Mohammad Al Shamsi, a grade 12 student at Al Dhafra school in Al Ain, was only 13 years old when he became a millionaire. He had saved his pocket money to buy some National Bonds certificates and one of them proved to be a winner! Instead of rushing out and buying electronic gizmos, or the latest audio-video system, he put some of the money in the bank and the rest he used to invest in more bonds.
"I was thrilled beyond belief,'' says Al Shamsi, now 18. "My father always encouraged me to save my pocket money. And that's what has helped me become a millionaire today. Thanks to this, my future is pretty much secure.''
If this young man's savings helped him reap a bonanza, meet Mohammad Inamul Haq, a Pakistani national from Abu Dhabi who became a millionaire not once but twice, the second time thanks to his toddler son. Using Dh20,000 he had saved for over a year, the used car businessman invested in National Bonds. And he got lucky earning a million twice within two months in 2009 in the Bonds' millionaire draw.
"I feel I've got a new life,'' says Mohammad, 47, who has been in the UAE for 20 years. "I have always been very lucky but winning a million twice was unbelievable. The first time I had invested an amount of Dh20,000 in bonds in my name and was pleasantly surprised when I won a million dirhams.
"After I won the first time, I invested a portion of the money in bonds in the name of my youngest son Hamdan, who was two and a half years old at the time, and became a millionaire the second time."
He has used his winnings to purchase a freehold property in the UAE in the names of his four children; Hamdan, four, Hamad, eight, Sara, ten, and Shaikha, 13.
"Even if one doesn't win a raffle, investing in bonds is good because the savings will hold you in good stead on a rainy day!" he advises.
It's vital to secure your financial future
Mohammad's words make sense. The 2011 National Saving Index, released by National Bonds based on a survey in the country, found that 86 per cent of UAE residents believe that their savings are inadequate for their future, and 46 per cent admitted that over the past year they saved much less than they had originally planned. Shockingly, 71 per cent of respondents said they do not save regularly.
"Youth today need to learn about the importance of savings because they are the foundation of our country's future and they can contribute to the financial stability of our economy by securing their own financial future,'' says Mohammad Qasim Al Ali, Chief Executive Officer, National Bonds Corporation PJSC. "If we raise a generation of savers, then in case of any external factors such as an economic downturn, unemployment levels, health or family problems, they will have back-up available to get them through the tough times.''
Danielle Livellara, a US-based Financial Wellness Consultant, agrees. "It's never too early to start saving,'' she says. "Teaching your children to save at an early age can help set them up for a lifetime of financial success.''
Danielle says parents need to teach children the value of money as soon as they begin asking for things. "Give them some change and a savings bank to get them into the habit of saving. If they want something like a new bike, instead of just buying it for them, have them earn money and save it to buy the bike.''
Parents can also advise children about the different ways they can save. Qasim Al Ali says, "From a proactive point of view, we are launching financial education seminars which we can conduct with minors to explain the importance of savings to them, and in the past have distributed savings boxes in schools across the UAE. We have had some winners as young as two years old, and some who are teenagers who can really appreciate to a certain extent what it means to win such a huge amount."
Danielle says saving money is one of the most important things you can do for yourself and your family. "Saving allows you to be self-sufficient and to be able to take care of yourself both in good times and in bad. It also allows you the freedom of choice.''
She admits that having more money does not necessarily mean you will be happier. "But chances are you will feel less stressed about how to pay your bills,'' she says. "As a financial wellness consultant, I have seen first-hand how stress over money can lead to marital problems, health issues, and poor business management.''
Danielle says it's a great idea to establish your own "rainy day fund" in case of emergency.
"I'd recommend three to six months worth of living expenses. I have a client who was laid off recently, but since she has six months worth of living expenses in her savings account, she is not worried about how to pay the mortgage next month. If you lost your job, how long could you keep your household running? You need to keep that in mind when saving.
