.5-3% above the mid-market rate on foreign currency conversions, plus a per-transaction fee (amlah). Services like Wise and Revolut typically charge around 0.3-0.7%. The difference adds up quickly: on a $10,000 transfer the bank spread (at 2%) is about $200 versus roughly $50 with Wise or Revolut, a $150 saving; on $100,000 it is about $2,000 versus $500, a $1,500 saving; and on $250,000 it is about $5,000 versus $1,250, a $3,750 saving. Over a typical Aliyah transition where a family moves $100,000-300,000, choosing a specialized service over a bank can save $1,500-7,500.
Nobody can reliably predict exchange rates (the NIS/USD rate has fluctuated between 3.1 and 3.8 in recent years), so most approaches focus on reducing timing risk rather than calling the market. The simplest method is to convert each month only what you need for expenses, which naturally dollar-cost averages your rate over time. For a large sum, you can convert in tranches by splitting it into 3-6 equal transfers over several months. Alternatively, you can set a target rate (based on the 5-year average or your personal break-even) and convert when the rate hits it, using rate alerts from a service like Wise. If you need the money soon for a down payment or large purchase and cannot wait, converting everything immediately for certainty and peace of mind is also a valid choice.
A practical split for most olim is to keep about 20-30% of liquid savings in your strongest foreign currency (USD, GBP, or EUR) and convert the rest to NIS as needed for Israeli expenses, adjusting the ratio over time as your life becomes more Israel-centered. Reasons to hold some foreign currency include ongoing obligations in your home country (student loans, credit cards, subscriptions, family support), emergency diversification (a common guideline is 3-6 months of expenses in a foreign currency account as a safety net during regional instability or currency stress), investment diversification if you invest through a foreign brokerage, and travel, since keeping a foreign card and account avoids double conversion when you visit home.
Your emergency fund of 3-6 months of expenses should primarily be in the currency you actually spend, which for most olim means NIS. The right split depends on your income: if your income is in NIS, keep 80-100% of the fund in NIS so it is immediately available in the currency you spend; if your income is in foreign currency, such as from remote work, keep about 50% in NIS for immediate Israeli expenses and 50% in your income currency; and if you have significant foreign assets, a small allocation of 20-30% in a foreign currency savings account adds diversification against NIS devaluation. For NIS savings, a short-term pikadon (bank deposit) or money market fund works well, while a Wise or Revolut account gives easy access to foreign currency balances.
For amounts over $50,000, Interactive Brokers (IBKR) offers the best rates because you convert at the actual interbank rate, with a typical spread of about 0.002-0.02%. The process is less intuitive than Wise: you deposit USD into your IBKR account, convert to NIS on the forex market, and withdraw to your Israeli bank, taking around 1-3 business days. Among the alternatives, Wise typically charges 0.3-0.7% and is fully available in Israel, Revolut runs about 0-0.5% depending on plan, and GMT, an Israeli company with full local support, charges roughly 0.3-0.8%. Israeli banks sit at the high end at 1.5-3%, so they are best reserved for convenience and small amounts.
If you must convert through an Israeli bank (some mortgage payments or large transactions require it), there are several ways to limit the cost. For transfers over $10,000, call the bank's foreign currency desk (Machleket Matach) and negotiate, since they can often reduce the spread to 0.5-1% for large amounts. Use the foreign currency desk rather than a branch, because branch staff use the standard retail rate while the forex desk has authority to offer better rates. Time conversions during Israeli banking hours when markets are open (Sunday-Thursday, 9 AM to 5 PM), as Friday and pre-holiday conversions often carry wider spreads. Finally, maintain a foreign currency account at your Israeli bank so you can deposit dollars via wire and convert to NIS when the rate is favorable rather than automatically upon receipt. As a rule, never convert sums over $10,000 at the branch counter without negotiating.
American olim face several US-specific currency considerations. Under FATCA, Israeli banks report US person accounts to the IRS, so the IRS knows about your Israeli accounts; keep this in mind when deciding how much to hold in Israel versus the US. The US also taxes foreign currency gains, so if you hold NIS and it appreciates against the USD, the gain can be taxable income on your US return; a personal-use exception may apply for gains under $200, but larger conversions can trigger reporting obligations. Do not convert or transfer funds in US retirement accounts (401k, IRA, Roth IRA) to NIS; keep them in USD in their US accounts, since the 10-year exemption covers their gains and distributions anyway. And remember FBAR: if your combined foreign accounts, including your Israeli bank, pension, and Keren Hishtalmut, exceed $10,000 at any point during the year, file your FBAR by April 15.
