The outbreak of covid pandemic and the financial stress imposed by its outcomes have highlighted the importance of financial planning and management in our everyday lives.
According to the 2020 International Survey of Adult Financial Literacy released by the Organisation for Economic Co-operation and Development (OECD), only 61% of respondents had the minimum and basic understanding of concepts and prudent principles required to plan and manage their finances. The responses were collected from twenty-six countries, including twelve OECD members – across Asia, Europe, Latin America, and some countries in the MENA region, including the UAE.
The reports also found that only a little over half of the adults had some savings or investments to fund their retirement, whereas 28% had sufficient funds to support their basic needs for just one week if they lost their jobs.
Adding to these findings from international surveys, the Department of Community Development – Abu Dhabi, in its Abu Dhabi Family Wellbeing Strategy published in January this year, outlined in its “Quality-Of-Life” survey that financial challenges and related worries loom large among the major concerns faced by both Emirate’s citizens and residents today. 87% of these respondents also agreed that it was necessary to budget and save for a convenient lifestyle, emphasizing the importance of financial planning in the UAE.
The Cause
In the UAE, many young adults show low levels of financial literacy, which is often reflected by their inability to choose the right financial products or undertake sound financial planning.
Some also openly agree that lack of financial wisdom attributes to difficulties in planning and budgeting their lifestyle and practicing savings in their life.
Consumer confidence in the UAE has also significantly increased, and consumers appear optimistic about the future in recent times. Regarding purchasing priorities, dining and entertainment, buying mobile phones, fashion and accessories emerged among the top spending categories for consumers in the UAE.
This dysfunctional consumption makes the disposition of the monthly income of the families, whether expatriates or locals, ignore the fulfillment of necessary needs and savings and instead focus on the acquisition of luxury items.
Social pressure, the rise of flaunting culture on social media, and the need to live a luxurious lifestyle are some common reasons that influence poor financial planning and management – leaving little to no room for investment opportunities and savings.
Risk Management
The COVID-19 pandemic and the resulting lockdown have caused approximately 114 million people to lose their jobs in 2020, signifying the importance of financial planning for risk management in such unprecedented times.
This has also led many young UAE nationals to be indebted to manage their basic needs or access to support from families. The youth debt crisis threatens the security of UAE society as a whole, given its danger to family cohesion and compliance with state laws.
Stress And Poor Health
The impacts of a lack of financial literacy and planning are not just limited to economic or financial statistics alone. Evidence suggests that financial insecurity is strongly linked to high-stress levels and poor mental and physical health, affecting the quality of living and work-life balance. In the OECD survey, sample groups have also complained that they keep worrying about meeting their everyday expenses in the UAE- which is taking a toll on their well-being.
Retirement Crisis
The lack of financial planning in the UAE has led many people backward in their retirement plans. Senior citizens tend to lack awareness and training to enable better retirement readiness and early retirement compared to many other countries in the MENA region. Leading investment firms also comprehend that the existing pension schemes and savings are inadequate for senior citizens to fund their autumn years, likely forcing them to work past their retirement age or remain dependent.
Managing your money and financial planning as a beginner can be challenging. Especially with the volatile market conditions and many investments and savings options available in the UAE, mitigating risks and choosing the right decisions can come with many skeptical views.
The best way to start your journey toward financial stability is through professional guidance. AIX Investment Group is an international institution in the UAE with over 35 years of experience in the investment advisory industry. Their advisors have considerable experience in a wide field of sectors, including investments, banking, real estate, development, and consulting, allowing them to provide only the best, personalized solutions for investors with high financial security.
