Written by Mr Jihad El Salah, Director and Actuary at Equevu
Abu Dhabi, UAE, 12 September 2023: In an era marked by globalization and technological advancements, the concept of financial wellbeing has gained paramount importance. For the UAE and the wider region, striving for financial wellbeing is not only a personal aspiration but a collective goal. In this column, we delve into the significance of enhancing financial wellbeing in the UAE and GCC, shedding light on the roles of government, employers, and wider society in achieving this objective.
What is Financial Wellbeing?
Financial wellbeing refers to the degree to which individuals feel a sense of control over their financial resources. This state of wellbeing is influenced by the roles and responsibilities of various stakeholders, which I will explore further in this column.
Importance of Financial Wellbeing and Government’s Role in the UAE and Wider GCC
The push for improved financial wellbeing in the UAE and the wider GCC region seamlessly aligns with national strategic initiatives such as the UAE’s 2071 Centennial Plan and Saudi Arabia’s Vision 2030. These transformative blueprints aim to cultivate diverse, innovative, and robust economies while prioritizing the welfare of their people.
To ensure financial inclusivity and alleviate pressure on social insurance programs, governments can strategically supplement pension plans in the GCC, taking into consideration the favorable demographics characterized by a predominantly young population. This demographic advantage makes early intervention key to improving financial wellbeing effectively. By empowering individuals to manage their finances effectively from a young age, governments can mitigate the burden on public welfare systems as citizens augment their retirement savings. This proactive approach not only capitalizes on the region’s youthful population but also reduces the necessity for government intervention to protect the lower-income segments of society.
Human capital development is another shared tenet across these agendas. Substantial investments in education and skills training underpin the nurturing of knowledge-based economies. Improved financial wellbeing enables individuals to invest more in education, cultivating a highly skilled workforce. This supports the aspirations of fostering innovation, research, and technological prowess, driving economic growth and global competitiveness.
Resilience against economic volatility is vital, given challenges from fluctuating oil prices and global market dynamics. Empowered financially, individuals are more likely to sustain spending during economic downturns, sustaining demand and economic activity. This collective resilience fosters economic stability.
There are certain policy improvements government can spearhead in order to improve the financial wellbeing of individuals, they include: comprehensive financial literacy programs, consumer protection regulations, responsible borrowing and saving incentives, workplace financial wellness initiatives, targeted support for vulnerable groups, and periodic financial wellbeing assessments. Policy improvements have significant scope to improve tangible outcomes, for example, according to the S&P Global Financial Literacy Survey the Scandinavian countries— Sweden, Norway, Denmark, and Finland — are leading the planet with an average of 69 per cent financially literate adult, whereas UAE and KSA scored 38 and 31 respectively.
The Role of Employers
Employers have a direct influence on the financial wellbeing of their employees. According to a study conducted in the UAE, 56% of participants highlighted the importance of financial benefits in determining their job satisfaction. There are easily accessible measures that employers can promptly put in place to enhance this aspect.
Initiatives like organizing financial wellbeing workshops and offering financial education can greatly assist employees. Additionally, ensuring transparency and fairness in salary structures and introducing employee savings schemes are straightforward steps that employers can adopt. Moreover, providing benefits to supplement the end-of-service benefit such as retirement and long-term savings plans, akin to the DEWS program in DIFC and the Dubai Government, can significantly bolster employees’ long-term financial security.
The Role of Individuals
Individuals play a pivotal role in enhancing their financial wellbeing by embracing responsible financial practices, informed decision-making, and ongoing education. Developing financial literacy empowers individuals to comprehend concepts like budgeting, savings, investments, and debt management. Budgeting ensures effective money allocation, while savings create an emergency cushion and support long-term goals. Mindful debt management and strategic investing contribute to overall financial health. Setting clear goals, staying informed about evolving financial trends, and seeking professional advice optimize decision-making. Additionally, cultivating a positive financial mindset, practicing self-discipline, and prioritizing career development amplify earnings potential. Proper risk management through insurancew safeguards against unexpected setbacks. Ultimately, individuals hold the key to their financial success by consistently implementing prudent practices, adapting to changes, and demonstrating a steadfast commitment to their financial journey.
Case Study: UK Strategy for Financial Wellbeing
The UK Strategy for Financial Wellbeing stands as an exemplary case study of effective public policy addressing financial welfare. By 2027, the UK aims to provide over 2 million individuals with access to debt advice, build financial resilience among children and young people, and embed financial education in the curriculum. Envisioned as a comprehensive initiative, it employs a multi-pronged approach to empower citizens. Through widespread financial education, individuals gain essential skills in budgeting, savings, and investments. The strategy’s emphasis on impartial advice ensures access to reliable guidance, particularly for vulnerable segments. Notably, it leverages employer engagement, recognizing businesses as conduits for financial empowerment. Striving for consumer protection, it fosters fair financial services and transparent information. By embracing digital innovation, it adapts to evolving financial landscapes. The strategy’s success lies in collaborative efforts, uniting government, financial institutions, employers, and communities. As a result, the UK’s approach to financial wellbeing emerges as a model for fostering economic resilience and informed decision-making, setting a precedent for impactful public policy worldwide.
The journey toward financial wellbeing in the UAE and GCC is a collaborative endeavour involving government, employers, and wider society. Initiatives like the UAE’s National Strategy for Financial Literacy highlight the transformative power of collective action. By empowering individuals with financial knowledge, ensuring equitable financial practices, and fostering a financially aware culture, the UAE and GCC can pave the way for enhanced financial wellbeing and sustainable prosperity. Equevu, driven by technology and expertise, is at the forefront of championing access to financial prosperity in the region.
Equevu represents two synergistic entities: Equevu Ltd, a technology company in Abu Dhabi Global Market, and Equevu Consulting Services FZC in Sharjah Publishing City. The brand delivers a comprehensive suite of services that include technology-driven workplace and personal savings systems, corporate financial literacy programs, as well as specialized actuarial consulting services focusing on end of service benefits. Adhering to international best practices and supported by reputable regional investors, Equevu strives to promote access to financial prosperity. Please note that Equevu does not engage in any financially regulated activities.