National Bonds Corporation Announces 2014 Savings Index for the UAE

National Bonds Corporation today released its 2014 Savings Index for the UAE. The index includes the results of a comprehensive annual survey that tracks the saving and spending habits of residents in the UAE. The study conducted among Emiratis, as well as Arab, Western and Asian expatriates aimed to track prevailing saving habits while identifying popular saving instruments and common challenges to saving.

In addition to drawing out responses from male and female respondents of mixed income groups, the study also targeted low income blue collar workers.

Among key highlights, the intention to save emerged as a top priority for a majority of those surveyed in the UAE, although perceived obstacles hinder them from taking the important first step. Emiratis and Arab residents are in general more accepting of the idea of saving despite the fact that most of them are yet to adopt a suitable financial plan.

More specifically, the index reveals that 77% of the UAE’s savers polled do not believe their current savings are adequate for the future, while 9% indicate an improvement in sentiment towards saving over the same period in 2013. 62% of savers in the UAE plan to increase their savings in the next six months, while 35% of non-savers plan to start saving during the same period. Among savers in the UAE, 74% Emiratis and 64% Arab expats are most keen to increase their savings in the next six months.

22% of the respondents surveyed admit to saving a little more in comparison to the same period last year (an improvement of 4% from 2013) and 31% of the residents claim they are saving about the same as last year (an improvement of 3% over 2013).

The study also shows that the majority of survey respondents in the UAE disburse a significant portion of their expenses on house rents and utility bills. The study indicates that over half of the respondents in the UAE have loans, with the majority paying out either one or two loans.

Taking into account the three key factors of financial stability, potential for savings, and the existence of an enabling savings environment, the study reveals that the country’s savings environment has remained unchanged with 26% of the UAE’s residents claiming the year 2014 as a good time to save. Westerners and Emiratis in the UAE showed the most positive sentiment across nationalities with 38% and 34% respectively, stating it is a good time to save, with no major difference across genders.

The majority of the UAE’s residents – nearly 87% – believe their financial status will remain the same or become stable in the next six months, indicating a minor increase of 3% compared to 2013. 54% of the respondents listed inflation and high costs of living as key factors that impact their current annual savings plan, while 48% state unexpected expenses as the primary reason.

Among the low-income category, 36% of those polled in the UAE admit to saving regularly – marking a 5% improvement over 2013. While 55% of the savers in this category admit to saving less than 10% of their income, 14% claim to save 30% of their monthly income. Meanwhile, 39% of the respondents said they saved as much as planned, 10% claim to have saved much less than planned and another 8% admitted to saving more than planned, registering an increase of 4% over 2013.

Announcing the study results at a press conference, Mohammed Qasim Al-Ali, CEO of National Bonds, said: “The 2014 savings index results are clearly indicative of negative market factors inhibiting segments of the UAE population from developing a healthy savings habit and achieving financial stability. National Bonds welcomes the participation of the media, as well as stakeholders in human development, public sector officials and relevant sectors of industry in raising financial literacy. We hope such engagement will positively impact all segments of society in the UAE and help communities achieve financial stability for themselves and their families.”

Summary of 2014 National Bonds Savings Index results for the UAE’s residents and workers category:

  • Country’s savings environment:  26% of the UAE respondents indicate that 2014 is a good time to save, showing no change over last year. 10% of respondents in the UAE indicate it is not at all a good time to save in comparison to 14% last year, while 43% remain neutral. 8% of those polled in the UAE said this is a very good time to save, compared to 7% in Saudi Arabia and 6% in the other GCC countries.

 

  • In the UAE, 84% Emiratis and 88% Arab expats view their current savings as inadequate for the future. 71% of Asian expats and 78% of Western expats share the same view. 

 

  • Savings potential: 62% of those saving in the UAE plan to increase saving in the next six months, while 35% of non-savers plan to start saving in the next six months. Notably 37% of non-savers plan to start saving.

 

  • Among ‘savers’ in the UAE, 74% Emiratis and 64% Arab expats are most keen to increase their savings in the next six months.
  • 39% male and 29% female non-savers in the UAE are keen to start saving in the next six months.

 

  • Current savings: 24% of the UAE’s savers claim they have saved as planned, while 32% have saved a little less than planned. 29% of the UAE’s savers admit to saving much less than planned, while 3% claim to have saved much more than planned.

