With many working professionals in the UAE living paycheck to paycheck, financial experts are urging residents to build an emergency fund as a necessity. As layoffs, pay cuts, and furloughs become a harsh reality for many in recent times, the experts argue that old rules of saving no longer apply.
Sonal Chiber, Senior Financial Services Consultant at Crisil Coalition Greenwich, believes that preparing for a rainy day is now “foundational to financial resilience.” She advises that people can no longer afford to keep their long-term investments and emergency liquidity in the same bucket.
“Individuals should aim to build an emergency fund covering six to nine months of essential living expenses,” Chiber told Khaleej Times. “This should be held in highly liquid, low risk instruments such as savings accounts or money market funds. The key is to separate emergency liquidity from long term wealth creation.”
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The debt trap
In the event of a job loss or furlough, many people are tempted to borrow money to meet immediate large expenses like school fees or rent payment. However, experts warn that the wrong kind of capital infusion can destroy a household’s future. Michele Carby of The Michele Carby Practice noted that the UAE’s legal framework makes unregulated borrowing particularly dangerous.
“Taking personal loans in times of financial stress can carry significant risks,” Carby explained. “In more serious cases, defaults may trigger wider financial repercussions, including lenders calling in other liabilities. In extreme situations, this can lead to legal restrictions such as travel bans.”
Financial content creator Kartik Iyer echoed this, warning against “kicking the can down the road.” He argues that taking a loan without income certainty turns a temporary problem into a long-term liability.
“This is where things can get ugly really quick,” he cautioned. “Borrowing money in tough times is just kicking the can down the road without addressing the real problem. Illegal lending is even worse. They come with extremely high interest rates, harassment and legal risks. One should stay away from these at all costs.”
How to build an emergency fund
Experts agree that building a financial buffer does not have to be overwhelming. The key is to start small and be consistent. Kartik recommended a simple three-step approach.
“Step one — track your monthly expenses properly. Not roughly. Exactly,” he said. “Step two — build an emergency fund of at least three months of expenses. Go up to six months if you have more than two dependents. Step three — keep this money aside. Build resilience before chasing returns.”
Michele suggests a structured budgeting method, allocating approximately 50 per cent of income to fixed expenses such as rent, utilities, and school fees; 20 per cent towards emergency savings; 20 per cent towards medium- to long-term investments; and 10 per cent for discretionary spending.
For those who find saving difficult, Beth Clay, Financial Wellness Consultant at Financed Well, advises automating the process. “Our brains aren’t wired for willpower,” she said. “We need to build a system that saves automatically and protects our future selves through a decision we make once.”
She recommends aiming for three to six months of essential living costs, keeping the money accessible and separate from day-to-day spending. Once that foundation is in place, she suggests putting away 10 to 15 percent of net monthly income into investments.
For those without an emergency fund, Salam Pappinissery, CEO of Yab Legal Services, suggested getting a legal freelance or part time job. “Try to find small jobs in areas where you have expertise,” he said. “Crucially, this work must be legal. You must obtain a formal work permit or a No Objection Certificate (NOC) from your current sponsor/employer. Engaging in ‘off-the-books’ work without a permit can lead to severe legal penalties, fines, or deportation.”
There is hope
While for many, a job loss can feel like the end, the experts say there is hope. Sonal shared a case study of a mid-career UAE professional who faced a pay cut but refused to see it as a setback.
“She reassessed her skills and transitioned into independent consulting,” she recalled. “She reduced her fixed expenses, built a modest emergency reserve and gradually diversified her income streams. Within a year, she had greater financial control and flexibility than before. Those who respond with agility tend to emerge stronger.”
Michele agreed, noting that the Covid-19 recovery proved that resilient investors reaped rewards, particularly in the UAE’s post-pandemic property boom. “This was a defining moment for many residents who had become accustomed to a certain lifestyle, assuming disruption was unlikely,” she said. “For those who were underprepared, it should serve as a wake-up call to take control.”
Source: Khaleej Times