It is important to save money for personal use and for family purposes like paying for education, travel, buying a house or car, and saving for retirement. However, with a changing global economic climate, people have been complaining that it is becoming more and more difficult to save money. According to the Organization for Economic Cooperation and Development (OECD) Economic Outlook analysis and forecasts, there has been a rapid decline in disposable household income over the last decade. We will look at how the current economic situation is affecting personal savings in the UK, US, Europe and the Middle East before moving on to give you some tips for saving and investing within these regions, from opening a savings account in Jordan to simple tips.
United Kingdom and Europe
According to a recent survey published in the Telegraph, high living costs and stagnant wage growth have forced one third of people in the UK to cut back their savings or stop putting money aside in the next 12 months. Four in 10 customers (38%) have no cash left for savings at the end of the month. One in nine (11%) customers are dipping into their savings on a monthly basis to cover unexpected outgoings and daily living expenses. Also reported in The Telegraph in March 2013, the Office for Budget Responsibility (OBR), the independent forecaster set up in 2010, reported that inflation has risen more than average saving rates since a decade ago. Savings have been shrinking in the UK since 2002.
Most European households have been affected by the impact of the financial crisis. The latest Genworth Index revealed that the number of financially vulnerable UK households has increased since 2007. A fifth of the UK households (21%) felt vulnerable with rising living costs, poor levels of income and savings, and are worried over job security. In terms of ranking by country, the UK was fifth among the European countries – Germany and France were faring even less well but the UK lagged behind Norway, Sweden, Denmark and Finland. Poland, Italy, Portgual and Greece were at the bottom of the table. Apart from Norway, cost of living is also an important concern for households in all the European countries.
According to a recent survey by the Commerce Department, Americans increased spending in February by 0.8 percent from January while incomes increased 0.2 percent. If you take inflation into account personal income declined for the past 3 months in real dollars. Americans saved a paltry 3.7 percent of disposable income, the lowest rate since August of 2009. The lowest rate of personal savings occurred in 2005 at the peak of the housing bubble when Americans saved a mere 1 percent of disposable income. The highest rate of savings occurred shortly after the recession of 2007/2008 began and reached a peak rate of 8 percent before settling at 5 percent.
A survey of 1,000 Saudi residents by Souqalmal.com, reported in Arab Business.com in April 2013, found that 60% of Saudi nationals save less than 10% of their income. Among them, two-thirds said they save nothing whereas one-fifth replied that they do not know how to save. Among the expats living in Saudi, 37% of Western expats claimed to save their earnings compared to 40% of Asian expats. On the other hand, 42% of Arab expats in Saudi Arabia did not save anything and 12% said they did not know how to save. As CEO of Souqalmal.com, the company that conducted the survey, has said, there is a need for greater education about savings plans.
A survey by Towers Watson, a global professional services company, found that expats living in the Gulf Cooperation Council (GCC) region were more likely than nationals to save and to have larger savings pool. The main reason to save was for housing (25%). Expats were also concerned about setting aside money for their children’s education (21%) whereas only a minority of the nationals (7%) rated this as important.
Simple Saving Money Tips
All of us need to be prepared for the future and make a resolution to start saving. With the tumbling interest rates, we need to have a way that helps us budget how much to save and spend. As shown by the survey results in the Middle East, Saudis and nationals in the GCC region particularly need to be educated on how to save. Begin with a small amount in order to get into the habit of putting aside some money each month. One of the best ways to save is to set up a basic savings account. Savings accounts also have other features, for example if you have a savings account in Jordan and you are eligible, your bank will issue you an ATM card that you can use in ATMs located in other places in the GCC or worldwide. However, you should not be tempted to use the savings account frequently for cash withdrawals as this defeats the purpose of keeping it for a rainy day.
Some of you might be thinking that putting aside money each month is too difficult. However, if this is the case then perhaps you need to think about cutting some of the small luxuries in your life such as your daily coffee from the local shop, walking to work rather than taking the car, or signing up for an online film rental service rather than taking trips to the cinema. It’s surprising how these little sums can add up.
Overall it’s important not to let the figures get you down, you are just one person in a wide pool of statistics, and you don’t have to be the average saver!