 

  • Variations in personal priorities: For the UAE, increased house rents (78%) and increased costs of utility items (64%) appear to have placed the most pressure on households across the country.

 

  • Increased rents appear to have a significant impact on household expenses for Asian and Arab expats. More specifically, 82% of Asian expats, 77% of Arab expats, 65% of Emiratis and 53% of Western expats surveyed said housing rents have a big impact on their household expenses.
  • Utility expenses like water and electricity are considered the second biggest household expense with 68% of Asian expats, 66% of Emiratis, 61% of Arab expats and 34% of Western expats pointing out that rising costs have had a direct impact on their family budgets.

 

  • Reason for saving: In the UAE, the number one reason for ‘savers’ to save is financial security, followed by children’s education and emergencies/contingencies, in that order. For ‘non-savers’, the priorities differed with respondents indicating that saving for a better lifestyle, followed by financial security and emergencies would most likely be priorities that they would save for.

 

  • Factor for saving: Attractive returns proved to be most important for ‘savers’ across the UAE when selecting a savings instrument, followed by good reputation of the provider and ease of liquidity.

 

  • Usage of credit card: 40% of credit card users in the UAE admit to an increase in their credit card expenses over the past 12 months showing a 6% increase compared to the same period last year, while 11% report a decrease in credit card spending showing a 2% improvement over 2013. Only 2% of credit card users claim they have not used a credit card in the last 12 months.

 

  • 84% of Westerners and 79% of Arab expats own a credit card, followed by Emiratis at 75% and 64%. It is worth mentioning that 66% of Western credit card users claim to pay their credit in full each month as opposed to 20% of Asian expats who pay the bare minimum on their credit expenses each month.
  • 23% of the UAE’s residents claim to have two credit cards.

 

  • Remittances: 63% of the UAE’s residents use remittance services. 83% of remitters use exchange houses, while 43% use banks. 39% of the UAE’s remitters send money outside the country once a month.

 

  • As for the low-income category, the results of the study showed that 85% of respondents who use remittance services in the UAE only use exchange houses. 54% remit money outside the UAE once a month while 34% do so once every two months.

Key results of 2014 National Bonds Savings Index for the GCC region:

  • Time to save: The overall sentiment in Saudi Arabia has improved from 2013 by 5% with 27% of respondents claiming this is a good time to save while 31% remain neutral and 42% admit that 2014 is not a good time to save. In other GCC countries, 26% of respondents surveyed say this is a good time to save reflecting a 2% improvement over 2013. Meanwhile, 42% remain neutral and another 32% believe this is not a good time to save given the prevailing economic situation.

 

  • Perception of financial status: 86% of respondents in Saudi Arabia and 88% of respondents from other GCC countries anticipate their financial status will remain stable in the next six months, showing a 3% increase for Saudi Arabia over last year and 1% drop for the other GCC countries compared to 2013. On the other hand, 14% of respondents polled in Saudi Arabia and 13% of the remaining GCC countries expect their financial status to remain unstable for the next six months.

 

  • Income stability: 58% of respondents in Saudi Arabia anticipate an increase in their income in the next six to 12 months showing an 8% surge in positive sentiment over 2013, while 33% forecast no change and a further 9% of respondents predict a decrease over the same period. As for the respondents from other GCC countries, 41% expect no change and only 6% predict a decrease in their incomes over the next six to 12 months. 53% of GCC respondents claim their income will increase in the next six to 12 months.

 

  • Factors likely to affect savings plans in current year: Across the board, a high cost of living and unexpected expenses are considered the most likely factors to affect savings plans in the current year. Increased rental costs are also a key concern for ‘savers’ in Kuwait, Qatar and the UAE.

Savings instruments

  • Savings accounts with banks have emerged as the most popular savings option in the UAE, Bahrain, Kuwait, Oman and Qatar, while 43% of all respondents in Saudi Arabia use current accounts in banks for saving.
  • Bahrain, Oman and the UAE have registered the highest use of savings schemes linked to prize draws among the GCC countries, with 27% of Bahrain’s respondents, 24% of Omani respondents and 15% of those in the UAE saving with prize draw schemes. 
  • 30% of residents in Qatar, 24% in Oman, 22% in Kuwait and 20% in the UAE are more likely to use property as a savings instrument.
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