The Covid-19 pandemic resulted in a sharp increase in savings globally as government stimulus cheques, strong stock market performance and spending cutbacks during movement restrictions resulted in more disposable income for a majority of households.
Many people created a financial safety net to protect themselves from the economic consequences of the pandemic, leading to a huge spike in funds held in savings accounts.
When asked how much money they need to save to consider themselves financially healthy, Americans put the number at $516,433 (Dh1.89 million), on average, a July 2021 report by financial services company Personal Capital showed. About 20 per cent said they would need more than $1m.
We asked personal finance experts to share five key signs that might indicate a person in saving too much.
1. Your emergency fund is overflowing
If the size of your emergency fund is too large, it means that you are saving more than is required, says Vijay Valecha, chief investment officer at Century Financial in Dubai.
“By definition, an emergency fund is supposed to have three to six months’ worth of expenses in a liquid, high-yield savings account. So, if the fund size is large, the person is missing out on good investment opportunities,” Mr Valecha says.
If three to six months’ worth of emergency savings does not seem like it will be enough, another rule of thumb is six months’ expenses for a dual-income household and one year of expenses for a single-income household, says Sophia Bhatti, a partner at Hoxton Capital Management.
“People tend to keep a lot of cash on the side just in case for a rainy day,” says Ramzi Khleif, general manager at digital wealth manager StashAway Mena. “However, all you need is six to nine months’ worth of essential expenses to put aside.”
People tend to keep a lot of cash on the side just in case for a rainy day. However, all you need is six to nine months’ worth of essential expenses to put aside
Ramzi Khelif,
general manager at StashAway Mena
“Once you have that, the rest can be invested. If you prefer to have liquidity at any time, make sure your investments are in liquid funds such as stocks or exchange-traded funds, so you have access to them quickly.”
2. You have stacked savings but no investments
If you’re debt-free, have money constantly going into your savings account and an emergency fund but have nothing invested, that’s a problem, Ms Bhatti says.
“Investing is one of the best ways to build wealth, but people often avoid it because they’re scared or don’t know where to start. The good news is that it doesn’t take much to get started with investing,” she says.
“All or a portion of the money you currently have going to savings can be reallocated to investments. You’ll find that investing can be more fulfilling and exhilarating than regular savings. Your money makes so much more when it’s invested.”
There have been occasions when a person saving too much in a bank account forgets to contribute to a retirement or investment account, Mr Valecha says.
“This can lead to serious consequences, especially for young people. At a young age, a person is supposed to invest more in risky assets like stocks and mutual funds,” he adds.
“Parking funds in a savings account with below-par interest rate results in the person not having sufficient funds at retirement age to cover living expenses.”
If you think hoarding cash under the pillow or in your savings account sets you up for retirement, you are wrong, says StashAway’s Mr Khleif.
On average, you lose about 2 per cent of your cash value due to inflation, he says.
“Any time your savings don’t grow at the same rate as inflation, you will effectively lose money. Hence, a retirement fund should be invested in for the long run to secure yourself the lifestyle you want at the age of retirement,” Mr Khleif adds.
Investing is one of the best ways to build wealth, but people often avoid it because they’re scared or don’t know where to start
Sophia Bhatti,
partner at Hoxton Capital Management
3. You’re saving but not focusing on paying down debt
Finance experts recommend having some money saved before aggressively paying down debt, but it doesn’t need to be a large amount.
If you have more than $1,000 in your savings and are still putting money in but have debt, especially credit card debt, then you’re saving too much money, Ms Bhatti suggests.
“You’re likely spending more on interest with your credit cards than gaining interest on the money in your savings account,” she says.
“Get $500 to $1,000 saved and then shift your focus to paying down debt. You can get further by focusing on one goal at a time.”
4. When you deny yourself social activities
Some people save but at the expense of their social life, Mr Khleif says. They stop socialising and avoid going out so as not to spend money, he adds.
“However, you can live a balanced lifestyle by budgeting every month and allocating a certain amount to your leisure spending. Consider using the 50:30:20 rule,” he says.
