Life is full of surprises and you never know when you might need to dip into an emergency pot of cash. But where is the best place to keep that money? Here are five easy-access savings options that you can raid in times of trouble.
The experts say you should have between three to six months worth of cash stashed away for a rainy day. It’s certainly a sensible idea as life can be unpredictable and you never know when you might lose your job or your health might take a turn for the worse. So where is the best place to put it?
1. Savings accounts
With interest rates at the levels they are today, you are not going to make a huge return storing your money this way. However, it’s certainly a better option than stashing it under the mattress and you can get your hands on the money whenever you need it – which is the whole point of an emergency fund: it needs to be instantly accessible. But there are deals to be had if you shop around for the best rates, particularly if you are going to leave a hefty minimum balance in there. Citibank’s NRI Savings Account offers 4% on minimum balances of AED40,000 and Emirates NBD’s Smart Saver Account offers 2.25% on minimum balances of AED3,000 and above.
2. National Bonds
This prize-linked savings scheme was set up in 2006 and offers customers a safe place to store their money with an annual return on their savings and the chance to win big prizes. Every Dh10 you save enters you into several prize draws to win cash, gold and cars with some draws every minute and others monthly. The top prize is AED1 million. Plus there is also an annual profit rate; the 2012 rate was 2.62%, which is a steady return for a savings plan that lets you get hold of your money easily. Savers can instantly withdraw AED10,000 a day from a National Bonds partner such as Al Ansari exchange. For amounts more than that, the bondholder needs to contact National Bonds directly to make the redemption.
3. Prize-linked accounts
Similar to National Bonds, prize-linked accounts are bank savings accounts that are linked to prize draws – certainly, a more exciting way to save. There are a number of options, such as Mashreq Millionaire, which has a top prize of AED1 million and occasional giveaways of AED5million. The downside of storing your money in these accounts is that you will earn minimal interest or, in some cases, no interest at all. Also there might be an early encashment fee if you withdraw the money too soon after depositing it.
4. Offshore savings account
Saving offshore is a sensible choice for expats who want to take advantage of their tax-free status. This is a good option for those concerned about storing too much in the UAE and for those who prefer to save in a different currency. Offshore accounts come in several currencies and must be in a proper financial jurisdiction such as Switzerland, the Isle of Man or the Channel Islands. There can be fees involved, but generally if you have enough deposited in the savings account, you should only be earning interest. Plus if you never have to dip into that emergency fund, it’s a nice pot of cash that is already in the right place ready for when you move home or onto your next expat posting.
5. Fixed deposits
If you want a guaranteed return on your emergency fund, then it might be worth sticking it in a fixed deposits account. Fixed deposits took a hit after the financial crisis, offering rates barely worth bothering about. But with some rates now hovering around the 1.5% mark, it is worth considering again. However, as the name suggests you need to deposit your cash for a fixed amount of time, which might be an issue if you want to get it in a hurry. Banks will penalise you if you withdraw the money too early, however, some accounts are more flexible. With names such as unfixed deposit or flexi, they allow you to withdraw money early but they make it clear that the money withdrawn will receive a lower interest rate.