Dubai – MENA Herald: UAE parents underestimate the importance of instilling healthy money saving habits in their children at a young age, resulting in a generation of young adults facing difficulty coping with the financial pressures of adult life, warn industry experts.
The high spending power of local and expatriate parents in the UAE, coupled with the lavish lifestyle, makes it difficult to fully prepare the nation’s children for the challenges and realities of their future. Latest figures from the Arab Monetary Fund suggest that the UAE hosts the region’s biggest spenders, with an average annual spend of over DHS 79,000. A 2015 HSBC study further found that 71 percent of UK expatriates working in Dubai worry that they will not have adequate funds upon retirement.
Industry experts at Nexus Group, the region’s leading financial advisor, warn that to ensure UAE children are able to survive in today’s uncertain and financially difficult environment, careful measures must be taken to ensure children understand the value of money and the benefits of saving.
“Many UAE parents practice unhealthy spending habits which can be easily passed on to children, resulting in a generation of young adults that are not capable of handling the financial pressures of adult life,” said Bashar Khatib, Chief Distribution Officer (CDO), Nexus Group.
“One of the most important and effective ways of instilling healthy saving habits in children at a young age is to set an ideal example. It is a good idea to involve children in family saving plans, so that they observe how parents make key decisions. This will help children understand that money is a valuable resource, and that all decisions must be accounted for. It is also advised to clearly express a parent’s desire for something that they can’t afford in order to help children understand that adults say no to themselves too.”
Providing a fixed and regular allowance, from an age as young as six, will help children to understand that proper money management is a vital aspect of life. Nexus advises parents to carefully calculate how much money their children require for daily expenses including meals, transport, and other necessities, then provide a 10% buffer, giving children an opportunity to save up for other purchases.
UAE children should be encouraged to apply for appropriate jobs that will not interfere with their academic obligations to help them gain a sense of responsibility and independence. There are a number of opportunities that UAE students can apply to, including sales promotions in malls, exhibitions, internships at global enterprises, or on-campus vacancies. Another way to introduce the value of money to children is to encourage them to earn their income through household chores, or pursuing a hobby of interest.
According to Nexus Group, having a bank account at a young age can help children witness how their savings grow in a realistic and secure setting, helps manage spending, and allows parents to track their children’s spending behavior. Alternatively, parents in the UAE can set up an account in a saving scheme, such as National Bonds, that allows young account holders to purchase bonds for as little as AED 100 at a time.
Children should also be encouraged to save in longer time intervals to learn the importance of financial planning and saving for their future goals. This will minimize the likelihood that they become ‘save-to-spend’ type adults who spend all their savings on purchases in frequent intervals, and are unable to accumulate wealth. Nexus Group also advises parents to encourage children to research a desired product before buying, preventing impulse purchases, and further enhancing the value of purchases.