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Business Research

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25th January 2021

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Part 1 1
Introduction 1
Country Profile 2
Research Question 2
Research Objectives 2
Hypothesis 3
Potential Contribution 3

Part 2 3
Literature Review 3
The Failure of UAE employees to save. 3
The Salary is not enough for the employees to have savings. 4
Financial Literacy in UAE 5

Part 3 6
Research Methodology 6

Part 4 7
Analysis 7

Conclusion 10

References 11
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Part 1

Introduction

The saving behavior of individuals can be described like the components of income. A part of

what he receives goes to the needs and wants, and the other to savings or investment. Savings

are unevenly distributed in each country according to the income level at the time of saving,

which is typically those who have a salary and have an income that supports a family.

Salaries are the main source of income for most UAE residents. Salaries also play a major

role in determining the nation's saving pattern. We live in an era of a high level of

employment growth, which has exerted a considerable impact on financial stability. Families

are at a stage where they manage to save money and on the other hand, spend it

extravagantly. Many individuals are unable to save money and can only accumulate minimal

amounts from their monthly salaries. Here in this report, the discussion is going to be on how

the employees living in UAE save money.

Country Profile

With its non-stop commitment to development and construction, the United Arab Emirates

has become one of the most advanced countries in the Middle East and North Africa region.

The region takes pride in housing some of the world's most innovative skyscrapers, luxurious

hospitals and educational institutions due to a massive influx of foreign workers (Al-Jundi

and Ahmad, 2015). In the UAE's competitive employment landscape, many companies are

recognising a corporate social responsibility to their employees. Similarly, companies in the

region have recognised the changing economic and lifestyle dynamics of expatriates in

general and as such are striving to develop some form of longevity plan for their expatriate

employees. As expatriates living in the UAE are remaining in the region for longer periods,

concerns about adequately saving for retirement are becoming more pressing.
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Research Question

UAE employees are an interesting bunch, bringing together people from different

nationalities, races and ages as well as religious diversity (Cherian et al., 2021). One of the

most common questions about them is how much do they save for their retirement.

Research Objectives

The study has been conducted using secondary data analysis and was aimed at collecting

information about the saving behavior of UAE employees. The objectives of the study were

to identify patterns in saving behavior, and its effect on the saving behavior of Emirati

employees. Savings are an important part of every person's financial strategy. They play a

vital role to achieve some of the most important goals in personal or household finance such

as education, maintenance needs and goals, or others. This study analyzes the saving patterns

and motivations of UAE residents in general and employees in particular.

Hypothesis

Based on the research done two hypotheses were formulated. They are as follows:

1. Hypothesis 1 (H1)- In most workplaces in the United Arab Emirates, employers are

not required to provide savings or pension vehicles for their employees., so this

results in the employees having very little money or no money at all to save.

2. Hypothesis 2 (H2)- Many residents in the UAE need to be educated about the benefits

of long term savings. There is a consistent gap in plans made by residents in UAE

with regards to savings and investments. This can be due to a lack of information,

education and knowledge about the importance of critical thinking in decision

making.

Potential Contribution

To determine the pattern of saving by the employees working in UAE, a lot of surveys were

done and many research papers from the previous years were studied. Several research papers
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were published recently that shows that employees of the UAE working population have

always been found to be in financial difficulties, even when the economy of the country was

healthy. In simple words, it can be said that the savings which people make every month

generally goes into paying off their debts. Even the difference between the income and

expenditures at times does not reach a substantial sum that can be used for savings.

Part 2

Literature Review

The Failure of UAE employees to save.

The UAE is an oddity when it comes to saving. By looking at the current level of household

savings in a country and comparing it to GDP per capita, it is possible to paint a picture of

just how well off people are, and just how much they are willing to save (Niankara and

Muqattash, 2020). The UAE has amassed a significant savings deficit due to its low savings

rate in comparison to its income, a situation that in turn hinders the country’s economic

health and growth prospects.

A large proportion of the country's citizens face the problem of inadequate savings for their

future. The cost of living has been increasing over time. However, the number of people who

are saving for their retirement and other financial needs is on a steady decline. According to

the National Bonds Savings Index, more than 80 per cent of UAE residents do not believe

their current savings will be adequate in the future (Baydoun and Anwar, 2018). A mere one

per cent said they felt their savings were adequate. Consequently, it is not unexpected that a

significant number would be concerned about their current savings. More significantly,

demographics point to younger age groups in the UAE being faced with a greater challenge

compared to their older counterparts (Karim, 2020). Therefore, financial planners should

encourage their clients to budget their money monthly. This will help them know the amount

of their future financial needs. For instance, if a person has various loans and credit cards that
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they are paying off monthly, they will be able to manage their expenses at the end of each

month with ease (Al Naeemy, 2020). A budget enables people to meet both short and long-

term goals.

