Eight in 10 UAE millennials struggle to manage money amid Covid-19

The generation is using budgeting apps to better prepare for their financial future, Standard Chartered survey finds

The amount of disposable income available to spend for millennials has come under pressure in the wake of the pandemic. Getty Images

Nearly three-quarters of people in the UAE have found it more difficult to manage their money since the start of Covid-19, according to a survey by Standard Chartered.

Millennials have been hardest hit, with almost eight out of 10 finding it challenging to manage their daily expenses.

"Millennials in the UAE have been more impacted by Covid-19 because they are in the early stages of their career or mid-managerial roles," Sonny Zulu, head of retail banking at Standard Chartered UAE, told The National.

"A majority of them are also dependent on loans and have maxed out their debt-service ratios because of financial pressures and lifestyle.”

The amount of disposable income available to millennials, who are aged between 25 and 44, has also come under pressure in the wake of the pandemic, Mr Zulu said.

This trend resonates globally, with 41 per cent of millennials most likely to struggle to meet day-to-day expenses, according to the Standard Chartered survey, which polled 12,000 adults across 12 markets including the UAE, UK, US and China between September 25 and October 1.

Millennials in the UAE are twice as likely likely to feel they don’t have control of their bank balance compared with those aged over 45, and 25 per cent more likely to have found meeting day-to-day expenditures, such as household bills, highly challenging, the survey found.

“The standard of living is quite high in the UAE and its cities rank high in the cost of living index. Also, there is easy access to consumer finance here. The UAE’s lifestyle is more skewed towards spending,” Mr Zulu added.

Some 34 per cent of millennials in the UAE said their borrowing increased in the past month compared with 22 per cent of those aged over 45.

Credit cards and mortgages are the main types of debt being racked up by millennials. However, they are not necessarily getting new cards. “A number of millennials had limits marked on their cards, but utilisation was much lower before Covid-19. During the pandemic, those existing limits are being fully utilised,” Mr Zulu said.

A majority of UAE millennials have maxed out their debt-service ratios because of financial pressures and lifestyle

More millennials are also taking out mortgages in the UAE, including for off-plan properties, while those who were renting decided to purchase property.

Covid-19 has had a significant impact on spending and savings habits across generations.

“Generation X’s major concern is job security or business sustainability. They are looking at alternative asset classes to invest in. Baby Boomers are looking for property to settle here and relooking at their savings in the UAE,” Mr Zulu added.

Despite the pandemic-induced economic pressures, the UAE’s millennials are using the opportunity to better prepare their financial futures.

One-quarter of UAE respondents have started using money management tools, such as budgeting apps, during the pandemic to help them stay on top of their finances, according to the Standard Chartered survey.

“Even before the pandemic, millennials’ adoption of digital platforms was relatively higher than other generations. However, there was not so much interest from millennials for savings and investment. Their uptake of digital money management tools has increased now,” Mr Zulu said.

Despite a drop in their disposable income, 42 per cent of UAE’s millennials have become more confident they can reach their financial goals, partly due to their uptake of digital money management tools. In the UAE, 31 per cent of millennials are saving for a major purchase such as a new car or home, compared to only 25 per cent of those over 45, the survey found.

To meet these ambitions, UAE millennials are choosing to better track and budget their spending. Half of the UAE’s millennials want to alter their daily spending, 28 per cent have started using a money management or budgeting app, while 64 per cent of those who haven’t plan to do so in the next three years.

“The pandemic has helped generate interest in savings. We expect to see a shift towards beginning to save in small amounts by millennials. [After] the pandemic, that behaviour is expected to continue,” Mr Zulu added.

A separate survey by Barclays Private Bank on the intergenerational transfer of wealth shows that millennials are driving a shift to sustainable investing among their high-net-worth parents and grandparents.

Almost 59 per cent of older generations of HNW families in the GCC said millennials are leading their family towards more sustainable investing, according to Barclays Private Bank's Smarter Succession: The Challenges and Opportunities of Intergenerational Wealth Transfer research. The survey polled 402 HNW families with at least £5 million ($6.6m) in assets in 11 markets, including Saudi Arabia and the UAE, during the second quarter of 2020.

“While differing life outlooks and values may determine discrepancies in risk investment appetites across generations, it is encouraging to see that impact investing is a movement that resonates with individuals of all ages,” Rahim Daya, head of private banking at Barclays Middle East, said.

This has led to increasing family allocations to sustainable assets and is acting as a common ground for different generations in financial planning, despite different views towards risk.

One in 10 (11 per cent) of all generations say that having a positive environmental impact is a major personal aim, and 58 per cent in the Middle East agree that responsible investing is now important to them.

“Our research shows how the younger generations, who have been engaged longer with sustainable investing, are providing a vocal impetus within their families to shift the perspectives of older generations,” Damian Payiatakis, head of sustainable and impact investing at Barclays Private Bank, said.