It is a common catchphrase many UAE-based expatriates hear on repeat from their friends and family at home: “You must be saving a fortune out there!” The truth of the matter is, when millennial expatriates arrive in the UAE, it is somewhere between accepting a comparatively high-paying job offer paired with tax-free salaries and actually receiving their first pay cheque, that their financial sense and approach to saving appears to change.
While the impetus behind moving to the UAE often lies in the comparatively higher wages seen in this market versus home markets, with many viewing it as an opportunity to create a nest egg for the future, it is widely known that very few working professionals actually save any of their household income — something that always surprises me. I often wonder whether UAE-based expatriates are unable to save because they are living beyond their means or whether it is because salaries are not in tune with the shifting economic landscape.
While the latter is a key factor in how much money people are able to save for their futures, more often than not, living in the UAE often comes hand in hand with high spend on material goods and on experiences such as travel and F&B. I see that many expatriates are simply distracted by the trappings of the good life — temptations of buying a new car; renting a home with a private pool or signing up to a golf or beach club membership.
We see a massive spend culture among many millennial expatriates in the region and many young professionals have a short-term view of their financial health. However, if you are over 28 years old, earning well and not saving a percentage of your monthly income towards your future or retirement, you are missing out.
It’s not just expatriates who are guilty of not saving. Many young Nationals are also accustomed to expensive lifestyles and luxurious treats in the region and beyond. Notably, many young Arabs are spending a significant portion of their disposable income specifically on clothing and footwear. Spending on mobile phones and dining out are next in order of priority among Arab youth.
By taking a proactive approach to finances early on, young people can build on their foundations by saving and investing small amounts regularly. There are simple steps that can make a huge difference to their ability to save now for a chance at a comfortable retirement. Early engagement with money management is key to plugging the savings gap and enhancing young people’s prospects at the end of their working lives.
Those that take responsibility and plan accordingly are undoubtedly in a stronger position for the future. However, as a professional body, we encourage access to qualified financial planners.
Goals and priorities
While financial planning is key in providing directions to younger savers what is equally important is hiring a qualified financial planner when you’re earning enough to save. A well-qualified financial adviser is trained to deal with a myriad of challenges and can help young professionals set financial goals and priorities, and then recommend specific steps to meet them. Check the credentials of the adviser in question — Are they professionally qualified? Are they members of a professional body? Do they have the right kind of experience? Qualified financial professionals can guide clients in saving, investing and growing their money and help them tackle specific financial goals — such as buying property or simply providing a macro-view of their money and interplay of various assets. Some planners specialise in retirement planning or estate planning, while others consult on a range of financial matters.
Saving for the future is paramount and this is true especially today, with the economic uncertainties and challenges we are facing as a society. With these challenges, we also have an opportunity — there are many ways to manage your finances for a more secure future. This could be sending money back to your home country; creating an offshore account; saving 10 per cent of your income as an absolute minimum. Whatever the approach is, saving is a must.
Factbox: Tips to create a saving pot
• Draw up an income and expenditure. You need to have a clear picture of how much money you have coming in and where it’s going each month/week.
• What’s your goal? Are you saving to buy a home? Do you know how much you want at the end of 5 years or by the time you are retired?
• What’s your spending priorities? Look at what you spend your income on and decide what are “needs” and which are “wants”.
• If you can’t afford all of your ‘wants’ then you have to look at ways of cutting costs.
• Open an offshore savings account and set up a monthly transfer to save the amount which will get you to your desired goal or do your research and meet with a qualified adviser who is a member of a chartered body to discuss your options.
Matthew Cowan, Regional Director — Middle East, Chartered Institute for Securities & Investment.