Moving to the UAE as an expat offers exciting career and lifestyle opportunities, but prioritising financial security is essential. Building an emergency savings fund is one of the most effective ways to stay financially stable.
An emergency fund is a dedicated savings reserve designed to cover unexpected expenses. At Remitly, we know that the cost of living in the UAE can be high, and the right approach to saving can help expats build a strong financial safety net.
We’ve created this guide to provide key insights on the importance of emergency funds, how much you can save, where to keep your money, and strategies to achieve financial stability in the UAE.
Importance of an emergency savings fund
Managing finances as an expat in any country is a challenge. Financial stability is incredibly rewarding in the UAE, but it comes with its challenges. The high cost of living combined with potential job instability or unexpected travel expenses makes it clear that having a dedicated reserve will offer peace of mind.
Here are reasons to make an emergency fund your top priority:
Protection against financial shocks
Life as an expat in the UAE comes with financial uncertainties, from sudden one-off expenses like car repairs and rent increases to prolonged challenges like job loss or medical emergencies.
Since residency in the UAE depends on employment, losing a job makes it hard to pay for essentials like rent, utilities, and groceries. An emergency fund helps cover these unexpected costs. Without one, you may have to rely on high-interest personal loans or credit cards, leading to long-term financial stress.
Handling family and dependent responsibilities
Many expats in the UAE have financial responsibilities beyond their individual needs, including supporting family members locally or abroad. This may involve remittances, school fees for dependents, and other obligations that require careful planning.
With an emergency fund, you can manage these responsibilities proactively, provide stability for your loved ones, and maintain your own financial independence.
Enhancing financial flexibility and growth
Whether changing careers, investing in new ventures, or planning major life changes, having a financial safety net makes decision-making easier. Strategic saving helps you stay in control, adapt to changes, and seize opportunities without added stress.
How much should you save?
The right amount to save as an expat is a crucial step. The ideal savings fund amount depends on various factors, including individual circumstances, income, living expenses, and job security. Additionally, depending on your personal situation, individual and family needs play a significant role in defining the right amount to be sure short-term and long-term uncertainties can be easily managed.
Determining the right emergency fund size
An emergency fund has to cover at least three to six months’ worth of essential expenses, such as rent, utilities, groceries, transportation, and healthcare. The ideal amount depends on the following:
- Minimal fixed expenses: A three-month fund may be sufficient if you have a low-cost lifestyle and financial flexibility.
- Higher financial commitments: If you support dependents, have outstanding loans, or face large monthly expenses, a six-month cushion will provide greater security.
- Unpredictable expenses: If your financial situation includes irregular costs, such as medical needs or family obligations, a more robust fund can help manage unexpected financial pressures.
Example savings calculation for expats
An expat in Dubai with the following monthly expenses:
| Expense category | Cost (AED) |
| Rent | AED 5,000 |
| Groceries and dining | AED 2,000 |
| Utilities and internet | AED 700 |
| Transport | AED 1,000 |
| Health insurance and medical costs | AED 500 |
| Total monthly expenses | AED 9,200 |
Based on the information above, the recommended emergency savings would be:
| Emergency fund duration | Total Savings (AED) |
| Three months | AED 27,600 |
| Six months | AED 55,200 |
| 12 months | AED 110,400 |
This calculation can help expats set realistic savings goals based on their financial situation. However, savings targets don’t take a one-size-fits-all approach. Several personal and financial factors can influence how much to set aside.
Key factors that influence how much to save
Beyond fixed expenses, several broader factors affect your ideal savings amount:
- Cost of living variations: While the UAE offers tax-free income, the cost of living in Dubai and Abu Dhabi come with high expenses, requiring careful financial planning.
- Job market and career growth opportunities: The stability of your profession and potential career advancement affect how much you can save. Industries with rapid growth may offer more financial stability, while competitive or contract-based fields may require a larger financial cushion.
- Financial awareness and planning: Many expats move to the UAE without a solid savings plan. Learning how to budget, manage investments, and plan for the future is essential.
