Saving for a rainy day: Why failing to plan is planning to fail

Saving for a rainy day: Why failing to plan is planning to fail
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Published May 25th, 2016 - 11:26 GMT via SyndiGate.info

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Financial experts agree that an emergency fund is not just a nice extra, it can be a lifeline. (Shutterstock)
Financial experts agree that an emergency fund is not just a nice extra, it can be a lifeline. (Shutterstock)
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Life in the UAE can move pretty fast, and the money in your pocket can move even faster. However, in this era of living in the moment and spending on credit, the idea of saving up for a rainy day isn’t an easy sell.

A survey by Compareit4me.com revealed that majority of UAE residents still struggle to save, with more than half of the respondents (53 per cent) saying they don’t think they earn enough money to allocate any to savings. The findings also indicated that less than half of UAE residents set aside funds from their monthly wage for retirement or emergencies. It is not a trend restricted to here either: According to a recent survey by consumer financial services company Bankrate.com, just 37 per cent of Americans have enough savings to pay for a $500 (Dh1,836) emergency. 

Financial experts agree that an emergency fund is not just a nice extra, it can be a lifeline. “Establishing an emergency fund is critical to any sound financial planning for innumerable reasons,” says Sam Instone, CEO of AES International, one of the leading financial advisers in Dubai. “Failing to plan appropriately for the unexpected is the single biggest cause of financial pressure that we see within the UAE. I would recommend trying to save at least three months’ worth of salary and leave that in a savings account with your bank.”

Job loss or change

Most UAE expats have experienced a sudden change on the professional front and it is vital to be prepared. “There are various unexpected expenses that can arise when living abroad, such as redundancy, an urgent requirement to go home, or a change in personal or professional circumstances, which forces a speedy relocation,” says Brendan Dolan, Regional Director of investment solutions firm Old Mutual International for Middle East and Africa. “We would recommend that people do not rely on credit cards, loans, or worse, tap into their retirement provisions to cover any emergencies. Instead, place their money in an income-earning, and easily accessible savings account, enabling them to access the money quickly and inexpensively if an emergency should arise.” 

Unexpected travel

It may seem a bit ghoulish to plan ahead for sudden death, but if you lose a loved one the last thing you want to worry about is travel costs. You also wouldn’t want the cost of a plane ticket to prevent you from being there for the birth of a relative’s or friend’s child. If you have to travel unexpectedly, your emergency fund can help keep charges off your credit card and ease stress.  

Rent hikes

The UAE’s real estate market is still volatile, with some residents complaining of sudden rent hikes. If this happens and you don’t want to leave your apartment, having money in the bank will be a blessing. Umer Ali, Sales Director at Dubai site Propertytrader.ae, advises renters to think strategically. “Anyone who rents a place in Dubai right now is going to deal with the same uncertain conditions that are reflected elsewhere due to the global economy. So it makes sense to have enough spare cash to cover at least six months of rent. Even if your financial situation is good, still try to save enough money to cover a spare rental year — just in case.”

Medical emergencies

Even if you have good health insurance, it doesn’t always cover the whole cost of care, especially if you or a family member is in need of an ambulance ride, a major surgery or physical therapy. Then there are your pets — veterinary visits, especially during an emergency, can be costly if you don’t have pet insurance.

Unexpected bills

The devil is in the detail and it is often those unexpected obligations or financial blips that mess things up. Instone warns that these financial curveballs can cause monetary havoc. “Forgotten bills or credit-card debts, perhaps stock market dips if you are an investor, or a lack of correct insurance coverage — these can all hit you hard, so an emergency fund is a must-have.”

Maintenance and repair

Whether it is a burst pipe or a problem with your car, household repair and maintenance can sometimes cost you a fortune, which is why an emergency fund is a safety net. “Things don’t always go according to plan and it’s vital you have money set aside to deal with anything that comes your way,” says Jon Richards, CEO of Compareit4me.com. “We all know your car tyre is likely to blow on the month you can least afford to replace it. And even if you have insurance to cover accidents, there is often still an excess to pay, which can be costly.” 

By Emma Procter

 

© Al Nisr Publishing LLC 2016. All rights reserved.

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