Nobody wants to be caught unprepared – even more so if they have half a lifetime to build and execute a plan for whatever the future holds.
This is why savings and investment have become a vital goal for millennials and Gen Z-ers in the United Arab Emirates (UAE) and elsewhere. Both generations faced uncertainties in managing their money in 2017. Despite this, they appear to be more ready to achieve financial freedom by age 45 to 50.
In this blog, we will explain why the younger generations of UAE residents prepare early for their future and help you understand the importance of savings and investment.
Why Do People Save?
Money is made to be spent. So why do people decide to set aside part of their salary?
Although it may vary from person to person, millennials and Gen Z-ers build up a savings plan in the UAE because they want to:
Prepare for Rainy Days
No one can predict the future. But instead of worrying about it, why not prepare for whatever it may bring?
One key savings goal for UAE residents is to build an emergency fund. This money reserve helps ensure they can afford unexpected expenses because of sudden events, such as unemployment, natural disasters, and illness.
An emergency fund gives you peace of mind, so you can avoid worrying about whether you’ll struggle financially in case of sudden financially draining life events.
Have the Capability to Take Calculated Risks
Smart saving also gives you the freedom to take strategic risks, such as:
Starting your own business
Switching career paths
Exploring other hobbies and interests
With a savings plan, you can make these potentially risky moves without taking out high-interest or long-term loans that could prove challenging to pay off later. This way, you won’t have to worry about immediate financial burdens.
Achieve Life Goals and Prepare for Retirement
Having enough money saved also makes it easier to achieve your life goals. These can include buying a new car, investing in a new home, starting a family, or paying for a child’s education.
Whether you choose simple savings or get a more robust investment plan, having something that helps you stow away money for an extended period enables you to build a strong foundation for the life goals you set for yourself. This applies to people reaching the end of their careers and those whose working life has just begun.
Have Long-Term Financial Security
Among the many benefits of savings plans, long-term financial security is the most critical one for young adults. After all, there’s no better time to start preparing for the future than now.
You cannot predict how long the “good days” will last. To make sure you are financially prepared for the future, you must have a safety net.
If you’re employed, your company may offer an employee savings plan.
If you’re a business owner, you can opt for a time deposit, high-yield saving plans, or insurance policies with an investment component.
Remember: The more money you set aside, the more prepared and worry-free you become, no matter what the future holds.
Benefits of Investment Plans
As a child, you were taught to put coins left over from your allowance in a piggy bank. Now that you’re older and wiser, you discover better ways to save.
Savings take many forms, from traditional bank accounts to more robust strategies with higher yields, known as investments. You can invest in various asset types, including real estate, stocks and equities, bonds, and commodities.
This section covers the key benefits of investment plans and shows you how to get the most out of the money you saved.
1. Diversification
You can put your money into a wide range of assets when investing. This benefit, known as diversification, is an effective way to reduce financial risks.
To better understand this, consider the adage, “Do not put all your eggs in one basket.”
If you invest all your money in a single asset, you put everything you have in that one “basket.” If it happens to fall, then all your “eggs” will break, leaving you with no alternative.
But when you invest in various assets, your money still grows, even if some of your investments underperform. This helps you avoid financial setbacks and ensures your investments still turn a profit.
2. Inflation Protection
When you save, you want to prepare for the future. But what happens if the money you set aside is no longer enough for the services or goods you need or want?
The cost of products and services tends to rise over time because of inflation. Diversified investment plans can help with this.
Most assets return profits if left untouched for the long term. But for your savings to truly grow, you need investments that provide inflation protection. Some assets that are considered best for this include real-estate investment trusts (REITs), commodities, and a 60-40 stock-bond portfolio.
3. Income, ROI, and Legacy
If you’re approaching retirement or want to retire early, you need to look for something that gives you a steady income stream to live a comfortable, worry-free life.
While many traditional pension plans are not enough to give you this, you always have the option to invest your earnings today in assets that earn you higher returns.
With a well-thought-of investment plan, you can spend your golden years without facing financial burden. If you make the most of compound growth (returns on initial capital earning even more returns), your money can grow even faster.
Of course, you don’t just save money for yourself. Your children and grandchildren can also benefit from the fruits of your investments, helping your entire family become financially stable.
Prepare for Your Future Today
Understanding the benefits of saving money for retirement, emergencies, and financial freedom allows you to make smarter financial decisions.
Ensure your legacy with our smart saver plan and prepare for your future today.