Having money in the bank has many advantages, including easy access and low risk. These perks in combination with a lack of understanding of other investment options mean that many people continue to park their savings in a regular account with no growth.
Financial experts agree that other than saving for short-term goals or emergency funds, putting all your money in a regular savings account could diminish its value in the long run due to inflation.
Deciding where to hold your money is dependent on inflation, financial goals and the need for liquidity.
Choosing the ideal savings scheme
“One must consider the current inflation rate to ensure that the savings earn a rate of return that matches or surpasses inflation, preserving the purchasing power,” says Jelena Janjusevic, associate professor of finance at Heriot-Watt University Dubai.
“Also, assess risk tolerance as higher yields typically accompany greater risks, and determine how much risk you are comfortable assuming to achieve a higher return on your savings.”
The projected inflation rate in the UAE for 2024 is around 2.3 per cent, according to the Central Bank of the UAE.
So, unless your savings in the country are increasing in value by at least 2.3 per cent per annum, you’re losing money.
“Evaluate liquidity requirements and choose a savings vehicle that permits easy access to funds without penalties or limitations,” Ms Janjusevic says.
“Lastly, align your yield calculations with long-term financial objectives, whether saving for immediate needs or future goals such as retirement.”
We compiled a list of eight low-risk savings products in the UAE.
National Bonds
National Bonds claims it offers profits ranging up to 11 per cent per annum across diverse products such as Second Salary, The Payout, Term Sukuk and My One Million.
As an example, the Term Sukuk is great for someone who already has money saved and can keep it parked for a short time. This Sharia-compliant low-risk bond instrument has tenures starting from three months for a year at a minimum investment of Dh10,000. Profit rates in 2023 ranged from 4.4 to 4.9 per cent per annum.
However, if you need a more liquid option, National Bonds has products where money can be redeemed easily after an initial lock-in period, which ranges from 30 to 90 days.
Subscription fees and withdrawal charges may apply, depending on the timing of the withdrawals.
Mashreq Money Multiplier
This savings account in Mashreq offers 1.5 to 3 per cent profit on savings tied to a spend/remit condition. For instance, if you save Dh10,000 to Dh29,999 and commit to a spend/remit slab of Dh3,000 to 7,999 in a month, you’ll be eligible to earn 1.5 per cent interest.
The highest rate of 3 per cent is paid to savers who hold an average monthly balance of Dh150,000 to Dh200,000 with a monthly spend/remit requirement of Dh20,000. If the saver falls below the spending threshold, interest paid will be lower.
Wio Fixed Saving Spaces
Digital bank Wio offers up to 5.5 per cent in interest income for certain account holders. This rate is applicable on Fixed Savings Spaces, which is only accessible to Plus Plan subscribers. Tenures available range from one month to a year.
You could also choose to hold savings in the more flexible Saving Spaces which offers 5 per cent interest, subject to terms and conditions.
The Plus Plan requires account holders to maintain a minimum balance of Dh35,000 across the main account, savings and investments. The deposit itself does not have a minimum requirement.
Liv Money Ahead
Liv, the digital banking subsidiary of Emirates NBD, offers up to 3.5 per cent interest on their fixed savings scheme called Money Ahead Deposits.
A minimum deposit of Dh10,000 is required, with tenure options from one month to a year. Interest rates start at 2.1 per cent for a month, while the highest interest rate of 3.5 per cent is paid on deposits held for 12 months.
FAB iSave
First Abu Dhabi Bank (FAB) has a savings account that offers interest ranging up to 3.2 per cent, where the higher ranges are applicable for deposits more than Dh500,000.
However, the bank conducts promotional campaigns and this year account holders or new customers can start iSave accounts to get up to 5.25 per cent in interest income. This offer is only valid until September.
Money market funds make the perfect option for short-term savings
Bilal Abou-Diab,
co-founder and chief executive, Vault Wealth
ADCB Active Saver
Targeted towards individuals with a huge chunk of money in hand, this account offers interest rates of up to 2.25 per cent per annum.
The high rate is applicable to accounts that hold upwards of Dh2 million, making it suitable for residents who have a retirement fund.
Sarwa Save
Money market funds are now increasing in popularity as low-risk modest-growth avenues for investment.
Bilal Abou-Diab, co-founder and chief executive of Vault Wealth, says these funds make the perfect option for short-term savings and “allows the saver to hold something where their principal is highly liquid and super safe, yet generate a short-term income level that is in line with the interest rates available to uber wealthy individuals”.
UAE-based investment platform Sarwa has both Sharia-compliant and traditional savings products invested in money market funds starting from $500 and no lock-in period.
The traditional Sarwa Save+ has a projected return rate of 5.1 per cent before fees, while Sarwa Save Halal offers 4.6 per cent before fees.
The platform charges 0.5 per cent as an annual management fee.
StashAway Simple
StashAway, another UAE-based investment platform, also has a savings product where money is invested in a Sharia-compliant money market fund.
The management fee is 0.3 per cent with a projected rate of return of 4.7 per cent.
The National is not promoting these products. These rates are as advertised on published date and subject to terms and conditions, which can be changed at the discretion of the provider. All stock market investments are subject to market risks.
Tax authority targets shisha levy evasion
The Federal Tax Authority will track shisha imports with electronic markers to protect customers and ensure levies have been paid.
Khalid Ali Al Bustani, director of the tax authority, on Sunday said the move is to "prevent tax evasion and support the authority’s tax collection efforts".
The scheme’s first phase, which came into effect on 1st January, 2019, covers all types of imported and domestically produced and distributed cigarettes. As of May 1, importing any type of cigarettes without the digital marks will be prohibited.
He said the latest phase will see imported and locally produced shisha tobacco tracked by the final quarter of this year.
"The FTA also maintains ongoing communication with concerned companies, to help them adapt their systems to meet our requirements and coordinate between all parties involved," he said.
As with cigarettes, shisha was hit with a 100 per cent tax in October 2017, though manufacturers and cafes absorbed some of the costs to prevent prices doubling.
Yuki Means Happiness
Alison Jean Lester
John Murray
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MATCH INFO
Real Madrid 2
Vinicius Junior (71') Mariano (90 2')
Barcelona 0
TEACHERS' PAY - WHAT YOU NEED TO KNOW
Pay varies significantly depending on the school, its rating and the curriculum. Here's a rough guide as of January 2021:
- top end schools tend to pay Dh16,000-17,000 a month - plus a monthly housing allowance of up to Dh6,000. These tend to be British curriculum schools rated 'outstanding' or 'very good', followed by American schools
- average salary across curriculums and skill levels is about Dh10,000, recruiters say
- it is becoming more common for schools to provide accommodation, sometimes in an apartment block with other teachers, rather than hand teachers a cash housing allowance
- some strong performing schools have cut back on salaries since the pandemic began, sometimes offering Dh16,000 including the housing allowance, which reflects the slump in rental costs, and sheer demand for jobs
- maths and science teachers are most in demand and some schools will pay up to Dh3,000 more than other teachers in recognition of their technical skills
- at the other end of the market, teachers in some Indian schools, where fees are lower and competition among applicants is intense, can be paid as low as Dh3,000 per month
- in Indian schools, it has also become common for teachers to share residential accommodation, living in a block with colleagues
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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FIGHT%20CARD
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The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
