For many of us, saving is a bit of a tough topic. We all know the feeling of planning to put aside SAR500 a month for when the times are bad, only to then go to the car in the morning and realize we need to change the battery…

So how can we come up with a way to save money for when times are bad, yet still manage our daily activities? The answer is employer-sponsored saving programs.

It is quite simple, the employer and the employee pitch in together to save a set amount of money every month. For the employee, it may be a certain % of the salary that is directly transferred to the savings-account. For the employer, it's an obligation made over a period of time. What does that mean? It means he rewards you for saving.

Let’s think about this, imagine you are joining a new employer who will offer you a 10,000 salary with a 10% saving contribution plan that is being fully matched over 1 year. This means you get 10,000 salary every month paid out; on top of that you are eligible for the employee-benefit contribution from your employer; 1,000 will be contributed to a savings-account in your name. The employer will give you an obligation every month to match your contribution over 1 year, so every month you get a 12th of that obligation building up a matching amount.

Lets focus on how exactly that works, so in our example you got a SAR1,000 obligation for the first contribution, in January, that means 1/12th of the obligation would have been paid to you in January to your savings-account. The next month you will contribute again and add another obligation payment so you now get 2/12th. After 12 months you reach the maximum matching and benefit the most out of your plan, because you ‘laddered’ the matchings. 

So let’s look at the example again:

SAR 10,000 monthly salary

SAR 1,000 monthly contribution to the savings-account

SAR 1,000 monthly obligation from employer as part of the employee-benefit plan

So the total compensation package you actually received is SAR12,000.

But the question is why?

And the answer is, because your employer wants to encourage financial stability, so you don't have to focus on money worries and have more workplace motivation at work, that way you will stay longer in the company and feel a part of it, hence improving talent-retention for your employer. 

You as an investor will save up on a monthly basis and be able to select what to do with the money. Thrift Plan is a platform allowing all this to be made really easy. We partnered up with fund managers to allow us to build customized portfolios to select from. All you as an employee need to do is decide whether you would be ready to take some risk or better not, but don't worry we are here to help you make this decision. After that, you just sit back and watch your savings grow.