Under this model, 50 per cent of your income goes to necessary expenses (such as food, transport and rent), 30 per cent towards personal expenses (such as entertainment and travel) and 20 per cent towards saving.
“Include fun spending in your budget, so you know you can afford it and it’s already planned out,” Ms Bhatti says.
“Even if you reduce your savings slightly to ensure you can have some fun, it will be worth it in the long run. You work hard for your money, so you should be able to enjoy it.”
If a person is unwilling to give any funds to charity, it also indicates that they find it too painful to part with money, Mr Valecha says.
“Having too much money doesn’t increase happiness. Beyond a point, the act of giving boosts our joy,” he adds.
Parking funds in a savings account with below-par interest rate results in the person not having sufficient funds at retirement age to cover living expenses
Vijay Valecha,
chief investment officer at Century Financial
5. You’re saving money just to take it right back
If you’re constantly pulling money out of your savings, especially to cover bills and general spending, it is an indicator that you are saving too much, Ms Bhatti says.
“Take a step back and review your budget. After all your bills and expenses are covered, what amount do you have left? From that amount, allocate money to enjoy yourself and the remaining into savings,” she recommends.
“The amount that’s allocated to savings is what should be going into savings. Anything more, and you’re doing it at the expense of other bills and spending.”
Thor: Ragnarok
Dir: Taika Waititi
Starring: Chris Hemsworth, Tom Hiddleston, Cate Blanchett, Jeff Goldblum, Mark Ruffalo, Tessa Thompson
Four stars
Normcore explained
Something of a fashion anomaly, normcore is essentially a celebration of the unremarkable. The term was first popularised by an article in New York magazine in 2014 and has been dubbed “ugly”, “bland’ and "anti-style" by fashion writers. It’s hallmarks are comfort, a lack of pretentiousness and neutrality – it is a trend for those who would rather not stand out from the crowd. For the most part, the style is unisex, favouring loose silhouettes, thrift-shop threads, baseball caps and boyish trainers. It is important to note that normcore is not synonymous with cheapness or low quality; there are high-fashion brands, including Parisian label Vetements, that specialise in this style. Embraced by fashion-forward street-style stars around the globe, it’s uptake in the UAE has been relatively slow.
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
THREE
%3Cp%3EDirector%3A%20Nayla%20Al%20Khaja%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Jefferson%20Hall%2C%20Faten%20Ahmed%2C%20Noura%20Alabed%2C%20Saud%20Alzarooni%3C%2Fp%3E%0A%3Cp%3ERating%3A%203.5%2F5%3C%2Fp%3E%0A
Killing of Qassem Suleimani
MATCH INFO
Uefa Champions League last 16, second leg
Liverpool (0) v Atletico Madrid (1)
Venue: Anfield
Kick-off: Thursday, March 12, midnight
Live: On beIN Sports HD
The specs: 2018 Audi Q5/SQ5
Price, base: Dh183,900 / Dh249,000
Engine: 2.0L, turbocharged in-line four-cylinder / 3.0L, turbocharged V6
Gearbox: Seven-speed automatic / Eight-speed automatic
Power: 252hp @ 5,000rpm / 354hp @ 5,400rpm
Torque: 370Nm @ 1,600rpm / 500Nm @ 1,370rpm
Fuel economy: combined 7.2L / 100km / 8.3L / 100km
NEW%20PRICING%20SCHEME%20FOR%20APPLE%20MUSIC%2C%20TV%2B%20AND%20ONE
