With the summer season in full swing and the Eid holidays just around the corner, thousands of residents in the UAE will leave the country to spend their holidays abroad over the next few days. But it is important to ensure there is enough money saved to pay for the expensive trip.
Every summer, people from the UAE jet off to new destinations or visit families in their home countries, only to discover the flight, accommodation or holiday they had booked is more than their bank account can handle.
Money experts warned that, considering the high cost of travel, coupled with the rise in spending during Ramadan and lack of proper financial planning, many consumers are more likely left with little or no savings this summer.
A new research by Halifax showed that consumers have already drained their saving pots to pay for holidays and weekend breaks, with the average amount withdrawn from bank accounts standing at more than double the average amount deposited.
While most of the consumers (77 per cent) were able to set aside something over the last three months, more than a third of them said they have used their savings over the same period, according to the survey. Although the survey was done in the UK, the same trend can be observed in the UAE.
“Summer is an expensive time for Western expatriates, and for people with families back home, as well as for those who will be travelling in Eid. Add this travel expense to the cost of Ramadan and there will be little saved during this summer, I fear,” said Steve Gregory, managing partner at Holborn Assets.
It is not a bad idea to use savings to pay for vacations, but it is important that people set aside a budget and spend only the money intended for the holidays.
“While it’s great to have some money put aside for a rainy day, saving for something specific makes it harder to justify dipping into your savings because you can see the impact on the things the money could be used for,” said Richard Fearon, head of Halifax Savings, in a statement.
“Savings can be a great way to help you realise both long and short term goals, but, just like any other area of your finances, they are most effective when managed as part of your overall budget,” he added.
Gregory said one needs to allocate long-term savings as well as medium and short-term savings, which serve differing purposes.
It may be too late to start saving for this summer, but if you intend to have enough cash to spend in your holiday next year, the best strategy is to budget.
“Stop taking your credit cards out with you and draw weekly what you will need in cash and use it. When it is gone, go home. If you cannot trust yourself not to use cards, restrict your daily drawing to your budget provision, draw that only and leave the cards at home,” advised Gregory.
“If your budget after meeting all your other needs is Dh50 per day, then take Dh350 per week, and no more when that has gone. It’s important to discipline yourself before someone else does it to you. That someone else might be your partner, your bankers, your spouse, your debt collectors or your prison wardens. It’s much better to manage yourself.”
The survey by Halifax also showed that while some people (23 per cent) do save for their holidays, many of them (21 per cent) still dip unexpectedly into their hard-earned funds.
Besides saving for holidays, people are currently saving for their retirement (14 per cent) and house deposit (12 per cent). The overwhelming majority (59 per cent) are saving money for emergency or have no specific savings goal in mind.
The other most common reasons that lead people to raid their savings are over spending (17 per cent) and unexpected home or car repairs (16 per cent).