No savings for one in three Emiratis and a fifth of UAE expats

Survey compiled by Souqalmal.com says high living costs, the perception of being rich and little education on how to manage income and debt is contributing factor for lack of savings.

Half of the respondents claimed they do not save anything at all, according to the Souqalmal.com survey. Silvia Razgova / The National

One in every three Emirati citizens does not save a portion of their disposable income.

A survey compiled by Souqalmal.com showed 30 per cent of nationals do not know how to manage their money.

“The combination of high living costs, the perception of ‘being rich’ due to no taxes and a lack of education on how to manage income and debt could explain the results of our survey,” said Ambareen Musa, the founder and chief executive of Souqalmal.com.

The flow of easy credit in the country and the issues of overspending and subsequent debt management have been brought into sharp focus after UAE nationals were immunised from serving jail time over bounced cheques by presidential decree in October.

Bouncing a cheque is a criminal offence in the Emirates but cheques are widely used as guarantees throughout the economy.

The Central Bank is reviewing the number of defaulters in the wake of that decree after earlier launching a fund to restructure mounting debt incurred by Emiratis.

Mashreq said last month that there was a rising number of nationals falling behind on their loan repayments since the decree.

Interest rates in the UAE are at the higher end of the scale compared with developed markets. The average monthly interest rate on a UAE credit card is 2.705 per cent, equivalent to an annual rate of 37.75 per cent, according to data collated from Souqalmal.com. The highest interest rates on transactions is 3.33 per cent, 47.6 per cent on an annual basis.

Those travelling overseas can face higher interest charges still, the data showed, with  monthly interest rates topping out at 3.89 per cent, equivalent to an annual rate of 58 per cent. A fifth of UAE residents – expatriates as well as Emiratis – said they were unable to save a part of their income. Thirty-two per cent of Arab expatriates said they were struggling to make ends meet and 12 per cent said they did not know how to save.

"We found that many residents do not have a clear management of their monthly incomings and outgoings," the report said.
Four out of 10 respondents save less than 10 per cent of their monthly income. Half of the respondents claimed they did not save anything at all.

That is compared to one out of five people in the UK who say they have not saved at all for their retirement, according to an HSBC report published in February.

In the United States, the number of people who have not put money aside for a rainy day rose to 28 per cent last year compared to 24 per cent the year previous, according to a report by Bankrate, which appointed Princeton Survey Research Associates International to conduct  telephone interviews with 1000 people living in America.

The UAE figures come amid an increase of investment in infrastructure – boosting the economies of Abu Dhabi and Dubai – more than four years after the global financial crisis triggered a wave of indebted expats leaving the country rather than risk prosecution.

When the Dubai property bubble burst, banks – armed with security cheques – held the threat of jail time over defaulters ahead of efforts to negotiate on mortgage repayments.

Just under half of the respondents said they stashed their money in a savings account. The rest said they preferred to invest in property. The “least popular” option was investing in equities, the report said.

Trading on  stock markets in the Emirates declined after the onset of the global financial crisis cut investment appetite and slashed asset values.

The Abu Dhabi Securities Exchange General Index has lost 42 per cent of its value since its peak of 5,148 points in 2008, while the Dubai Financial Market General Index has lost 67 per cent in the same period.

The survey, which interviewed 900 respondents living in the Emirates, showed that the western and Asian expatriates saved the most – about a third of their income.

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