Expat parents in the UAE need to think twice before taking out personal loans

The UAE is a popular place for expats to live and work. The high salaries, great schools, idyllic weather, beautiful beaches and vibrant culture make the Gulf State a prime location to raise a family. Unfortunately, many UAE expat families have a problem, and that problem is debt.


Debt is a growing trend among young people


Debt is by no means an issue which is unique to the UAE, increasingly debt is becoming more and more of an issue, especially for younger generations. Northwestern Mutual’s 2018 Planning and Progress Study found that millennials between 25 & 34 have an average debt of $42,000.


Within the UAE studies have shown that 46.7% of the population are in some form of debt with 12.8% of the population actively looking for a loan. The median age in the UAE is 33.5 with 65.9% of the UAE population aged between 25-55 – taking away the 25% of the population aged 24 and under, predominantly who are yet to start work, we can conclude the majority of those in debt, are found between the parental age group of 25-54.


The danger of debt for parents


Parents in the UAE commonly take on debt for things such as cars, school fees, mortgages or unplanned expenditures. Research coming out of the US has shown how certain forms of debt can negatively affect children’s behaviour. The evidence from this research shows a clear link between the happiness of children and the form of debt their parents are in. 


 Children who showed higher levels of happiness were those who came from families whose parents had mortgage and education debt. Unfortunately, children who come from homes with unsecured debts, similar to the personal loans we commonly see in the UAE, showed lower levels of happiness.


The key difference, the research found, was to do with the constructive nature of the loan. In the cases where loans were taken to fund mortgages and school fees, stress levels were lower within parents as they felt the debt was more justified and structured. Whereas, unstructured loans which are usually channelled towards non-investment based spending for example car or payday loans, which may lead to short term reduce stress, but lead to longer-term induce higher levels of stress during the repayment process.


The bottom line


Within the UAE we see widespread consumerism and widespread debt, the two are often linked. For parents in the UAE, taking on debt can be a dangerous cycle and lead to high levels of stress which have the potential to impact your child’s mental health. Therefore, it is essential all families take the time to sit down and create a constructive financial plan in place to benefit you and your family today and tomorrow. 

Photo by Alexander Dummer on Unsplash

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