Generational responses to the pandemic
Devesh Mamtani from Century Financial believes the cash-hoarding tendency of each generation is influenced by what stage of the employment cycle they are in. He offers the following insights:
Baby boomers (those born before 1964): Owing to market uncertainty and the need to survive amid competition, many in this generation are looking for options to hoard more cash and increase their overall savings/investments towards risk-free assets.
Generation X (born between 1965 and 1980): Gen X is currently in its prime working years. With their personal and family finances taking a hit, Generation X is looking at multiple options, including taking out short-term loan facilities with competitive interest rates instead of dipping into their savings account.
Millennials (born between 1981 and 1996): This market situation is giving them a valuable lesson about investing early. Many millennials who had previously not saved or invested are looking to start doing so now.
Since the start of the Covid-19 outbreak earlier this year, Karishma Valecha and her husband have been more thrifty with their day-to-day expenses. They have been using enhanced budgeting methods to cut down on their weekly grocery purchases, as well as cutting back on discretionary spending such as dining out and buying non-essential items, which has resulted in a boost to their savings.
“My husband and I used to go out five times a week to dine out before the pandemic. We also used to go for outings with our family. All that has stopped after Covid-19. We have been home bound since February,” says Ms Valecha, a Dubai-based housewife from India. The couple now prefer to cook at home, although this results in higher grocery bills.
Before the pandemic struck, the 38-year-old’s biggest expense was travel. Ms Valecha typically went on four overseas holidays every year. But she has not travelled since the outbreak of the pandemic. The last destination she visited was Bali in October 2019.
"The pandemic has changed our spending habits. I have downloaded several apps on my phone that help me do a cost comparison of grocery products before ordering them online. My husband and I have also reduced our visits to the mall, so that has helped cut down our expenditure," she tells The National.
However, even before the pandemic, Ms Valecha did not have any debt. Her family had taught her to set aside 60 per cent of her income towards expenses and the remaining 40 per cent for savings.
“We have always set aside an emergency fund for a rainy day even before the onset of the pandemic,” says the former banker, adding they invest in stocks and fixed deposits.
During the pandemic, Ms Valecha and her husband, a financial director with an energy drinks company, continued those investments, particularly in gold futures as bullion prices have been rising steadily.
“We have also been investing in stocks in companies like Uber and Boeing because we expect them to perform well and anticipate price appreciation. We have also invested a small amount in mutual funds in India,” she says.
The couple has also managed to offset some expenses during the pandemic because of a rent reduction offered by their landlord.
This resonates with a recent study conducted by YouGov on behalf of consultancy Kearney Middle East, which found that four out of 10 UAE residents increased their personal savings during the Covid-19 stay-at-home measures, as they cut back spending on big-ticket items and even reduced the amount of money remitted back home.
“Staying at home and the various movement restrictions have caused UAE residents to rethink their lifestyle and personal financial decisions," says Devesh Mamtani, chief market strategist with Century Financial, a financial consultancy in the UAE. "Job losses, reduced salaries and leave without pay on account of Covid-19 have resulted in a reduction in personal disposable income.
“This has forced residents to make more rational decisions as far as spending and investments are concerned.”
Banks in the UAE are also reporting an increase in customers opening new savings accounts and a rise in account balances during the pandemic.
“The average balance per customer across our standard, gold and diamond accounts has increased during the pandemic," says Philip King, global head of retail banking at Abu Dhabi Islamic Bank. "This is a trend that has been evident across our general and private banking offerings as customers have cut down their monthly expenses and taken the opportunity to save.
“What was significant was an increase in customers opening savings accounts through our digital channels. With mobility limited, nearly a third of new customers opened their savings account through our website or mobile app,” adds Mr King.
Zachary Holz, a 37-year-old American teacher in Dubai and author of the personal finance blog The Happiest Teacher, says he is now saving between 80 and 85 per cent of his monthly salary compared with 60 to 65 per cent before the pandemic.
“One of the big expenses I cut was eating out. I used to go to a little grocery store to get lunch every day when I was working at school. I could not do that anymore, so I am preparing more food at home now. Also, I had a maid coming to my house earlier but that has stopped,” says Mr Holz, who has been in the UAE for five years.
He also spent less on petrol and car maintenance because he wasn’t going anywhere, while he didn't shop for new clothes or spend on leisure activities.
