Planning for your children's future

Faiza Harzallah and her husband Ahmad have decided to downsize where they live in an effort to save money for the future.

"There is no way we are able to save anything right now," she said.

The 33-year-old mother of two, with another little one on the way, is looking to move from the family's three bedroom apartment to a two home because they are facing a large rent hike by renewing their lease.

The Harzallah's rent has rocketed by Dh5,000 to reach Dh45,000 in the past year.

Faiza and Ahmed have six-year-old son, who is already in school. and He and their other children, say the couple, are their number one concern.

They want to be able to save and send their children to good schools. Currently, they are paying Dh15,000 per year for school fees which will double when their daughter aged 18 months, will entre school in a few years, followed by the new addition to the family which is due in January.

"There is no way we would sacrifice our children's schooling for anything, they must go to good schools. There were cheaper schools that we could have sent our son to but his level learning would be compromised and that is not an option for us," she added adamantly.

Concentrating on saving for the future has left her family to live a virtually no frills lifestyle, limiting outings to a shopping mall in order not to spend an exorbitant amount of money.

Because although she may set a budget, inevitably Faiza ends up spending more on expenses she didn't budget for.

Faiza has found that although she and her husband make good money they are just not able to put anything away at the end of the month and are living on the sparse amount of cash left in their account.

The expert's view: A cording to the Citibank Investment Advisor the most important thing to remember about building wealth is making regular investments and reinvesting and starting as early as possible.

"If Faiza decided to put Dh500 of her income into an investment account every month, and commits to letting the money ride, on a 12 per cent return, she would have Dh114,000 after ten years, Dh486,000 after 20 years and Dh1.7 million in 30 years," said an adviser.

He added the target amounts can be used to fund her childrens' education in 12 years and a retirement planning in 30 years.

Solution: Vinod Bhatia, Investment Specialist for Emirates Bank, agrees with regular savings payment plan as one solution.

"It is possible to have three separate plans - one for each child which can continue until the child reaches 18," said Bhatia.

"Alternatively the investor can have a single plan starting immediately, with the first payback starting when the eldest child reaches 18 and the last payback being when the youngest child completes his or her education."

A second option recommended by Emirates Bank is to go in for a multi asset class, multi manager, global portfolio.

The advantage of this portfolio, says Bhatia, is that Faiza would simply chose a portfolio, then the fund manager would ensure the asset allocation is done accordingly.

The hardest part of implementing these strategies is making the regular monthly investments. The best way to ensure regular investments is to set up a process to automatically deduct a fixed amount from every month

For education and retirement planning, it is also important to have enough life insurance to cover for events that might interrupt future contributions.