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UAE - Residents across the UAE are becoming more confident about their ability to save money for the future, yet many still struggle to find the necessary discipline to hit their saving targets, experts have noted.
While the majority of residents know about the difficulties that they can run into if they don't have funds set aside for emergencies and important events such as weddings and their children's education, they struggle to create a viable plans that allows them to save regularly. Experts believe that there is still a disconnect between the intention to save and actually doing so on a regular basis.
While many residents maintain that the high cost of living and other factors such as rents, school fees, and rising fuel prices are hindering their ability to save money regularly in the UAE, finance professionals say that the global economic environment is set to improve and that should be a good incentive for residents to save regularly.
"The IMF has predicated global activity will gain momentum in 2018, and with the growth predicted here in the GCC, the savings environment looks set to increase in 2018. The more money people have, the more they should be saving," said Mohammed Qasim Al Ali, CEO of National Bonds Corporation.
"The UAE has the largest portion of regular savers in the GCC and I am confident that we will continue to lead the way in this area if we keep striving to raise awareness of the importance of saving. If people realise the key role which savings plays in securing a happy future, everything else would fall in its place."
National Bonds' 2017 Savings Index showed that 41 per cent of savers in the UAE are planning to start their savings journey in 2018. However, 57 per cent of savers plan to increase their savings in this year, dropping from the 64 per cent recorded in 2017. The UAE also saw an increase in the number of respondents which feel they are saving enough, four per cent higher than in 2016. However, a total of 85 per cent of respondents still feel that they are still not saving enough for their future.
When asked why they felt that it was a good time to save, 43 per cent of UAE residents cited better investment opportunities, a 36 per cent increase from 2016. Despite a clear intent to save more for the future, bankers reported that almost 25 per cent of residents across the country don't even save Dh1 from their monthly salaries. More in-depth data by Emirates NBD also showed that 38 per cent of adults are financially illiterate, with 68 per cent having no formal savings. More importantly, 94 per cent of residents report feeling financial stress. These are troubling figures that call for immediate action, experts stress.
"Living and working in the UAE allows people to live a certain lifestyle and unfortunately savings can often be forgotten about," says Gemma Frankland, head of global partners at Guardian Wealth Management.
"Although there can be a lot of demands on your salary, from school fees to car payments, it is important to plan for the future. The earlier people start saving the better. For your long-term goals such as retirement, you should try to put away 20-30 per cent of your monthly salary."
Frankland further stated that as with any kind of financial planning, setting out a budget and a target to reach, and then being disciplined to stick to it, is key. Getting into the habit of saving is essential in order for residents to get a good foundation to achieve their financial goals. "You can begin by putting away as little as $200 per month. Also, apportioning any pay rise into your savings is a great way to boost your finances instead of simply increasing your expenses," she advised.
Mercer's latest survey data showed that, globally, 85 per cent of respondents were willing to change their current lifestyle, realising that trade-offs such as saving more or downsizing, were necessary to afford to live longer. In addition, 40 per cent were willing to save a greater percentage of disposable income, followed by 32 per cent, who were willing to spend less and downsize. It was also found that 27 per cent were willing to take on part-time work.
While it is imperative for residents to save for important milestones in their life and for their retirement, experts also say that it is important for them to learn how to properly manage and invest their money. Investing carefully and early, they say, can lead to an easier retirement.
"Today's world of mass media and amazing government education plans is helping many individuals to learn the benefits of early investing. The various ETF's, mutual funds, and insurance policies have really led to an improvement in the number of people saving for retirement. The number has, however, still not reached its desired goal and investor education and retirement planning is a concerning need to be addressed," says Vijay Valecha, chief market analyst at Century Financial Brokers.
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