In terms of debt, he had a car loan but he has since sold the vehicle and is now renting one instead.
In an uncertain world, it is good to have a substantial amount of dry powder to deploy however you need to
Before the onset of Covid-19, Mr Holz had an emergency fund that would cover his expenses for three to six months but that fund has ballooned to cover two years’ worth of expenses.
The teacher says the extra cash helps him sleep better at night because he is awaiting his new work visa from China. “Once I get more stable in terms of my new job, I will invest the extra savings in a preferred asset class,” he adds.
Mr Holz has been primarily investing in stocks, bonds and property, specifically in real estate investment trusts in his home country of the US.
During the pandemic, he also started tracking the number of days in which he did not spend any money at all and says he had nine "no-spend days" in April.
"I am not trying to recreate such days now because my emergency fund has reached a point where I am satisfied. But at that point, I felt like I was in charge of my personal finances. In an uncertain world, it is good to have a substantial amount of dry powder to deploy however you need to," Mr Holz tells The National.
Mr King says that on average, deposits at ADIB were up 10 per cent from the end of March to July, while there was a marginal increase in customers proactively paying down their cards and home finance products in May and June. However, by July, these payments had returned to typical levels as stay-at-home restrictions eased.
Financial consultants say that residents have come to terms with the fact that the current economic factors may last for a longer period than initially thought. This has forced them to treat the increase to their savings during the pandemic as a critical cash buffer that will protect them against any future job-related uncertainty.
According to David Raynor, a consultant with financial advisory deVere Acuma, people in the UAE reduced their monthly outgoings by up to 20 per cent during the period when stay-at-home restrictions were in place.
“I always recommend that clients need to apply personal taxation. This would be putting a saving of around 10 to 20 per cent of their monthly income into a savings account while working in the UAE. This should be done at the start of the month rather than with what is left after expenses and entertainment,” says Mr Raynor.
He recommends people have liquid savings of somewhere between three and six months’ salary as an emergency fund that can be used should the situation arise.
“Savings plans continue to dominate the market in such uncertain times. Individual investors are now looking at plans with short-term tenures when compared with previous demand for plans with a duration of less than 10 years,” says Mr Mamtani of Century Financial.
Financial consultants say that people with a high debt burden in the UAE are increasingly looking to reduce their debts and normalise cash outflows as far as interest payments are concerned. They recommend individuals with lower incomes and fewer cash reserves to start building up their emergency funds.
Wealth advisers also suggest that people start saving for retirement only if they have enough funds to sustain themselves in the UAE in case of a worst-case scenario.
“For those unfortunate to lose their jobs and income, this gives a taste of what their financial future could look like in terms of retirement if they don’t take proactive steps to build sustainable savings towards their future," says Mr Raynor.
He says there has been increased interest in personal protection plans, with parents wanting to ensure that if something should happen to them, their children are protected.
“This tectonic shift in personal financial responsibility is positive for residents in the longer term. Over time, when things improve, wise decisions made now will only add to one’s wealth in the long run,” adds Mr Mamtani.
Dubai Rugby Sevens, December 5 -7
World Sevens Series Pools
A – Fiji, France, Argentina, Japan
B – United States, Australia, Scotland, Ireland
C – New Zealand, Samoa, Canada, Wales
D – South Africa, England, Spain, Kenya
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Have you been targeted?
Tuan Phan of SimplyFI.org lists five signs you have been mis-sold to:
1. Your pension fund has been placed inside an offshore insurance wrapper with a hefty upfront commission.
2. The money has been transferred into a structured note. These products have high upfront, recurring commission and should never be in a pension account.
3. You have also been sold investment funds with an upfront initial charge of around 5 per cent. ETFs, for example, have no upfront charges.
4. The adviser charges a 1 per cent charge for managing your assets. They are being paid for doing nothing. They have already claimed massive amounts in hidden upfront commission.
5. Total annual management cost for your pension account is 2 per cent or more, including platform, underlying fund and advice charges.
If you go
The flights
Emirates and Etihad fly direct to Nairobi, with fares starting from Dh1,695. The resort can be reached from Nairobi via a 35-minute flight from Wilson Airport or Jomo Kenyatta International Airport, or by road, which takes at least three hours.
The rooms
Rooms at Fairmont Mount Kenya range from Dh1,870 per night for a deluxe room to Dh11,000 per night for the William Holden Cottage.
