Money, or the lack thereof, is a constant source of stress for a lot of people. Once the salary is withdrawn and the rent, credit card bills and utilities are paid for, there is always very little left to save or spend on some of life’s little luxuries.
It’s little wonder that many families end up borrowing money after payday. For some, there’s no other choice but to tighten the belts and make some sacrifices, just to be able to set aside for unexpected expenses.
The inability to save is affecting households around the world. In fact, most people are able to set aside only 10 per cent of their monthly income for saving and investment purposes. Fortunately, when it comes to keeping money in the bank account, consumers in the UAE and other countries in the Middle East are among the most diligent.
The Global Savings and Investment report by Nielsen, a provider of consumer information and insights, showed that one in every two people in the UAE (52 per cent) and the whole Middle East/Africa (50 per cent) have increased their savings and investment allocations lately, compared with 36 per cent in Latin America, 29 per cent in North America and 27 per cent in Europe.
Nearly one-fifth of the respondents in the region (18 per cent) increased contributions significantly, by more than 25 per cent of their take-home pay. The figure is comparatively higher than the global average of 10 per cent.
In other words, there are more people in this region who are able to set aside a bigger portion of their paycheck towards future expenses — be they health care, children’s education or house purchase. The findings put a spotlight not just on the growing disposable wealth in the region, but also on consumers’ strong aspirations for a more secure financial future.
Financial experts said there is a strong commitment to save money in the Middle East because the expatriates, who make up the bulk of the workforce, are left on their own to secure their retirement. The pension and security systems cater only to the citizens. The upside, however, is that wealth seems to be growing faster in this market. In the UAE alone, there’s one dollar millionaire in every 25 households.
“Unlike the United States and Europe, most of the African countries and many of the Middle Eastern nations don’t have a safety net of social benefits,” said Arslan Ashraf, Nielsen managing director for the Arabian Peninsula. “Hence, people in these regions tend to save for rainy days and mitigate any risks arising from unplanned eventualities.”
Nielsen’s report, furnished to Gulf News last week, was based on a survey conducted between August and September last year among 30,000 consumers in 60 countries throughout Asia-Pacific, Europe, Latin America, Middle East, Africa and North America. The study seeks to understand the current and financial goals of consumers, as well the strategies that they use to prepare for the future.
Steve Gregory, a financial adviser and managing partner at Holborn Assets, said that since there is no income tax regime in most of the Middle East region, there is nothing to fund social support services.
“The result is people must prepare and make provision for themselves. In addition, the number of dollar millionaires in the UAE, Qatar and Kuwait are among the world’s top five countries, which enjoy the densest concentration of millionaire population in the world,” Gregory said on Thursday.
When it comes to financial goals, saving money for medical care, unexpected expenses and children’s future are high on the agenda of consumers in the region.
About four in every 10 people (41 per cent) are “actively” saving/investing their income for health issues. Almost the same number 40 per cent) are setting aside funds for household emergencies, according to Nielsen’s study
Future expenses for children are the priority for 35 per cent of the active savers/investors. About a third (33 per cent) are making sure they have enough money to dip into in case they lose their job or are unable to work, while 31 per cent are saving towards their first property.
Retirement earned the least votes (30 per cent) from current savers.
In the UAE, saving for longer-term issues, such as children’s future and higher education, are priorities among one-third of the respondents (34 per cent and 32 per cent respectively). About one-fourth (28 per cent) are presently saving for retirement.
“However, if you look at the highest responses for financial goals, then it is children’s future/education and home,” said Ashraf.
Gregory said people’s saving priorities are largely dictated by culture and family, so different nationalities prioritise in different ways.
“There are major differences in how people from differing regions deal with family, social and money issues. I believe people here prioritise in a way which is learnt behaviour from their peers and parents,” said Gregory.
Financial experts have encouraged consumers time and again to ensure a good portion of their income is saved towards emergencies and other financial goals. A savings pot gives people confidence that they are prepared to face the unexpected and will not succumb to excessive borrowing.