%3Cp%3E%3Cstrong%3EApple%20Music%3Cbr%3EMonthly%20individual%3A%20%3C%2Fstrong%3E%2410.99%20(from%20%249.99)%3Cstrong%3E%3Cbr%3EMonthly%20family%3A%20%3C%2Fstrong%3E%2416.99%20(from%20%2414.99)%3Cstrong%3E%3Cbr%3EIndividual%20annual%3A%20%3C%2Fstrong%3E%24109%20(from%20%2499)%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EApple%20TV%2B%3Cbr%3EMonthly%3A%20%3C%2Fstrong%3E%246.99%20(from%20%244.99)%3Cstrong%3E%3Cbr%3EAnnual%3A%20%3C%2Fstrong%3E%2469%20(from%20%2449.99)%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EApple%20One%3Cbr%3EMonthly%20individual%3A%20%3C%2Fstrong%3E%2416.95%20(from%20%2414.95)%3Cstrong%3E%3Cbr%3EMonthly%20family%3A%20%3C%2Fstrong%3E%2422.95%20(from%20%2419.95)%3Cstrong%3E%3Cbr%3EMonthly%20premier%3A%20%3C%2Fstrong%3E%2432.95%20(from%20%2429.95)%3C%2Fp%3E%0A
ONCE UPON A TIME IN GAZA
Starring: Nader Abd Alhay, Majd Eid, Ramzi Maqdisi
Directors: Tarzan and Arab Nasser
Rating: 4.5/5
Last five meetings
2013: South Korea 0-2 Brazil
2002: South Korea 2-3 Brazil
1999: South Korea 1-0 Brazil
1997: South Korea 1-2 Brazil
1995: South Korea 0-1 Brazil
Note: All friendlies
MATCH INFO
Manchester United v Everton
Where: Old Trafford, Manchester
When: Sunday, kick-off 7pm (UAE)
How to watch: Live on BeIN Sports 11HD
UAE SQUAD
Omar Abdulrahman (Al Hilal), Ali Khaseif, Ali Mabkhout, Salem Rashed, Khalifa Al Hammadi, Khalfan Mubarak, Zayed Al Ameri, Mohammed Al Attas (Al Jazira), Khalid Essa, Ahmed Barman, Ryan Yaslam, Bandar Al Ahbabi (Al Ain), Habib Fardan, Tariq Ahmed, Mohammed Al Akbari (Al Nasr), Ali Saleh, Ali Salmin (Al Wasl), Adel Al Hosani, Ali Hassan Saleh, Majed Suroor (Sharjah), Ahmed Khalil, Walid Abbas, Majed Hassan, Ismail Al Hammadi (Shabab Al Ahli), Hassan Al Muharrami, Fahad Al Dhahani (Bani Yas), Mohammed Al Shaker (Ajman)
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
UAE currency: the story behind the money in your pockets
THE CLOWN OF GAZA
Director: Abdulrahman Sabbah
Starring: Alaa Meqdad
Rating: 4/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
More from Neighbourhood Watch:
THE BIO:
Sabri Razouk, 74
Athlete and fitness trainer
Married, father of six
Favourite exercise: Bench press
Must-eat weekly meal: Steak with beans, carrots, broccoli, crust and corn
Power drink: A glass of yoghurt
Role model: Any good man
More on animal trafficking
Key figures in the life of the fort
Sheikh Dhiyab bin Isa (ruled 1761-1793) Built Qasr Al Hosn as a watchtower to guard over the only freshwater well on Abu Dhabi island.
Sheikh Shakhbut bin Dhiyab (ruled 1793-1816) Expanded the tower into a small fort and transferred his ruling place of residence from Liwa Oasis to the fort on the island.
Sheikh Tahnoon bin Shakhbut (ruled 1818-1833) Expanded Qasr Al Hosn further as Abu Dhabi grew from a small village of palm huts to a town of more than 5,000 inhabitants.
Sheikh Khalifa bin Shakhbut (ruled 1833-1845) Repaired and fortified the fort.
Sheikh Saeed bin Tahnoon (ruled 1845-1855) Turned Qasr Al Hosn into a strong two-storied structure.
Sheikh Zayed bin Khalifa (ruled 1855-1909) Expanded Qasr Al Hosn further to reflect the emirate's increasing prominence.
Sheikh Shakhbut bin Sultan (ruled 1928-1966) Renovated and enlarged Qasr Al Hosn, adding a decorative arch and two new villas.
Sheikh Zayed bin Sultan (ruled 1966-2004) Moved the royal residence to Al Manhal palace and kept his diwan at Qasr Al Hosn.
Sources: Jayanti Maitra, www.adach.ae