About Takalam
Date started: early 2020
Founders: Khawla Hammad and Inas Abu Shashieh
Based: Abu Dhabi
Sector: HealthTech and wellness
Number of staff: 4
Funding to date: Bootstrapped
Honeymoonish
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Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
THE SPECS
Engine: 1.5-litre
Transmission: 6-speed automatic
Power: 110 horsepower
Torque: 147Nm
Price: From Dh59,700
On sale: now
The view from The National
Plan to boost public schools
A major shake-up of government-run schools was rolled out across the country in 2017. Known as the Emirati School Model, it placed more emphasis on maths and science while also adding practical skills to the curriculum.
It was accompanied by the promise of a Dh5 billion investment, over six years, to pay for state-of-the-art infrastructure improvements.
Aspects of the school model will be extended to international private schools, the education minister has previously suggested.
Recent developments have also included the introduction of moral education - which public and private schools both must teach - along with reform of the exams system and tougher teacher licensing requirements.
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THE BIO
Age: 30
Favourite book: The Power of Habit
Favourite quote: "The world is full of good people, if you cannot find one, be one"
Favourite exercise: The snatch
Favourite colour: Blue
THE 12 BREAKAWAY CLUBS
England
Arsenal, Chelsea, Liverpool, Manchester City, Manchester United, Tottenham Hotspur
Italy
AC Milan, Inter Milan, Juventus
Spain
Atletico Madrid, Barcelona, Real Madrid
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Countries recognising Palestine
France, UK, Canada, Australia, Portugal, Belgium, Malta, Luxembourg, San Marino and Andorra
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
How to help
Send “thenational” to the following numbers or call the hotline on: 0502955999
2289 – Dh10
2252 – Dh 50
6025 – Dh20
6027 – Dh 100
6026 – Dh 200
Financial considerations before buying a property
Buyers should try to pay as much in cash as possible for a property, limiting the mortgage value to as little as they can afford. This means they not only pay less in interest but their monthly costs are also reduced. Ideally, the monthly mortgage payment should not exceed 20 per cent of the purchaser’s total household income, says Carol Glynn, founder of Conscious Finance Coaching.
“If it’s a rental property, plan for the property to have periods when it does not have a tenant. Ensure you have enough cash set aside to pay the mortgage and other costs during these periods, ideally at least six months,” she says.
Also, shop around for the best mortgage interest rate. Understand the terms and conditions, especially what happens after any introductory periods, Ms Glynn adds.
Using a good mortgage broker is worth the investment to obtain the best rate available for a buyer’s needs and circumstances. A good mortgage broker will help the buyer understand the terms and conditions of the mortgage and make the purchasing process efficient and easier.
Crazy Rich Asians
Director: Jon M Chu
Starring: Constance Wu, Henry Golding, Michelle Yeon, Gemma Chan
Four stars
Sinopharm vaccine explained
The Sinopharm vaccine was created using techniques that have been around for decades.
“This is an inactivated vaccine. Simply what it means is that the virus is taken, cultured and inactivated," said Dr Nawal Al Kaabi, chair of the UAE's National Covid-19 Clinical Management Committee.
"What is left is a skeleton of the virus so it looks like a virus, but it is not live."
This is then injected into the body.
"The body will recognise it and form antibodies but because it is inactive, we will need more than one dose. The body will not develop immunity with one dose," she said.
"You have to be exposed more than one time to what we call the antigen."
The vaccine should offer protection for at least months, but no one knows how long beyond that.
Dr Al Kaabi said early vaccine volunteers in China were given shots last spring and still have antibodies today.
“Since it is inactivated, it will not last forever," she said.
LIVING IN...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Generational responses to the pandemic
Devesh Mamtani from Century Financial believes the cash-hoarding tendency of each generation is influenced by what stage of the employment cycle they are in. He offers the following insights:
Baby boomers (those born before 1964): Owing to market uncertainty and the need to survive amid competition, many in this generation are looking for options to hoard more cash and increase their overall savings/investments towards risk-free assets.
Generation X (born between 1965 and 1980): Gen X is currently in its prime working years. With their personal and family finances taking a hit, Generation X is looking at multiple options, including taking out short-term loan facilities with competitive interest rates instead of dipping into their savings account.
Millennials (born between 1981 and 1996): This market situation is giving them a valuable lesson about investing early. Many millennials who had previously not saved or invested are looking to start doing so now.
