Financial illiteracy is something to work on

A number of personal finance education programmes are cropping up in the UAE to cater to companies looking to help their staff handle their finances more effectively.

Rasheda Khatun Khan runs the Mastering Your Personal Health financial literacy course. Jeffrey E Biteng / The National
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Sam Smart is lucky – or so it seems. With the equivalent of Dh1 million in savings, and a plan to buy a house next year, he is in a secure financial position.

But things are about to get tough. Within the next year, he will lose his job or suffer a personal catastrophe, his credit card debt will rise as he struggles to get by, and there will be a global event that will further affect his finances.

We can say all this with certainty because he is not real. He is a character in a board game used in a programme designed for companies that want to help their staff brush up on their personal finances knowledge.

“If we look at people who are distracted by personal finance issues, what happens at work?” says Patricia O’Sullivan, managing director of Protraining, which runs the programme, called Money $marts. “They manage their issues at work, so instead of working they are distracted. What happens to productivity then? It goes down. What happens to stress? It goes up. If people get themselves into financial challenges it does have an impact in the workplace.”

Money $marts is one of a handful of personal finance education programmes now available to UAE companies that want to help staff, struggling with the rising cost of living and heavy debts, manage their finances more effectively

The wealth and wellness planner Rasheda Khatun Khan, founder of Design Your Life and a member of The National’s debt panel, runs Mastering Your Personal Health and other firms run CSR financial literacy courses for blue-collar staff. This week, the money transfer company Xpress Money said it had helped 125,000 blue-collar workers across the GCC over the past three months, offering advice on financial planning and savings.

Ms Khatun Khan says bookings for her two-to-four-sessions have doubled in the past year, with the programme now representing about 50 per cent of her business. And it’s easy to see why.

Figures released in February by the ­National Bank of Abu Dhabi revealed that the average UAE resident had Dh42,571 of personal debt as of the third quarter of 2016, a figure which has risen steadily over the past couple of years. And the Central Bank of the UAE recently announced that total personal loans hit Dh349.9 billion in February, a 3 per cent increase on January.

“What’s happened is this pool of people in debt is increasing, or it’s becoming more apparent because they are obviously reaching limits where they can’t get more loans,” says Ms Khatun Kahn. “So they can’t hide any more, if you like, and the first thing it affects, especially if you are living in this region, is your employee status.”

Her corporate clients typically suffer from one of two problems: either employees are approaching them for a loan because they cannot get credit at a bank, due to bad debt or laws to limit people’s liabilities; or banks are contacting the companies to find the people who owe them money, she says.

“Most of the time it’s because the firms are worried about the number of employees approaching HR for loans. When their performance drops they are sitting down and asking them: “Is everything all right, what’s the problem?” A lot of staff say they are stuck financially but the employers are not able to, and maybe not prepared to, increase their salaries.”

Raf Van Eijcken, the regional manager for the Middle East at Baltimore Aircoil Gulf, booked Ms Khatun Khan to speak to his employees in February after becoming concerned about how much they were borrowing.

He had not­iced an increasing number of requests over the past eight years for credit fac­ilities, which he knows about because banks require the company to provide a backup letter confirming how much the employee earns.

“You don’t really want to refuse it because you need to give your employees the opportunity to use such facilities, and you would assume that they would manage their own personal situation, but after a while I see they struggle to make the payments on time,” he says.

“From what I can see, [personal fin­ance problems] really distract employees. You want your employees to be happy. You want them to feel comfortable at work and you want them to live a comfortable life because they work for your company and you would like to give them something back to have a happy life.”

Mechanical engineer Sony Joseph, from Kerala in India, has lived in the UAE since 2003 and worked for Baltimore for 11 years. He says the event was useful as he had never monitored his spending before.

“If there was an emergency, I couldn’t cover it,” says Mr Manoj, 38. “Now after the meeting I am going to build savings for emergencies. Now I have a plan.”

Aarati Rai, 40, an Indian who grew up in Oman, attended another personal finance event run by Money $marts in March, and was similarly inspired.

While she has no debt, having paid off the multiple loans she took out at university, the training programme encouraged her to set up savings accounts for her various goals the day after her session. She particularly liked the game.

“It makes the short- and long-term consequences of your actions very tangible. Because they walk you through four years of the consequences of your choices,” she says. “To me that made it very real, and of course you get very competitive. But it does give you options and you can start to think very creatively about what you can do with the finite amount of money that you have got.”

The board game takes up about half of the two-day Money $marts programme, which launched this year after 12 months of planning and was designed with the help of financial consultants. During the first two years of the game, which takes place on the first day, Mr Smart builds up a large amount of credit card debt.

“We break after two years and we talk about credit cards. The advantages and the perils, if you like, the potential for trouble, and how to use credit cards responsibly,” says Ms O’Sullivan.

“Then Mr Smart buys a house, so we look at that. And by the fourth year they are making their own decisions on making investments, reducing their debt, increasing their income, especially around passive income. And they are doing this in a team. There are three or four people to each team. They have opportunities to buy houses, gold, stocks, so there is investment.”

Ms O’Sullivan decided to use a board game to teach personal finance because she felt it was inappropriate to ask for examples from people.

“We have found on the second day that everyone is talking about their personal situation and challenges they face. But it does take time to get to that point,” she says.

The programme also includes a money personality quiz, where people find out whether they are a spender or a saver. People do not need a quiz to know they are a spender, says Ms O’Sullivan, but seeing it in black and white tends to bring it home.

In addition, the programme discusses people’s financial goals; assets and liabilities; compound interest and other forms of passive income, budgeting and saving.

“The one that often has the most impact on them is the session on budgeting and saving, on the second day. We ask them to plan the financial life they are running,” says Ms O’Sullivan, who reveals that discussions around credit cards also resonate. “We get them to check the annual percentages on their credit cards. Monthly it might only be 1 to 2 per cent, but annually it could be 18 per cent to 20 per cent,” says Ms O’Sullivan. In reality, the figures are much higher. According to Souqalmal.com, the average annual percentage rate on UAE credit cards is around the 40 per cent mark.

Oshba Mubarak, learning and development manager for Aldar Properties, which invited Protraining to present a showcase with a view to rolling it out across the group, says the financial information was presented in a fun and easily understandable way.

“I have attended a couple of sessions with another company where it was a very business driven simulation with fin­ance, but I think this one is where you put it into the personal and practical terms, people have more buy-in with it,” says Ms Mubarak.

But while educating staff on better money management is important, it’s something a company must budget for itself. Ms Khatun Khan charges between Dh8,000 to Dh12,000 for her fin­ancial session, while Money $marts charges Dh1,850 per person for the two days.

However, while the Money $marts team have only run a few sessions so far, with 10 more in the pipeline by the end of the year, they have noticed an immediate effect.

“We have had people go home and pay off their entire credit card balance at the end of that first day. We have had somebody who went away and bought gold,” says Ms O’Sullivan. “Even though we say this is not investment advice they are inspired.”

pf@thenational.ae

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