A well-structured savings strategy gives you the confidence to navigate life in the UAE without unnecessary financial stress.
Savings goals based on individual and family needs
Your saving goal might need to align with your personal and family circumstances:
- Single expats: With fewer financial obligations, a three to six-month emergency fund might be generally sufficient.
- Expats with families: With additional commitments like school fees and healthcare, saving six to twelve months of expenses is recommended.
- Self-employed or business owners: With unpredictable income, aim to save at least six to twelve months of personal expenses. Also consider a separate emergency fund for business-related expenses.
Choosing the right savings method is crucial because it ensures your emergency fund remains accessible when needed. Once you’ve set your savings goal, the next step is finding the best place to store your funds for security, liquidity, and potential interest earnings.
Where to keep your emergency fund
Having an emergency fund is essential, but where you store it matters just as much. There are many options that can keep your money safe, easily accessible, and allow you to earn some interest while remaining available for unexpected expenses.
Options available in the UAE banking system
There are various banking solutions in the UAE for expats to store emergency savings. These include:
- Savings account: UAE banks offer savings accounts with good interest rates, usually between 0.5% and 2.5% per year. Mashreq Bank’s Easy Saver Account gives up to 2.40% interest per year. Emirates NBD offers a standard savings account with a 0.20% yearly interest rate.
- Fixed deposits: In the UAE, fixed deposits offer good interest rates, with some banks giving up to 4% or more. HSBC UAE provides AED term deposit rates of up to 4.15% per year. Bank of Baroda offers up to 3.95% for a 12-month term, while ADCB provides rates up to 3.50% per year for select tenures.
- Money market accounts: Some banks offer money market accounts that combine the flexibility of savings accounts with the chance for higher returns. ADCB offers a Money Market Feeder Fund, which invests in the JPMorgan Liquidity Funds – USD Liquidity LVNAV Fund, offering secure investments with the potential for higher earnings.
- Digital banking and fin-tech platforms: UAE-based digital banks like the Liv Bank and Mashreq Neo offer flexible saving options with higher interest rates and easy mobile access.
Comparing local vs. offshore savings accounts
Many expats consider keeping their emergency funds offshore to diversify their holdings and hedge against economic uncertainties. Here’s a comparison:
| Feature | Local UAE savings account | Offshore savings account |
| Accessibility | Easy to access anytime | May take longer to withdraw funds |
| Currency flexibility | AED-based accounts with EUR/USD options | Multiple currencies available |
| Interest rates | Competitive, but varies by bank | Often higher in offshore jurisdictions |
| Tax considerations | No income tax on savings interest | Subject to tax laws in home country |
| Regulatory protection | UAE banking regulations apply | Varies based on offshore jurisdiction |
If you need instant access to funds, a local UAE savings bank account is the better option. However, if you seek higher returns and currency flexibility, consider an off-shore account.
Regardless of where you choose to store your savings, ensuring quick access to funds during an emergency is crucial. Ultimately, the choice depends on your priorities, whether it’s accessibility and convenience or higher returns and currency flexibility. Evaluating your financial goals will help determine the best fit for your needs.
To prevent accidental spending, keep your emergency savings in a dedicated account separate from your daily-use account. If you have international financial obligations, maintaining part of your funds in a EUR or USD account can help protect against currency fluctuations.
Saving is just the first step. Growing your savings through smart financial habits ensures long-term stability.
Tips to save money in the UAE
Proper budgeting helps you control spending, avoid unnecessary debt, and increase your savings.
Effective budgeting and expense tracking
Budgeting and tracking are important for saving money. Follow the steps below to manage your finances efficiently:
Use the 50/30/20 rule:
- 50% for essentials (rent, utilities, grocery, and transportation)
- 30% for discretionary spending (dining out, shopping, and entertainment)
- 20% for savings and investments
Track your expenses: Use mobile apps like YNAB, Mint, or UAE-based apps like Liv. to monitor your spending habits and identify areas for cost-cutting.
