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.
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.
