More than eight in 10 savers in the UAE believe it is important to have an emergency fund in place to survive difficult economic times, driven by the financial lessons learnt during the Covid-19 pandemic, according to a new study by Sharia-compliant savings and investment company National Bonds.
Sixty-four per cent of respondents to the annual National Bonds Savings Index said they were now working towards establishing an emergency fund to protect their financial futures, the study found.
“People have learnt a lot from the Covid-19 experience about the importance of having an emergency fund or having enough funds to sustain [them] and then, God forbid, they lose their jobs and to sustain their families as well,” said Mohammed Qasim Al Ali, group chief executive of National Bonds, which is owned by the Investment Corporation of Dubai.
“I think that Covid-19 has really been the ultimate lesson for us all that life can stop in a second.”
The National Bonds Savings Index was launched in 2011. This year’s survey was conducted by data consultancy company Kantar, which polled 2,000 people in the UAE on their savings behaviour.
The pandemic raised widespread concern over personal financial issues as millions of people globally were either furloughed or lost their jobs, highlighting the importance of saving, having an emergency fund for short-term cash needs and enough money for retirement.
An emergency fund is money set aside for the purpose of unexpected financial expenses, such as a medical emergency, a job loss or unplanned car or home repairs. It is typically a static number equal to about three to six months of a person’s expenses depending on their financial commitments.
More than one third of respondents to the National Bonds Savings Index survey said they planned to retire in the UAE because of the country’s “stability”.
“This has led to a significant number of individuals, particularly expat Arabs, considering longer-term investment opportunities within the country as well as 60 per cent of Asians, and Westerner respondents are eyeing the UAE as an investment destination,” it said.
The UAE, the second-largest Arab economy, has recovered strongly from the pandemic-induced slowdown on the back of the government’s fiscal and monetary measures.
The UAE has also undertaken several economic, legal and social reforms to strengthen its business environment, increase foreign direct investment, attract skilled workers and provide incentives to companies to set up or expand their operations.
The government’s overhaul of a number of visa programmes, including the golden visa, green visa and retirement visa, has also boosted opportunities for residents to put down roots in the Emirates.
Last October, National Bonds launched a Golden Pension Scheme to help private sector foreign employees with their retirement planning.
Under the scheme, employers can choose to either invest the entire end-of-service benefits accumulated over the years as a lump sum or invest a portion of it, while employees can contribute as little as Dh100 ($27.22) a month.
In April this year, the company, which has 850,000 customers and almost Dh14 billion in investments, also unveiled its Second Salary programme that aims to generate a supplementary income for Emiratis and residents during retirement.
The programme comprises a saving phase, in which customers deposit money into National Bonds every month for a period of between three and 10 years, and an income phase, which allows customers to draw an income every month, the company said at the time.
“We have seen that there is a huge increase of 176 per cent in the disciplined monthly saving plans that our customers opted for in the first half of 2023 compared with the first half of 2022,” Mr Al Ali said.
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"That indicates that the public, in general, is now understanding the importance of savings to protect themselves and their loved ones."
Meanwhile, 68 per cent of those polled by National Bonds who have not yet started saving say they plan to begin within the next six months to a year, while 76 per cent said they are thinking about saving and investing specifically in the UAE.
Despite the UAE’s improving savings culture, 18 per cent of respondents are uncertain about suitable savings avenues, highlighting the importance of ongoing awareness campaigns focused on promoting financial knowledge, National Bonds said.
However, dependence on a single source of income is one of the major concerns for 33 per cent of the respondents, particularly women in their 40s, it added.
Both Emiratis and expatriates share key savings aspirations, including starting their own business, purchasing a home and securing future education for themselves and their children, the survey found.
“Savings is … a journey. It's not a random thing that we do in our life. We have to be disciplined. And the more discipline, the better. You end up with better results, of course, in your life,” Mr Al Ali said.