The Salary is not enough for the employees to have savings.

A study conducted shows that UAE employers do not pay enough to their employees for

savings although they are aware of the importance of savings and their role in increasing the

standard of living. Most of the population in the UAE depends on more than one income.

With no savings or pension to fall back on, they are forced to rely heavily on their salaries

(Alkhawaja and Albaity, 2020). Research indicates that an increasing number of UAE

employees have inadequate savings and live above their means, which could leave them

vulnerable in the event of an economic downturn (Jureidini, 2018).

Apart from the companies where employees’ pension funds are invested, there is not a single

company that encourages its employees to invest their savings, whether through pension

schemes or NSCs or by any other means. The most worrying aspect of the survey is that 76

per cent of the respondents said that their main source of income is their monthly salary.

There are three main issues with this (Jahan, 2021). First, it shows a lack of understanding

about future financial obligations and retirement planning in particular. Second, if there is

any saving at all, it is on the part of employers. Third, the respondents tended to rely heavily

on government subsidies and family support to meet their living expenses. This can only

result in even more pressure on government resources and a growing burden on the younger

generation.

Financial Literacy in UAE

Financial literacy among youth in the UAE is relatively lower than in other countries, with

many lacking the skills to manage their finances and make sound investments. Globally,

nearly a third of youngsters struggle to manage their money, with Asia and Africa leading the
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way in countries with low levels of financial education (Gerth et al., 2018). The Global

Financial Literacy Survey compiled by Visa saw the UAE placed 139th out of 140 countries

surveyed when it comes to teaching kids about bank statements, interest rates, credit scores,

mortgages and other money matters (Douissa, 2020). The cost of living in the UAE is rising.

This is quite a new phenomenon for the vast majority of residents and ex-pats who moved to

the UAE long when oil prices were declining. But as the economy rebounds, and with it

inflation, the country seems to be paying a price for its successes. In a situation like this, most

of the residents believe that their high cost of living is to be blamed for ther lack of savings

(Ibrahim and Al Haron, 2018). The root cause of the problem is, however, the lack of proper

education on financial planning. The lack of financial education in the UAE makes people

overlook important opportunities and take short-term, wasteful shortcuts. If individuals were

better educated to create a long-term financial plan, with the ability to perform complex

calculations, they would save more money for their future and their families. Individuals and

families should be encouraged to save a percentage of their income regularly over a long

period for specified savings needs (Oteng, 2019). It is mostly the case that individuals do not

plan for retirement, marriage, children's education and their own business. UAE should

include a plan for the long-term saving of individuals and families in the strategic plans of the

government. Currently, the government only encourages short term saving which is not

enough to meet individual needs. However, if the government steps up and offers a better

plan, then it will aid UAE citizens to be able to save more money.

Part 3

Research Methodology

This report looked at saving behavior in the UAE and at both the individual and personal

factors leading to this type of behavior. The research has followed all the ethical obligations

and rules of research methodology (Iphofen and Tolich, 2018). This study investigated what
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role demographic factors and individual characteristics play in determining saving behaviour

in the UAE. It also examined if there are differences in saving patterns between

demographically homogeneous groups. Secondary analysis of various surveys was used to

gain insight into what role demographic factors play in determining saving habits, as well as

whether individual characteristics are more closely associated with saving patterns than

environmental factors. The consumer culture experienced by Emiratis is evolving. The UAE

is a relatively young country with an increasingly urbanized population. Emirati consumers

are approaching the consumer market with a higher level of awareness and knowledge. From

television to shopping malls, the marketing of consumerism has embedded consumerism as a

social norm in their everyday lives (Tariq and Mohiuddin, 2020). Emirati consumers are

active participants in this market. Economic behaviour is influenced by a myriad of factors,

both environmental and personal. Saving, one of the cornerstones of personal finance and

therefore a necessary component of any financial plan, is no different.

Part 4

Analysis

Saving is an important indicator of future economic activity and prosperity in any economy.

The amount of money a person saves or invests, depends on their income, as well as their

personal preferences, financial practices, and awareness of the importance of saving for

future needs and in general. An economy that has a low saving rate may have fewer potential

funds for investments. Regardless of how much a government asks its citizens to save, people

may not always follow this advice due to various factors (Alafifi et al., 2019). In regards to

demographics, most of the people surveyed in the data studied for this report were senior

decision-makers and full-time employees living in UAE.

In a country like the UAE, where household savings rates are very low in comparison with

global standards, it is unlikely that savings institutions will invest their savings there in the
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future. The UAE has accumulated a significant savings deficit of public and private spending,

which has been made possible by the structural features in its developmental strategy, aimed

at promoting growth at the level of a zero-sum game, instead of securing sustainable growth,

which is based on reinvesting income in productive assets. Considering that wealth is the

greatest resource available in any economy, the UAE’s future economic well-being will

depend to a large extent on how effectively it can close its current saving deficit (Shibeika et

al., 2020). Closing the current saving deficit effectively will be far from easy and will require

careful consideration of a variety of factors. The historical drivers behind the saving

discrepancy, such as high personal disposable income or high corporate saving ratios are no

longer valid. There is also a growing concern over declining personal savings and investment

rates in the UAE, meaning that the future ability to fill the savings gap may be a matter of

pure speculation at this stage.

