An Arabic proverb cautions us to save our “white penny for a black day”. The maxim is widely quoted, but I believe it is misconstrued. A black day is not merely an unforeseen crisis but must be regarded as any day or phase in life that demands additional resources, say education and marriage. In failing to prepare for such eventualities, we are gearing up for disaster.
The wisdom or even the benefits of saving, particularly at times when markets are unpredictable are way too innumerable to list. And we must count ourselves lucky that here in the UAE we are provided with accessible and diverse tools that inspire us to make savings a way of life. However, the area that we need to consciously work on and make significant effort is in our will to save.
This is especially true for young professionals who are unquestionably the backbone of our economic future and whose contribution in insulating the country from impending crises is pre-eminent.
In this context, it could be interesting to note that in 2012, young professionals aged from 20 to 29 constituted 33.9 per cent of the workforce in the Emirates, according to a 2012 report published by the UAE National Bureau of Statistics. Given this statistic, the question that needs to be asked is: what percentage of these professionals are focused on mapping their future and working towards bridging their future financial shortfalls?
During the early days of our career, we seldom factor in potential expenditures or how inflation escalates such costs to a considerable extent. For instance, the consumer price index in the UAE ranks housing and children’s education among the top priorities for saving. Putting aside funds for retirement is also rated high, according to the National Bonds’ UAE Savings Index 2012.
Young professionals are at an advantage as the magic of compound returns are best achieved when savings start earlier.
For argument’s sake, if a 25-year- old employee puts aside Dh500 on a monthly basis until a presumed retirement age of 65, he would have accumulated a net fund of Dh240,000 – without including potential profits and prizes linked to some of the saving programmes. On the other hand, if a 45-year old breadwinner sets aside the same sum, he would accumulate only half the amount upon retirement.
Young people enjoy yet another edge in having the latitude to engage in relatively high-risk investments that would generally not be advisable for individuals nearing retirement.
Needless to say, seamless planning is undeniably a fundamental and a more prudent component of managing earnings from the point we start receiving our first salary. The need to balance income against expenditure to evade suffocation from self-imposed debts could hardly be emphasised enough, particularly in an age when high purchasing power or borrowing options, as well as temptations such as fast cars, luxury brands and fine dining abound in the world of the young and uninformed.
The message here is not to implore anyone to stay away or deny themselves any luxuries of life. On the contrary, I would urge everyone to exercise sensibility while spending from an existing pot.
Simply said, if you are to make the most of life, gaining financial immunity through regular savings is a crucial imperative.
I see that the community in the UAE needs to make several strides in this regard with 65 per cent of individuals across all nationalities not saving enough, and only 1 per cent categorising their savings as more than enough for the future, according to National Bonds’ UAE Savings Index 2012.
However, the scenario is not completely bleak. I see the awareness growing. I notice nationals and expatriates, across all age groups, moving towards the right direction. This is clearly exemplified in the same index that suggests a 7 per cent drop among people who confessed to saving much less than initially planned over the past year.
Common sense dictates that as you grow, your income grows, but so do inescapable expenditures that shadow you along your life’s journey.
It wouldn’t be misplaced to state that saving and empowering yourself financially are the supports that will prop you up and stop you from stumbling during the black days that are likely to surface and surprise.
Mohamed Qasem Al Ali is the chief executive of National Bonds Corporation in the UAE