Credit card culture weighs heavily on UAE saving habits

Only one in five Emiratis puts away savings every month but more than half make monthly payments towards personal loans, a survey found.

Just more than one in 10 single Emiratis save monthly, according to National Bonds Corporation.

The findings of the fin­ancial health check survey by the savings and investment company National Bonds cover more than 1,000 Emiratis and other nat­ionals aged between 26 and 40.

It found that savings rates are higher among those with specific goals, but that money is put aside sporadically. Overall, 36 per cent of Emiratis save for a major purchase, 34 per cent save to buy a house and 24 per cent save for retirement. Only 7 per cent save for their children’s education.

Savings rates among other nat­ionalities found a much higher level of people saving for retirement (35 per cent) and a similar amount of people (37 per cent) saving to buy a house. But only 18 per cent of people said they were saving for a major purchase.

In terms of regular outgoings, National Bonds found that 56 per cent of Emiratis made monthly payments towards settling personal loans, 32 per cent to settle credit card debt and 12 per cent to pay off mortgages.

For non-nationals, 50 per cent paid monthly towards per­sonal loans, 38 per cent for credit cards and 13 per cent for mortgages.

Only 17 per cent of Emiratis had some form of takaful insur­ance to cover loss of income in the event of unemployment, terminal illness or loss of life.

But this figure was even lower among other nationalities (14 per cent).

“Five months since our last financial health check, we are observing a major shift in our savers’ financial behaviour,” said Mohammed Al Ali, the chief executive of National Bonds Corporation.

“Saving for retirement and homes is gaining precedence among customers of all nationalities. However, debts due to personal loans and credit cards remain the biggest challenge.

“Despite the increased awareness today about the importance of savings and the burden of debt, the credit card culture continues to weigh heavily on many people, draining their income and severely impacting their financial security and the future of their children.”

He added: “The issue of debt is more related to habit than need if we consider the high income levels of individuals and consumption trends in society.

“This habit is reinforced by excessive consumption associated with earlier economic phases, but the same habits may not be appropriate for the upcoming economic phase if recession and its challenges continue to adversely impact the global economy.”

A study published last week by the finance comparison website Compareit4me found that 53 per cent of UAE residents do not save because they believe they don’t earn enough money to put away. More than 30 per cent of respondents don’t save any money at all, and 13 per cent argue that life is too short to save.

The Compareit4me group editor Sonja Stephen said people should develop a realistic savings plan. “Increasing emergency savings, signing up for a good pensions plan and even investing are all key areas that should never be overlooked.”

mfahy@thenational.ae

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