The UAE is witnessing a significant shift in how residents view their financial futures. About 75 per cent of residents in the Emirates expect a bonus in 2025 (compared to 68 per cent in 2024), according to a recent survey by Zurich International Life. This increase in expectation – coupled with a growing emphasis on saving and long-term financial planning – presents a unique opportunity to reflect on how best to use these funds.
Bonuses offer more than just a temporary lift to household finances – they are an opportunity to reinforce long-term financial security. While the temptation to spend is natural, many UAE residents are prioritising saving and future planning over short-term indulgence.
This points to a broader mindset change, where financial responsibility and retirement preparedness are becoming central to how people manage their wealth. As economic conditions fluctuate, this thought process becomes increasingly important for long-term stability and retirement readiness.
Balanced saving and spending approach
Financial planning today involves securing the future while still enjoying the present responsibly. Our research tells us that many UAE residents are setting aside their bonuses for investments or emergency savings while also valuing experiences that contribute to personal growth. Travel and skill development are emerging as key priorities, showing a level of longer-term thinking with financial planning and self-improvement going hand in hand.
Balancing immediate gratification with long-term investment is crucial. Allocating a portion of your bonus towards experiences that enhance your quality of life can be enriching, while directing another portion towards savings or investments builds financial resilience. The right approach depends on individual circumstances and financial goals.
Behavioural shift in savings
We are also seeing a generational trend. Younger residents, particularly Gen Z (18-24 years old), are showing a strong commitment to saving, with 31 per cent planning to save their entire bonus. Could the global pandemic occurring during key formative years of their lives have contributed to this attitude?
Millennials and older generations are also making healthier financial choices, either saving most of their bonus or striking a balance between saving and spending.
This reflects growing financial confidence in the UAE, where residents across age groups are prioritising long-term planning. Whether it’s building an emergency fund, investing in skill development, or preparing for retirement, the emphasis is on financial resilience and informed decision-making.
Tips on where to invest your bonus
Making the most of your bonus requires a clear strategy. The key is finding a balance that aligns with both immediate needs and future aspirations. Here are a few practical approaches:
- Strengthen your emergency fund: Before diving into more aggressive investment strategies, ensure you have an emergency fund that covers at least three to six months of living expenses.
- Prioritise debt repayment: Paying off high-interest debt, such as credit cards and personal loans, can reduce financial strain and free up future income for savings and investments.
- Focus on retirement planning: Consider allocating a portion of your bonus to long-term retirement savings. Securing future financial stability through a personal pension plan or other structured saving options is crucial.
- Assess your levels of life and health insurance: Protection is a key component of financial planning. Use your bonus to enhance your coverage, ensuring you and your family have a financial safeguard against unexpected medical or life events.
- Invest in skill-building and education: Personal development can yield significant returns in an ever-evolving job market. Consider using part of your bonus to acquire new skills such as data analytics and automation, pursue further education, or attend industry-specific training programmes.
- Diversify your investment portfolio: Explore a mix of asset classes to create a balanced portfolio that aligns with your risk tolerance and long-term goals. This can help safeguard against market volatility while positioning yourself for steady growth.
- Prioritise your family's future: Whether contributing to your children’s education fund or long-term family investments, considering your loved ones’ financial security is always wise.
While many budgeting formulas and rules exist, there isn’t a one-size-fits-all approach to allocating a bonus or disposable income. Financial planning is inherently personal, each strategy must take into account an individual’s current financial situation as well as future priorities. Although this process might seem complex at first, it need not be overwhelming.
Financial empowerment
Financial habits in the UAE are evolving, with more residents taking a proactive approach to managing their money.
Ultimately, your bonus represents an opportunity to reinforce your financial foundation. Thoughtful allocation, whether for an emergency fund, retirement, personal development, or a diversified investment portfolio, sets the stage for a more secure financial future.
Embrace the bonus as a strategic investment in your future, one that is built on careful planning, informed decision-making, and a balanced approach to saving and spending. You will have worked hard to earn it, and it will literally pay off if you take some time to make it work for you.
David Denton-Cardew is head of propositions at Zurich International Life Middle East
