UAE: How residents can earn ‘second salary’ every month

Experts explain how the new scheme works and offer advice on how UAE expats can secure their future and save enough for retirement

Waheed Abbas

Published: Thu 30 Mar 2023, 11:17 AM

Last updated: Fri 15 Nov 2024, 11:57 AM

With living costs on the rise across the world, having another source of income — or 'second salary' — would be a big help for UAE residents' financial security.

Savings remain a major issue for many expatriates, studies have revealed, with a large portion of UAE residents admitting that they have no — or minimal — extra cash stashed away for rainy days. Retirement is a concern for most, with many expats just relying on their gratuities and end-of-service benefits, experts said.

UAE entities and financial institutions have been taking steps to raise awareness and bolster financial literacy among residents. Recently, National Bonds announced a ‘second salary’ scheme for nationals and expat workers in the country.

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Under this scheme, if people save Dh5,000 per month for 10 years, they could expect to receive Dh7,500 monthly for the subsequent 10 years. Similarly, if they save Dh5,000 per month for five years, but choose to redeem within a period of the next 3 years, they could take home a monthly amount of Dh10,020 for three years – more than double their monthly savings.

Rupert J Connor, partner at Abacus Financial Consultants, said investing in income-generating assets — such as a rental property and a small business — or taking on a part-time job or side hustle are some of the options UAE residents have for second salary.

“One must weigh up the initial costs when entering into such a plan to ensure that the investment will actually generate an income or not. For example, when buying an investment property, planning must be carried out in terms of deposit size, mortgage required and rising interest rates, etc. Alternate income streams help cover the cost of living, leaving more towards the end goal of an early or a comfortable retirement,” said Connor.

In addition, he said, peer-to-peer lending companies can often provide a consistent return but one should always educate themselves on the risks involved.

“There are also instruments called government bonds or fixed-income securities, which pay a coupon that might be suitable. Structured notes can also be set up to pay an income and can be suitable for the right investor when advised properly.”

Bas Kooijman, CEO of DHF Capital, said many employers in the UAE have clauses which stipulate that an employee cannot work for anyone else during their tenure with the company. However, various legal side hustles are still available for residents to capitalise on.

For instance, he said, people can sell their furniture, clothes and other items that they no longer use on websites like Facebook Marketplace and Dubizzle.

“You can even browse these pages to purchase items at convenient prices before flipping them to make a larger return on your investment.

Alternatively, you can take on freelance jobs using websites like Fiverr or part-time jobs that are offered by companies looking to promote their products in places such as shopping malls, supermarkets, and at events to earn between Dh3,000 and Dh15,000 a month – depending on the hours and the company you work for,” added Kooijman.

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How much to invest every month?

DHF Capital said that the second salary plan introduced by National Bonds means the more money people save, the more money they can make for a secure and profitable income.

“Diversifying your portfolio with real estate investments, gold, digital currencies, stocks, bonds, forex, and so much more can help you yield a second salary at a later date in the short- or long-term future – based on how aggressively you save and how patient you are.”

Rupert J Connor said the advised amount to save towards retirement is anywhere between 5 and 20 per cent of income in the UK.

“But this does not leave much margin for investing into something to secure a second salary, especially given the current rise in living costs. In this instance, perhaps short-term savings can be generated by reducing their monthly retirement savings in order to carve out an opportunity. However, individuals should always be cautious, as not every investment property, speculative investment or side hustle is guaranteed to make a return,” said Connor.

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Is gratuity enough for retirement?

Bas Kooijman said data showed that 45 per cent of the UAE residents have not yet started saving for retirement, even though 44 per cent of people expect to retire by 55, and 63 per cent hope to do so before they turn 60. Furthermore, 40 per cent of UAE residents will only start saving for retirement 10 years or less before they reach it.

“The recently introduced second salary plan could change this, but as it stands now, UAE residents can do a lot more to ensure that they are adequately prepared for their golden years.

“While gratuity is a useful aid for retirement, the amount of money that you will receive when leaving a company is largely predicated on the amount of time you spend there and the salary that you make. Additionally, if you are not disciplined enough to not touch the gratuity you receive – until you retire – then there is a high probability that it will dissipate before you have left the workforce.

“However, if you change jobs regularly, you could repeatedly use this gratuity to invest in assets that multiply your earnings so that you are better prepared for retirement when it comes,” he said.

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