Have you thought about what would happen in case of a crisis? Do you have sufficient funds set aside to help you out? You can’t predict an unfortunate life event or when you might get caught in a sticky financial situation, so it’s advisable that you have enough money set aside to help keep the boat afloat, till you figure out a more permanent solution. An emergency fund does not include your savings but is a pool of money specifically dedicated to help you out in times of crisis.
Below are a few scenarios, where an emergency fund would come in handy.
What if you lose your job…
Have you ever thought about what would happen if you lost your job, and with it, your only source of income in the UAE. Losing a job would mean that your visa would also expire soon if you’re not able to land a new job within the grace period. So, while you’re putting all your energy into finding a new job, how do would you take care of the household expenses?
What if your spouse passes away…
It’s a scary thought, but if your spouse passes away, are you financially prepared to manage things on your own here in the UAE, even for a month? And since Shariah Law is applicable in all death cases in the UAE, without a legal will in place, all assets belonging to your spouse will be frozen. Losing a loved one is traumatic, and being left with no financial resources will just turn into a harrowing experience.
What if you require expensive, non-covered medical treatment…
So health insurance has now been made mandatory in the UAE. But your health insurance policy may only have a certain maximum cover and will most likely exclude treatments for some medical conditions. And what if you or an immediate family member needs to undergo such a treatment, which is either not covered by your policy or exceeds the maximum cover?
Dealing with such unfortunate life events can be extremely stressful, both emotionally and financially. If you don’t have a financial back-up plan in place, things could go downhill very quickly – you could either get trapped in spiraling debt or even worse, be forced to leave the country because you can’t afford living here anymore.
[Related: Five places to keep your emergency savings]
How much money should you set aside?
Leading a comfortable life in Dubai doesn’t come cheap. Here’s a look at the average cost of living for a family of four in Dubai, and how much it would cost to survive here and afford the basic necessities for a period of one to three months:
|Expense categories||Monthly spend (AED)||2 months’ expense (AED)||3 months’ expense (AED)|
|Children’s school fees**||3,600||7,200||10,800|
|Car loan EMI/Car rental***||1,500||3,000||4,500|
* Monthly break-up of average annual rent in Dubai ** Approximate monthly school fees for two children, based on a monthly break-up of annual fee *** Based on an average 5-year loan for a car worth AED 100,000 (80% LTV)
Keep your emergency pot handy
Bad news does not come with warning bells. So it’s important to keep your emergency fund accessible at all times. While it’s a good idea to store some cash at home for immediate use, you can keep the bulk of your emergency pot in a savings account or a fixed deposit. This way your money can earn some returns for as long as it’s kept in the account, and you can withdraw it whenever required using your debit card, cheque book or by placing a request for premature withdrawal of the fixed deposit.
Among some good savings account/term deposit options are the FGB Accelerator Programme, NBAD Savings Account and the NBAD Fixed Deposit which is available in various tenure options.