Saving money in the UAE: Why is it such a struggle?

Published January 19th, 2016 - 10:03 GMT
Dubai’s inflation reached 3.99 per cent in 2015. (File photo)
Dubai’s inflation reached 3.99 per cent in 2015. (File photo)

Many expatriates living in the UAE are struggling to save money mostly because their monthly income is not enough to keep pace with the rising cost of living in the country, a new survey indicates.

In a study among 2,200 residents who are mostly expatriates in the UAE, it was found that about three in ten (30 per cent) are unable to save even a single dirham. Nearly six in ten (53 per cent) are not confident that household incomes leave enough room for savings.

The study, which was conducted between December 2015 and January 2016, highlighted not just the impact of living costs on family incomes, but also the poor savings culture or the lack of financial discipline among a number of residents.

Dubai’s inflation reached 3.99 per cent in 2015, mainly due to the costs of furnishings, household equipment, routine household maintenance, as well as accommodation, water, electricity and gas, among others

According to Jon Richards, CEO of compareit4me, who conducted the study, many people moved to the UAE because they believed they could make more money, but they failed to take into account the high cost of living that comes with moving overseas.

“I think that often, expats are attracted here with the considerably higher salaries than their home country, but don’t factor in the huge expenses involved with living here,” Richards told Gulf News.

“You can of course budget your lifestyle here, which many don’t do, and then fall into the debt trap which I guess falls into the lack of discipline category.”

The respondents, who were mostly expatriates, included a huge mix of Western and Asian nationals from various countries. The researchers, however, did not look into the income demographics of the survey participants.

Preeti Bhambri, founder of personal finance website, said she had come across a number of cases where expats find it hard to provide financial support to their families because of high school fees, transportation and other living expenses in the country.

"UAE is an expensive country to live in, with rent accounting for the biggest expense for every expat. There is reason to believe that some part of this population is struggling to meet living expenses as people often resort to debt to pay for basic [needs]," Bhambri told Gulf News.

However, not everyone in Dubai is up to their neck with debt or household expenses. Those who have made an effort to stick to a savings habit have seen their nest eggs grow despite high living costs and modest incomes.

Andrew Prince, financial planner at deVere Acuma, said the inability to save could be a result of lack of financial education either within the established framework of school or from parents. "In fairness, you don't know what you don't know, so how can you possibly teach?" Prince noted.

He said people can kick start the habit of saving money by paying themselves first.  A good rule of thumb is to set aside 20 per cent of the monthly salary first before anything else.

"Before your salary reaches the bank account, establish how much you are going to set aside each month for your 'tomorrow'," said Prince.

"So, for every Dh10,000 income, Dh2,000 is set aside and saved for tomorrow. The balance is for you to spend today on rent, food and entertainment [among others]."

Prince said it may be challenging for a lot of people to really follow through this habit, but with a "little discipline and practice, a good habit will form and you will be on your way to financial security."

It may be a good idea to "index your savings strategy" so that any wage adjustments that will come in the future is also  incorporated within it.

"Does it work? Well, I have one client in his late 20s who saves 25 per cent of his income, has a healthy bank balance and still plays golf every week. And before you ask, yes he is on a modest income."

By Cleofe Maceda


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