Make the most of what you earn in the UAE
They are not aware of the magic of compounding interest. The earlier the investment, the higher the return
In radio broadcasts for the past 16 years, K V Shamsudheen has advised listeners across the Gulf to prepare a nest egg for when they retire.
He uses a simple mantra of a systematic investment plan on a long-running weekly show – Financial Planning and Investment Opportunities – on the Asianet channel that attracts 1.4 million listeners in the GCC in the southern Indian Malayalam language.
Logging in 800 live broadcasts to date, he talks listeners through saving for a comfortable retirement in the 50-minute programme, which is open to callers.
“I tell people to keep in mind, ‘This is not a permanent place, you must have something in your hand to live happily.’ This is my message that I pass on,” he said.
He also hosts public meetings in the GCC and India. His most recent were four programmes in Dubai, Sharjah, Al Ain and Saudi Arabia in May and three in India in July.
On the radio and in the public meetings, which often last more than two hours, he uses a well-meaning trick to bring his audience around to saving.
When he asks if anyone in the audience is saving, the answer is usually negative. Then he asks how many would go back to India if their salary was cut by 20 per cent, to which two or three people say they would return. This is when he draws in the unsuspecting crowd.
“I ask how they will live on 20 per cent less salary and they say, ‘We will adjust’. That is when I catch them. I tell them they have to sacrifice from the next month onwards. I make them take an oath that, whatever salary they are getting today, they will keep aside 20 per cent.”
Mr Shamsudheen makes a pitch for a systematic investment plan to draw them into regularly setting aside at least 20 per cent of their monthly earnings to get a return of more than twice that amount if they go home in 10 years.
“They are not aware of the magic and benefits of compounding interest. The earlier the investment, the higher the return. Every month, by adding money, the return will be compounded. That is the charm of this investment,” said the Sharjah resident and chairman of the Pravasi Bandhu Welfare Trust, which offers free financial advice to low and middle-income workers.
“If they don’t do this they would just spend the amount. Instead, this goes into mutual funds so even if the market fluctuates they will get more units when the market is down.”
He also tosses in advice against alcoholism and smoking in his programmes.
Recalling the dire straits indebted workers were in years ago, Mr Shamsudheen said the situation has improved since 2008-2012 with a fall in the number of cases.
“Up to 2012, every day I would get one or two calls or emails from people with loans of Dh50,000 and higher. It was such a bad situation. Last year, there were two cases a month.”
His tips include first clearing high-interest loans and selling off assets at home to clear the debt.
Using the radio, he tries to target workers before they get into debt.
“I’m trying prevention. Most people don’t take a loan for a reason, they take a loan because the banks are giving it. I tell them because a friend is spending money, that is not the reason to spend money. Or they take loans to build a home, for their marriage or for their children’s marriage. But on all these occasions, they never think of how they will pay it back. An individual must understand his financial capacity, his responsibility, and based on that he can spend money. Financial discipline and planning is very important.”
His audience is workers from southern India’s Kerala state. Indians are the largest foreign community in the UAE and more than 40 per cent of them are from Kerala.
The radio show has triggered a chain reaction, with listeners acting on advice and ensuring their friends and family follow.
Indian driver Pradeep Kumar has been tuning in for years. Paying heed is helping him to save for his daughter’s nursing degree, invest about 10,000 rupees (Dh570) a month in two mutual funds and buy a small house in his village. All this on a salary of Dh2,000.
Mr Kumar also encouraged his son to buy a hen that provides the family with about 20 eggs a month. The family consumes half the produce, sells the remainder and uses the earnings towards paying for the boy’s school expenses.
This roused his 11-year-old son’s business appetite. The boy used his savings to buy a small aquarium in which he breeds fish that he then sells for five rupees each.
“I give my children training. When I speak to my children on the phone, I remind them that we are poor. Other people can go to hotels and eat, but we must stay in control,” said the 47-year-old former taxi driver from Malappuram in Kerala.
Mr Kumar’s father was a woodcutter and his wife works in a flour mill and he regularly reminds his children of their humble background.
The Sharjah resident is also happy to guide his neighbours and a Sri Lankan housemaid has benefited from his wisdom. The maid worked in Saudi Arabia and then Kuwait, but did not save because she sent most of her wages home.
This was until Mr Kumar suggested she tell her family that her pay had been cut.
“I told her to put aside Dh300 in her own name and not to tell anyone. If she saves even for 10 months, she will get Dh3,000. Now there is money in her bank account in Sri Lanka, but no one knows and she can use it when she really needs it for her family and herself.”
For those who say it is hard to save, he breaks it down again.
“Everyone has money problems, but if you save every month it will become a habit. If I didn’t save every month, when I go to my village I won’t have anything. Slowly, slowly the money will grow if I don’t touch it.
“If there is money, people have problems. If you don’t have money, you have problems. I earn Dh2,000 but someone who gets Dh5,000, maybe he has problems. I spend Dh20 to Dh30 for my children’s clothes, there may be people who spend Dh250. There are clothes for Dh20 or for Dh800, you have to see what fits you. It takes years to save. But to break your savings, you can do it in less than a minute.”