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SURVEY: MONEY MANAGEMENT SKILLS ESSENTIAL TO SOUND INVESTMENT, STABLE FUTURE

Various economic indicators point to sustained development in Saudi Arabia which lately is forecast to register a bumper year in 2015 with a real growth of 10.5%. And as the economy expands, so does the population. Data from the Central Department of Statistics & Information showed that Saudi population reached around 20.3 million in 2013. It is forecast to increase at an average annual rate of 2.8 percent until 2020.

Against this backdrop, Abdulaziz Alsaghyir Holding – a Saudi joint stock company, with a capital of SR500 million and headquarters in Riyadh – commissioned a research survey on individual income management amid rising social issues and economic developments as part of its corporate social responsibility program.

The survey conducted by Knowledge Center for research and studies the Corporate Social Responsibility arm (CSR) of Alsaghyir Holding revealed that a large majority of the participants  are not able to save, either because of rising prices or due to poor money management skills. However, poor money management skills account for the largest group of non-savers.

It was discovered that regardless of the financial standing of an individual, absence or lack of necessary money management skills will lead to stark future.

It was also observed that social pressures make people spend more than what they earn and hence incur debts, underlining marriage and property as the two main expenses that upset budgets.  Therefore, due to low savings, investment is also low, the survey noted.

The survey which covered representatives from male and female Saudis aged 20-49 living in Jeddah, Riyadh and Dammam revealed three major attitudinal segments based on their psychographics (which encompasses their personality, values, opinions, attitudes, interests, and lifestyles.

The largest segment consists of people with very poor money management skills, followed by another which claims to plan ahead and manage money but is still not able to meet all financial obligations.

The survey found out that about three quarters of the target group have either no savings or with very low levels of savings which lead to low investments and larger private debts.

The third group, about a quarter of the target group, consists of people who are well off, or at least they think they are, spend a lot, maintain a high status among their social circle and are looking for investment opportunities.

The survey result underscored the importance of providing money management training programs for the “Bad Money Managers” which represent 48% of the survey; frugal and smart savings and investment plans for the “Careful Planners” (at 26% of the poll); and high-end investment opportunities for the “Affluent Spenders” (depicting 26% of the sample).

The “Bad Money Managers” exhibit lack of control over their expenses and do not know how much they have or how much they are going to need in future. They are often borrowing money to meet their expenses. They do not know how to strike a balance between their income and expenditure. People in this segment are mostly found in Riyadh, in middle socioeconomic classes and in younger age groups. These people have sufficient incomes but they do not know how to manage it – and as a result they end up spending more than what they earn – and hence have to borrow.

The low levels of savings result in low levels of investment, nonetheless for the Poor Money Managers, gold is the most popular option.

These people are typically in debt and are keen on seeking guidance on managing their savings.

InfographicYet the “Careful Planners” are very concerned about the increasing cost of living and plan ahead to manage expenses and to meet emergencies. They feel social pressure to spend but are price conscious and spend carefully. They have typical conservative views about life and believe in destiny. They also firmly believe in careful financial planning as the solution to all financial woes.

Demographically, “Careful Planners” are mostly found in middle socioeconomic classes C1 and C2 and, understandably so, in Jeddah, as the city is home to a large and growing middle class. The younger age group of 20-29 comprise the most of this segment as this is the age of struggle, an individual is not settled in his career and savings are low.

From the Psychographics standpoint, they are traditionalists. They are very concerned about rising prices and as a counter measure they plan ahead. Despite their limited income they tend to spend more in order to keep their standing in the society intact.

Their traditional mindset makes them buy houses and property. And because of their disproportionate levels of spending, they mostly remain hand to mouth and are not able to save. And consequently not able to invest.

These people are not satisfied with their financial status because most of the time they are not able to afford the lifestyle like that of their rich friends. Since these people are “Careful Planners”, they would prefer someone to guide them on managing their savings better.

But the “Affluent Spenders”, the survey disclosed, spend to maintain a high social status. This category is mainly found in Riyadh and in upper socioeconomic strata and understandably so as the city is home to a large and swelling affluent class. The age group starts from a young and carefree to the middle and established – those who get a good start in life without many liabilities and soon attain stability.

Psychographic analysis of this group paints a picture of satisfaction with income and financial status, thriftiness in spending to maintain a high social status and a look-out for viable investment opportunities – most of them invest their savings in property or buying a house.

As a result of their high level of savings, they easily afford large expenses such as marriages and purchase of property.

“Affluent Spenders” are also keen on investing their savings in high yield instruments such as stocks, gold and business. They enjoy shopping, go on vacations, buy gifts and frequently purchase luxury items on cash or through credit cards. They are content with their income and assets which allows them to maintain a high position in society. Beside, they are looking for investment opportunities to grow their wealth, the survey noted.