Building your savings is the first step to securing your financial future; however, it is probably the most difficult habit to cultivate. With rising living costs in the UAE and temptations to spend at every shopping mall, it's easy to burn through your paycheck with little to show in savings by the end of the month.
A 2016-2018 McKinsey survey of UAE’s employed residents found that 59% were not optimistic about their household economic situation, with 72% stating that they live paycheck to paycheck. And like stated above, the UAE’s numerous malls, fine dining options, local attractions, and nearby travel destinations make it easy for us to spend money on temporary pleasures rather than plan for the long-term. We are bombarded with ideas about how to spend our money. But there’s not enough out there to teach us how to save.
The reality is that any employed person has a responsibility to save for their future. Without careful planning and sufficient savings, we are unprotected during emergencies such as layoffs or major illness, unprepared for our life expenses like a down payment on a house or a child's college tuition, and are likely to jeopardise our standard of living in our later years. Does anyone really want to put themselves into these difficult situations because of their reluctance to structure their finances?
Of course not.
Luckily, financial discipline can be easily introduced into our lives with a simple first step, according to Ashok Sardana, founder and managing director of Continental Group International. His recommendation is simple: "Remember to pay yourself first, i.e., put money into your savings account, at the start of the month."
He elaborates, "For the first 10 days of the month, you work to pay your landlord, the next three days for your child’s education, the next five for your food, your car and your utility bills. How many days do you work for yourself? So, pay yourself first."
The 'save before you spend' mantra is an easy way to avoid overspending, but first time savers may still find it's easier said than done. Entering the saving mindset takes some deliberate effort, but it becomes effortless with time.
"Saving is like exercise — start small and your financial fitness grows," Sandana tells Continental Group's clients. "Or look at it this way: when you start saving and see results, you are encouraged to continue and increase your contributions."
If you don't have a savings plan, here's what you should know:
- A savings plan allows you to put away a portion of your income so that it’s not readily accessible for spending.In the absence of such a savings mechanism, it is very likely that you will end up falling into the trap of impulsive spending. You may want the new car or new HDTV that you see advertised everywhere, but you need to put your money in a savings plan that ensures that you have enough saved for the down payment on a house next year.Savings plans are thus useful for preventing your entire paycheck from being eaten up by spending and ensuring that you are able to meet your future financial goals. It’s important to note that you must have a separate savings fund for emergencies, which is easily accessible.
- You can open multiple savings plan to meet your various financial goals. If you have several different financial goals, like having enough money to take a luxury vacation next summer and building your retirement fund, investing in multiple savings plans could make sense. It can help you focus separately on both goals and make it easier to keep track of your progress.
- Savings plans are a safe, no-risk way to start growing your wealth. With a savings plan, you earn interest on the money you keep in that account. This allows your savings to grow without much effort or planning on your part. That means you have more earning potential with your money compared to keeping it under lock and key at home.
- Choose your savings plans wisely. Put your savings in a plan that gives you returns higher than 1%-2%. These plans can be contractual or non-contractual but it is recommended that you choose an assured plan that lays out the minimum that you are guaranteed to earn.
Once you know the simple ins and outs of a savings plan, it’s time to talk to a qualified financial advisor about what option is right for you. A savings plan is an easy first step to planning your future and will pave the way forward for other financial moves, such as more sophisticated instruments. To learn more, register for a free consultation with a Continental Group advisor by simply following this link, https://www.cfsgroup.com/contact/, and start your savings journey today.