The festive season is notoriously expensive — but the next present you buy could actually save you money. Investing in a financial gift for yourself could be the best New Year’s resolution you make. From cheap mortgages to credit cards with cash back and new investments, savings abound for those willing to shopping around. Consider some of our top financial gifts below, and your bank balance could look rosy rather than in the red.
1. Get a fixed deposit account
Want to buy a property in a couple of years’ time? Or are you saving for your child’s education? For anyone with short-term savings goals, fixed deposit accounts could be the answer. They offer low-risk savings over fixed periods, typically one to five years. Interest rates are generally better than most current accounts, but most fixed deposits do not allow access to your cash during the term, or levy penalties for early withdrawals. According to the Souqalmal.com comparison website, Emirates NBD offers the best fixed deposit rate in the UAE, at 2.5 per cent for a three-year deposit.
2. Invest in a mutual fund
Those who want the exposure to the markets but lack experience should consider a mutual fund investment. These pools of funds invest in securities like stocks and bonds, and give small investors exposure to broader portfolios than would otherwise be possible. “For a few thousand dollars, clients avail themselves of the best fund managers and have peace of mind knowing someone is looking after their money 24/7,” says Andrew Prince, a financial planner at the Dubai-based wealth management firm Acuma. One of the world’s best-performing mutual funds is the Matthews India Fund, with a 66 per cent increase in value this year. “Funds investing in India did particularly well last year, with some achieving over 70 per cent returns,” adds Mr Prince. But he cautions: “Just remember, what goes up …”
3. Buy National Bonds
UAE National Bonds make for a more unusual financial gift to yourself. While they don’t offer as attractive average returns as some riskier investments, buyers have the opportunity to win big. Monthly prizes include a Dh1 million jackpot, two cars and Dh50 awarded every minute. “You are effectively lending money to the government who in return will give you a little profit, typically about 2 per cent per annum,” says Mr Prince. “This is a modest return unless you get lucky, in which case you could be the proud owner of a new car or even become a dirham millionaire. Importantly for those of Islamic faith, they are Sharia-compliant and the returns are generally at least as good as deposits in the bank even if you don’t get lucky.”
4. Get a new current account
Most current accounts in the UAE pay you zero interest on your deposits — and some even charge you a monthly fee. But make it your new year’s resolution to switch banks, and you could be in the money. Swapping is a hassle — especially if you have regular payments going out of your account — but it can be financially rewarding. For example, RAKBank’s “RAKvantage Account” has tiered interest rates of up to 1.25 per cent according to the deposit amount. FGB’s First Gulf Bank Power Plus account offers the best rate in the UAE, with interest of 2.65 per cent, according to Souqalmal.com. But a representative of the bank said this rate may be revised in the new year.
5. Remortgage your property
Record low rates in countries such as the UK mean that homeowners pay as little as 0.99 per cent interest on their mortgages. But in the UAE, some are stuck on rates as high as 8 per cent, says Warren Philliskirk, director at Mortgage International in Dubai. A recent change in Central Bank regulations means early repayment charges on mortgages are capped at 1 per cent of the outstanding loan up to a maximum of Dh10,000. This means remortgaging could pay off, with rates of between 3 and 4 per cent offered by some UAE banks. Yet those looking to remortgage should consider costs carefully, as additional charges and fees can amount to thousands of dirhams — and bear in mind some banks may not lend against particular property developments. “When moving from one bank to another, we first look at the overall savings against the accumulated costs of moving to see whether it’s actually viable,” says Mr Philliskirk.
6. Get a credit card that pays
With double-digit interest rates on outstanding balances, credit card operators certainly know how to make their money. Some offer perks that mean that they end up paying you each month — but it only pays off if you always clear your balance in full. Perks vary from cash back to air miles and free valet parking — so the best card on offer depends on your needs. Emirates Islamic Bank offers a credit card with 10 per cent cash back on spends with Etisalat and du, 5 per cent back on transactions in electronics stores, and 1 per cent on all other purchases. But it is worth doing your sums to see whether it is worthwhile, given the Dh350 annual membership fee.
7. Consolidate your debt
If your debts are mounting, the best financial gift you could give yourself for next year could be another — cheaper — loan. Credit card debt can be particularly expensive, and a consolidation loan would almost certainly have a lower interest rate. But discipline is required in such situations so as not to allow your debt to spiral. The lowest interest rate on loans available to expatriates in the UAE is 4.75 per cent through CBI, according to Souqalmal.com. But to qualify for that rate, customers need to earn at least Dh20,000 a month. Ambareen Musa, the chief executive of Souqalmal.com, says there are many factors to consider when choosing a personal loan, such as whether the lender requires your salary to be transferred to them, as well as arrangement and processing fees. Those who have not been living in the UAE for long may also be charged a higher rate, she adds.
8. Insure your belongings
Just 6 per cent of UAE residents have insurance cover for their home contents, according to survey last year by Zurich. That was despite the issue being thrust into the limelight after the devastating fire at Tamweel Tower in Dubai in November 2012 that consumed the life possessions of many. Most UAE residents “are not aware or educated about the subject and its risks”, says Alison Fenech, the head of general insurance at Nexus Insurance Brokers. “People also tend to look at insurance as an extra expense when in reality it isn’t. What they don’t realise is that although the frequency of a loss is minimal, the severity is high,” she says. With insurance on Dh60,000 of belongings typically costing just Dh180 a year, it could be one of the best investments you make for next year. “Your contents are at risk every day. Today you are lucky; tomorrow you might be unfortunate and suffer a loss,” adds Ms Fenech.
9. Have fun and save
If you have made any of these financial gifts to yourself, it’s time to go out and celebrate — and you can save money there, too. The Entertainer, based in Dubai, has been publishing books of “two for one” vouchers since 2001. Its range of UAE books for next year offer combined savings of Dh2 million on restaurants, hotels and attractions. The Abu Dhabi book has 750 vouchers and costs Dh355 if purchased before December 31. That’s admittedly steep, given many other discounts services such as Groupon do not require a hefty initial outlay. But Penny McNamara, the head of brand, events and PR at The Entertainer, says her firm’s offers are “far more flexible” because they are valid all year. With the average UAE customer saving Dh4,500 last year, it shows that making a financial gift to yourself can also be fun.
pf@thenational.ae
Follow us on Twitter @TheNationalPF
