Majority Of UAE Residents Use Funds From Bonus To Pay Debts, Bills

More than half of UAE residents use their bonus payments to pay their debts and settle their bills, new research from insurance firm Zurich International Life has shown.

According to the survey conducted by YouGov, 71 per cent of the residents expect to receive a bonus pay from their companies in 2015.

Out of that, almost 39 per cent said they will use the money to pay off their debts while 16 per cent said they will use the extra amount to pay school fees or rent.

About 13 per cent of those polled said they will leave it in their bank accounts while 11 per cent said they will invest in a savings scheme.

Around seven per cent of the respondents said they will spend the majority of the bonus.

The study, which surveyed 1,000 residents, found that Arab expats are the most likely to use their bonus amounts to settle debt (45 per cent) or pay bills (19 per cent).

On the other hand, Western expats were the least likely to settle debt (32 per cent) or pay bills (nine per cent) with their bonus payments.

Emiratis were the most likely to spend their bonus payments while Indian expats are most likely to invest their bonus payments in a savings scheme, the survey showed.

“The tendency to live a lavish lifestyle in the UAE means many residents need their bonus to pay off financial liabilities,” said Paul Dawson, head of retail distribution at Zurich International Life.

“This leads to a greater strain on their long-term savings. Many expats look forward to tax-free bonuses when they move to the UAE with the intention to save and secure their financial future. They probably don’t expect needing to use their bonus to clear debt accumulated during their stay.”

Despite higher salaries being a motivating factor to shift base to the UAE, the Zurich poll found that just 44 per cent of the residents realise their financial goals when they leave the country.

The survey also noted that the majority of company bonuses equated to a month’s salary or less. Less than seven per cent of those polled said that they received a bonus that was three times or more their monthly salary.

The survey is among the many studies released by various organisations that track spending habits of the UAE’s residents. Most studies have noted that financial savings of local residents have been falling due to high inflation over the last two years.

A study by National Bonds Corporation last year showed that 77 per cent of UAE residents believe that their current savings are not adequate to fund their future needs. In addition, 54 per cent listed inflation and high costs of living as key factors that impacted their current annual savings plan.