Set monthly saving goals: Treat savings like a fixed expense by automatically transferring a portion of your salary to a dedicated savings or investment account each month.
Utilising tax-free salary advantages
One of the biggest financial perks in the UAE is the tax-free salary. Make the most of it by:
- Saving before you spend: Since there are no income taxes, it’s easy to spend freely. Set up an automatic transfer to a high-yield savings account or investment portfolio before paying expenses.
- Investing in retirement planning: The UAE does not have a public pension system for expats, so planning for long-term financial security is crucial. Offshore retirement accounts, like Zurich International Life, help expats grow their wealth in a tax-efficient way. For a diversified investment approach, index funds, such as the S&P 500 Index Fund from Vanguard, offer a low-cost way to build long-term wealth. Additionally, exchange-traded funds (ETFs), like the iShares MSCI World ETF, allow expats to invest in a wide range of assets.
- Hedge against currency risks: If you plan to return home or send money abroad, fluctuations in the AED exchange rate can impact savings. Consider holding funds in multiple currencies or using remittance services with favourable rates.
Beyond saving and investing, maintaining awareness of daily spending habits is key to avoiding lifestyle inflation.
Minimising lifestyle inflation
With its luxury shopping malls, fine dining, and entertainment options, the UAE promotes a spending culture. As income grows, you might be tempted to upgrade to a more expensive lifestyle. However, mindful financial choices can help ensure long-term stability.
Recognise social pressures to spend
- Earning more doesn’t mean spending more: Many professionals feel pressured to match the lifestyle of peers or keep up with Dubai’s status-driven culture.
- Avoid impulse upgrades: A salary increase shouldn’t automatically lead to a bigger apartment, luxury car, or designer brand. Ask yourself: Do I need this? Or do I just want it?
Stick to smart spending habits
- Delay major purchases: Before upgrading your home, car, or gadgets, wait at least 30 days to assess if it’s truly necessary.
- Use discounts and rewards: Maximise savings with apps like The Entertainer (2-for-1 deals) and Air Miles or bank cashback programs for everyday spending.
- Take advantage of seasonal sales: Events like Dubai Shopping Festival (DSF) offer significant savings on major purchases.
Avoid hidden lifestyle costs
- Limit non-essential subscriptions: Audit monthly costs for gym memberships, streaming services, and premium apps and cancel those that are rarely used.
- Rethink transportation costs: While cars are a status symbol, Dubai’s metro, buses, and NOI card discounts can significantly cut commuting expenses.
You can maintain financial security while enjoying everything the UAE offers by resisting lifestyle creep, focusing on true financial goals, and making deliberate spending choices.
Building and maintaining an emergency fund is crucial for expats in the UAE in cases of unexpected events. Expats can create a strong financial safety net by deciding how much to save, choosing the right place to store the funds, and practising smart financial habits.
FAQs
What is the best way to save money in the UAE?
The best way to save money in the UAE is to set a monthly budget, cut unnecessary expenses, and use high-interest savings accounts or fixed deposits. You can automate savings and explore investment options like ETFs to help grow your funds. Tracking your spending with a budgeting app can make it easier to identify areas where you can cut back.
What is the best savings account for emergency savings?
Some of the best savings accounts for emergency savings funds in the UAE include the FAB iSave Account, Mashreq Happiness Account, and Emirates NBD Smart Saver Account. They all offer competitive interest rates and easy access to funds. Choose an account with no withdrawal penalties so you can access your money when needed.
What is the best way to start an emergency savings plan?
Start by setting a clear savings goal (three to six months of expenses), opening a dedicated savings account, and automating monthly transfers. Cutting discretionary spending can also help you stay on track. Starting with small, consistent contributions can make saving less overwhelming and more suitable over time.
How much money should I have in savings for an emergency fund?
You should save three to six months’ living expenses to cover emergencies like job loss or medical bills. If you have dependents or an unstable income, consider saving up to 12 months of extra security. Reassess your emergency fund annually to adjust for lifestyle or income changes.