In UAE the salary is not enough for employees to have savings. In this developing country,

everyone wants to look forward to something bright in his life. The best people from all over

the world have been migrating to UAE for jobs and financial security. Few employees in the

UAE can save their salaries as there are few restrictions on their spending, living style etc.

Some of the workers in the UAE must save some money to buy homes, furniture, or they

need some money to be able to invest in other businesses (Bashaikh and Rana, 2021). When

they have the savings they can invest in saving accounts like fixed deposits and saving

certificates, they can also invest it in trading company stocks, commodity trading etc. But

most of them are not able to do it, because their salaries are not enough to have savings. Most

of the employees in UAE puts a lot of money on rent and most of the people are living in flats

or villas on rent. Some people are living in company-provided accommodation and some of

them are staying in rented house/villa. The rent is varying from area to area and location but

one thing common between all areas is that it is very high compared to other cities. Most of
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the people in the United Arab Emirates (UAE) are ex-pat employees. Expats spend a lot of

money due to their high salaries and luxurious lifestyles (Benuyenah and Pandya, 2020). As

an ex-pat employee in UAE, one may earn more than their peers back home, but the high cost

of living means that they cannot save much of it.

The residents of UAE are in working condition, although their income is high, by most

standards, they are not able to set aside money for the future. The reasons could be the

absence of financial education or an inability to save. To solve the issue and favour their

future, the current educational system needs a serious upgrade in which financial education is

taught as part of general education. In the UAE, youth are not comprehensively given

financial education to help them plan for their future and make sound investments

(Zafarullah, 2018). The root cause of this is the lack of proper financial education. Inadequate

financial education in the UAE means that people struggle to keep on top of their finances

and manage their day-to-day expenses. It is essential to provide employees with financial

education and training to help them understand the complex financial issues they are

increasingly facing today. Cultivating a culture of financial literacy and providing employees

with the right knowledge and resources will enable them to plan their finances better, save

more make sound investments, as well as avoid financial pitfalls that decrease productivity

and stifle economic growth in the region.

Many say that high living costs in the UAE are to blame for people's inability to save.

However, this is not the case. The real issue is the lack of proper financial education, which

creates a black hole in the saving habits of individuals. With the most diversified economy in

the world, the UAE has enviable infrastructural and educational facilities. Though the country

is one of the wealthiest per-capita nations, there is also a lack of financial education which is

causing a general lack of savings among households. Lack of proper financial planning

results in households making short-term investments such as taking on additional debt to

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finance their consumption in the present and not being able to save for a long-term future for

themself and their family. The middle-class population in the UAE has a high cost of living

here and are neither earning enough income nor having access to subsidies. With the current

education system, people are not trained to understand how interest rates function, the basics

of financial planning, risks and investment strategies – in short how to manage their savings.

People need to learn skills that will help them fend off bad investments, poor spending

decisions and other potential mistakes (Amari et al., 2020). There has been a lot of discussion

about the implications of the increasing cost of living in the United Arab Emirates. An

important part of this cost that is often overlooked is the high cost of savings and

investments. Given the typical UAE household income, people find it difficult to save enough

money for their retirement and their children's future. They often resort to borrowing on

credit cards or getting into predatory loans making their level of debt continue to go up

instead of decreasing as they grow older. As the country has started its efforts recently, it is

more vital that a campaign be launched to educate citizens on the importance of investing for

their future and creating a commitment from them from a young age that will ensure a

prosperous nation in the future.

Conclusion

In UAE, a high proportion of the population is faced with the problem of insufficient savings

for their future. This is due to two reason that has become the basis for the hypothesis of the

paper, one is that the salary is not enough for saving and the second is that there is a lack of

education in financial planning among the citizens of Dubai. The majority of the employees

in the UAE are hired on a contract basis. They do not get paid enough to have some savings.

The money the employees earn go into the high cost of living and meet their day to day

needs. The main purpose of financial planning is to facilitate both long term and short term

goals in life. The majority of people in the UAE are unaware of the income tax structure and
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fail to make sound financial decisions. There is a lack of education in financial planning

among the citizens of the UAE. Although there are many investment companies in the

country, most people are not following basic financial planning strategies. They should focus

on making themselves more financially aware and make use of available tools to plan their

future financial needs. Although there are many investment companies in the country, most

people are not following basic financial planning strategies. They should focus on making

themselves more financially aware and make use of available tools to plan their future

financial needs.

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