The Charles Dickens classic Little Dorrit is commonly misinterpreted as a “love story”. However, the primary character is not Little Dorrit, but the debt system and the detrimental effects it has on society.

Dickens often pointed out that money meant far more than simply the power to buy and sell. Money brings people together and tears them apart. It turns ordinary people into models of generosity or monsters of greed. Dickens despised the idea of debt and its negative impact on the community.

His observations hold true even today — and most likely will do so for some time to come or at least as long as our current financial systems exist.

Today, the value of personal loans far exceeds acceptable numbers, with financial experts claiming that loans feed on consumer culture and grow with the combined support of easily available liquidity from banks and low financial awareness among individuals.

Consumers today are more comfortable with the idea of borrowing instead of limiting consumption within their earnings. This sets off a vicious circle prompting people to spend beyond their earnings.

The numbers validate the observations. A study by the UAE Central Bank highlighted that personal loans rose by 2.69 per cent to Dh10 billion during the first quarter of 2014 from Dh7.105 billion in the same period last year.

Furthermore, the National Bonds Savings Index for 2013 revealed that 37 per cent of respondents in the UAE claimed to have opted for personal loans. The number is the highest among GCC countries.

Now, if we were to step back and quickly recall some of our most recent purchases, a good many of us are likely to notice a destructive cycle of loan accumulation — not for anything purposeful that may justify taking a loan in the first place but rather towards spending on unnecessary goods.

In doing so, we just let go of valuable money that could have been set aside for a rainy day. Failing to prepare for unforeseen eventualities only sets us up for financial ruin. Prosperity cannot be achieved at the expense of the future.

Keep track of expenses

At a macro-economic level, the trend is sure to impact the future of the UAE economy since debts do not fuel an economy but, rather, are obstacles to its sustained growth. Poor money management is more often than not the primary cause of all economic loss, whether at a personal or, indeed, a national level.

For effective financial management, we need to keep track of expenses and plan a monthly budget. Such an approach helps us understand how we can weed out unnecessary expenses and in the process avoid debt. While planning our budgets, it is important to ensure we spend within our means if only to prevent further accumulation of debt and the frittering away of our future income as payments for past expenditure.

In other words, taking prudent steps towards financial responsibility will allow us to reduce the probability of succumbing to the pressure of debt.

It is not just debt that needs to be avoided. It is equally imperative to take on a planned approach to savings and support the creation of a sustainable savings culture. The benefits of saving, particularly at times when markets are unpredictable, are far too many to list.

And, as with every other important aspect of life, it is vital to begin early. If a 25-year old employee puts aside Dh500 on a monthly basis until a presumed retirement age of 65 years, he would have accumulated a net fund of Dh240,000 — without including potential profits and prizes linked to some savings programmes. On the other hand, if a 45-year old breadwinner sets aside the same sum, he would only accumulate half the amount upon retirement.

On the flip side, there is also an element of risk in attempting to save too much too soon. Such an approach is often known to misfire, a reason why small but steady steps are a good way to start.

These are some of the core imperatives that individuals, families and even corporates need to abide by to cultivate a sustained savings habit.

Educating customers

For their part, financial institutes have an equal responsibility and must demonstrate socially responsible behaviour and take on the onus of educating their customers on their financial choices. As part of this mandate, institutions must make available practical savings tools for the community.

On this front, we are indeed fortunate that in the UAE we have access to diverse tools that inspire us to make savings a way of life. Institutes such as National Bonds Corporation have set the momentum in the right direction to the extent that the term “savings” as a buzzword is catching up with a substantial percentage of the population.

So, starting today, inspire yourself to take control of the two keys for achieving a secure financial future — avoiding debt and saving regularly. An enlightened society that finally imbibes the spirit of living within its means can accomplish incredible things indeed.

The writer is the CEO of National Bonds Corporation