Understanding the concept of savings and thrift

Awareness of the concept of savings and overconsumption must be a top priority for every Arab family. This is an important issue that requires attention from time to time in our daily lives.

Many people still resort to debt for their expenses that can be covered through annual savings, which requires patience and eschewing hasty purchases. Haste sometimes drives people to borrow money, take out loans or be bound by cheques, making them unable to put aside any money for their families. Loans can be properly utilised for useful and positive things that bring benefit to the borrowers.

However, what happens is that this money is sometimes spent on items and things that are not vital or urgent, but mostly symbols of luxury acquired to project affluence, according to experts.

Figures issued by National Centre for Statistics and Information show that in 2018 show the average monthly savings of Omani families reached RO 148 for those with a monthly income of RO 689.

The study shows that 64 per cent of Omani respondents save part of their income for emergencies and to secure their future, while 17 per cent save to build and furnish a house or purchase land, while 11 per cent save to start up their own business.

The study also shows that 46 per cent of citizens prefer to keep their savings in bank accounts, while 23 per cent invest in properties. In addition, 53 per cent of Omanis resort to borrowing from work colleagues, family members or friends to save money in bank accounts, whereas 83 per cent said that low income or the burden of debt is the main reason for not saving. 33 per cent said they don’t save because of the high cost of living and skyrocketing prices.

The study also shows that 4 out of 10 Omanis keep records of their income and spending to keep track of their monthly financial situation.

In the study I prepared for my PHD on the theme, “The Strategies and Trends of Omanis towards Savings”, the questionnaire revealed that 49 per cent of the subjects deny that low or insufficient income is the main reason for Omani families not putting aside any savings, while 93 per cent say that they save to secure their future and not avoid turning to others for help during emergencies or after retirement.

There is no doubt that financial planning plays a major role in helping people save, make the best use of their money, set priorities and make successful long-term plans. Smart financial planning also provides a safety net to family members in times of illness and loss of income.

The importance of savings lies in the fact that people will not need to take out bank loans. Data released by the Central Bank of Oman in 2018 shows that the amount of credit granted by banking institutions stood at RO 25.1 billion, which includes personal loans of RO 11.4 billion (45.5 per cent), while the rest (55 per cent) was distributed among the other economic sectors.

This is not in line with economic development or the national economic diversification policy that is currently encouraged.

Accordingly, it has become essential to raise awareness of the concept of savings among the Omani society by promoting awareness programmes and holding exhibitions and events for youth and children on the importance of savings and encouraging academic and research institutions to focus on conducting studies on this topic.

It is also vital for individuals to set their goals, write down their plans and follow up their monthly spending to identify the nature of their spending.

This will help them in preparing a budget plan that identifies their priority spending items, like rent, bills, etc, and other secondary items like travelling and so forth. Proper planning can also help in swap between spending items to cover any shortages and set aside some savings.

Each citizen needs to monitor and assess their spending at the end of each month to identify points of strength and weakness in the household financial plan and start saving today.

MANY PEOPLE STILL RESORT TO DEBT FOR THEIR EXPENSES THAT CAN BE COVERED THROUGH ANNUAL SAVINGS, WHICH REQUIRES PATIENCE AND ESCHEWING HASTY PURCHASES