"To me savings equal freedom. With enough money - or some kind of savings bonds - in the bank, you get to make choices that are best for you, and not feel forced to make a decision because you lack money,'' she says.
Make saving automatic
While Danielle says it's important to set aside money in a savings account, she also makes it clear that one should invest in children's education and their future.
"The easiest way to grow your savings is to set aside some money each month, and automate it,'' she says. A good rule of thumb is to save 10-20 per cent of your income, but if that is too high, start with what you can save. Set it up so that money is automatically deposited into your savings account, so you aren't tempted to spend it, she suggests.
Danielle advises trying to increase savings slightly each month. "See if you can increase the amount you save each month, even if it is only by a few dirhams. If you get extra funds during the month, like a bonus or a gift, make it a goal to put as much into savings as you can.''
Another way to increase savings is to review your monthly spending. "Most of my clients think they know how they are spending their money every month, and they are always wrong! When you know how much you are actually spending, you can make choices about what you really want.''
Qasim Al Ali adds, "Most people think that saving money is one of those tasks that are so much easier said than done. However they need to understand that saving is not an action, it is a habit, and developing it needs time and commitment."
Mohammad Qasim Al Ali offers ten tips on how to save wisely
1. Plan a budget. Detail your monthly income and expenses. Once you know how you're spending your money you'll be able to find areas where you can cut back a little.
2. Review your budget regularly. Break down your expenses into two categories - fixed, like rent, school fees and insurance premiums; and variable, such as food and grocery shopping bills and entertainment expenses. This will help you track your money and you'll have a clear idea where your money is going.
3. Don't be too hard on your expenses or you may end up becoming a miser. Remember that we are in a culture of generosity and charity so it's important to spend wisely on things that are important for you, your family and society.
4. Pay bills first. Arrange for your monthly bills to be paid, if possible in full, automatically as soon as you get your salary. This will ensure that you don't spend on anything unnecessary until you have completed your financial responsibilities for the month.
5. Beware of bank charges. It's important that you know how much money you are losing every month through bank charges, transfer fees, withdrawal fees, ATM costs, renewal fees and much more. These charges could be a drain on your savings. Look for savings schemes that have no charges.
6. Get some advice. Financial advice from a qualified person can go a long way to help you reach your goals.
7. Track your expenses. Be aware of your expenses each month. Develop the habit of saving receipts so you can keep a track of what you spend on.
8. Get friends and family involved. Savings are a bit like a diet - the more people you get involved with you the more support you can offer each other to stick to your goals.
9. Have an achievable goal in mind. It could be something small like a new suit, dress or phone, or something big like marriage, a new car or the house of your dreams. This will help incentivise you not to break the habit.
10. Don't let unexpected expenses demotivate you. Expenses like the replacement of a defective car part, hospital bill or lost phone can take a chunk out of your savings, and can be a source of frustration and demotivation for the person. Stay positive and remember that savings are for moments like these. You would have been in a much worse state if you didn't have the money when such surprises came along.
5 dos and don'ts to curb your spending habits
Qasim Al Ali advises on how to tighten your purse strings.
1. Be disciplined. Learn to cut back on luxuries such as designer clothes and eating out until you have paid off your debts. This also gives you something to look forward to, when you are in a position to spend on luxuries again.
2. Make small changes to your daily spending. For example, if you replaced your Dh22 cup of coffee-shop cappuccino or latte with a homemade one you could save more than Dh600 a month. If you utilise your gym membership in the evenings instead of going out, you save double, first using something you have already spent money on and second avoiding the expenses of food, transportation, cinema. Plus you are improving your health.
3. Do not carry more cash than you need. This will help you control your spending.
4. Do not carry your credit card everywhere. Keep in mind that the credit card is there as a backup. If you take it with you every time you go shopping, chances are that you will be tempted to use it.
5. Do not succumb to peer pressure when it comes to spending. Always be independent and make your own decision based on your own objectives.