85% of UAE residents still not saving enough for their future: National Bonds

Many residents delay saving because they mistakenly believe they are 'barely catching up with inflation' says the company's chief

Mohammed Qasim Al Ali, the chief executive of National Bonds, said many residents have 'a mental barrier' when it comes to saving. Razan Alzayani / The National

More than eight in 10 UAE residents feel they are still not saving enough for their future, the latest Savings Index from National Bonds Corporation has revealed at a time when many are struggling with cost of living increases.

Eighty-five per cent of those polled for the Dubai investment company's latest Savings Index said they are not stashing enough cash and while 57 per cent of savers plan to increase their savings this year - this is less than the 64 per cent quoted in 2017.

Mohammed Al Ali, the chief executive of National Bonds, said the index, which first launched in 2011, indicates that many residents have 'a mental barrier' when it comes to saving, mistakenly believing they are "barely catching up with inflation".

"People are not accustomed to planning ahead in their life. They live day to day, month to month and as long as they are running along they think they are in safe haven," he told The National. "Unfortunately it does not work that way and the moment a crisis hits in their lives, they find out that they don't have enough to cater for that emergency."

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The latest index comes at a time when UAE residents are struggling with the rising cost of living. Dubai, for example, was billed as the third most expensive expatriate destination in the world, according to a study released last week by UBS.

Steve Cronin of DeadSimpleSaving.com, a website to help residents invest their own money, said it is concerning that fewer people than last year are expecting to save more in 2018.

"This is likely due to people feeling the squeeze from the rising cost of living rather than an insistence on an extravagant life," he said. "More people are becoming conscious of their spending and trying to trim their lifestyle accordingly. This may be out of necessity to stay above water rather than a clear plan to save money."

However, Mr Al Ali said residents are mistaken in their perception that they are struggling.

"Have you noticed that rents have dipped down by about 15 to 20 per cent in certain places?" he said. "Now, if my rent has dipped down by 15 to 20 per cent – is that not more than enough to cope with the rise in inflation? Inflation is running about 3 to 4 per cent. I think if people reassess their expenses – they can find ways to save."

National Bonds’ survey of 1,300 people across the GCC also indicated that residents are keen to save but for many it is something they plan to do in the future. Forty-one per cent of respondents are only planning to start their savings journey this year while two thirds of savers in the wider region aimed to increase their savings in the next six months.

Mr Al Ali said the results indicate that although people want to save, they do not always have the tools or know-how to do so. “The wish is there to save but the discipline and the action is not matching the wish," he said. "Remember that financial literacy is not prevailing enough among the public and the UAE gives people a very good lifestyle, so many do not put money aside.

To help solve this disconnect, Mr Al Ali said residents need to be more disciplined and start saving immediately, rather than delaying for a future date.

"The golden rule here is that you have to pay yourself first," he said. "A lot of people are failing to do that – they pay others – they pay for their TV, their phone bill, the electricity bill, the rent etc, but they don’t pay themselves first."

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How to start saving today

Developing a plan to increase your savings rate will help to reduce money worries in the future, according to Mr Cronin, who said it is "not something to put off until next year". His top tips to help you start saving straightaway are:

• Decide that you are going to start being good with money from today.

• Pull together all your major assets (cash, gold, property, stock, bonds, pensions etc.) in one spreadsheet so you know what you actually have.

• Do the same for your liabilities (credit card debt, loans). The difference is your net worth, which you should track every month.

• Track all your major sources of income and expense, then identify what your monthly savings rate is.

•  Identify ways to boost your income and cut your expenses - get rid of unused subscriptions and avoid unnecessary purchases.

•  As your savings rate increases, learn how to invest your long-term savings in cheap and diversified products such as exchange-traded funds.

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