Sending Money Home: The Migrant's Side of Remittances

What sending remittances actually involves for the migrant: the budgeting, the sacrifices, the fees, and the family expectations.

A remittance is money that a migrant sends back to family or community in their place of origin. Remittances to low- and middle-income countries add up to hundreds of billions of dollars a year, and India alone has received more than 100 billion dollars a year in recent years. Those big national numbers are often discussed. This lesson looks at the other end of the transfer: the individual migrant earning the money and deciding how much to send.

Why migrants send money

Many migrants move precisely so they can support people back home. A parent may work abroad to pay for children’s schooling; a young adult may help cover a sibling’s wedding or a grandparent’s medical bills. Economists also describe remittances as a kind of family insurance. By having one member earn in a different economy, a household spreads its risk: if a drought hits the home village, income from the city or abroad keeps flowing. Some migrants are target savers, people who move for a set period to save a specific amount, such as enough to build a house or start a small shop, and then plan to return.

The budget behind each transfer

Sending money home usually means living very frugally. Migrants often share crowded rooms, cook cheaply, and cut personal spending so they can send as much as possible. Some face an extra burden: recruitment debt. Workers heading to jobs in places like the Gulf states have sometimes paid large fees to recruitment agents before leaving, often borrowed from relatives or moneylenders. The first months or even years of earnings may go mostly to paying that debt off, which is why international organizations have pushed for employers, not workers, to pay recruitment costs.

A monthly remittance budget

Imagine a construction worker abroad who earns 800 dollars a month. Shared housing and food cost about 300 dollars, and a phone plan and transport another 50 dollars. That leaves 450 dollars. He keeps 50 dollars as a small cushion and sends 400 dollars home. If the transfer fee is 6 percent, 24 dollars goes to the service, and his family receives the value of 376 dollars. Switching to a service charging 2 percent would save him 16 dollars every month, or 192 dollars a year - money that stays with his family instead of the middleman.

Fees and exchange rates

Every transfer involves costs. There is usually a visible transfer fee, and often a hidden cost in the exchange rate, the rate at which one currency is converted into another. A provider may advertise a low fee but give a worse exchange rate than the market rate, quietly keeping the difference. The World Bank has estimated that the global average cost of sending 200 dollars has been around 6 percent, well above the internationally agreed goal of 3 percent. For a migrant sending money every month for years, these small percentages add up to a significant sum.

The pressures that come with it

Remittances bring real benefits: better nutrition, more schooling, and improved housing for families back home. But the migrant can face heavy expectations. Family members may not know how hard the money was to earn, or how expensive life is in the destination. Some migrants feel unable to save for their own future because every spare amount is needed at home. Balancing obligations to family with the need to build some personal security is one of the quiet challenges of migrant life.

Comparing only the fee and ignoring the exchange rate

A service advertising zero fees is not necessarily the cheapest. If it converts money at a rate noticeably worse than the market rate, the family receives less. The fair comparison is simple: for the same amount sent, which service delivers the most money to the person receiving it?

Key takeaways

Remittances are money migrants send home, often the main reason they migrated.
They act as family insurance, spreading a household's income across different economies.
Many migrants live frugally, and some must first repay recruitment debt.
Transfer costs include both the visible fee and the exchange rate used.
Family expectations can make it hard for migrants to save for their own future.