It is every child’s dream to be someone famous when they grow up. Sometimes they might want to be a scientist, or a doctor, or even an astronaut, flying off into space. Paying for your child’s education so they can achieve their goals can seem daunting.
Parents in the UAE could pay up to Dh1 million to fund their child’s education from pre-school through to university, according to Zurich Middle East.
If you’re the parent of a newborn or young child, back-to-school season in the UAE might trigger some anxiety as you contemplate the cost of college education about eighteen years from now. Research shows that more than half of parents fail to plan for their child’s future. So, what are the average mum and dad with a tight budget to do?
Here are six simple, yet effective steps for getting started on financing your child's college education and preparing for the future – without breaking the bank.
Step 1: Start now
There is no time like the present if financing your child’s higher education is one of your top monetary goals. “The cost of tertiary education can be scary, but that shouldn’t be a reason to put you off planning for the future,” says Keren Bobker, an independent financial adviser at Holborn Assets in Dubai.
“And the sooner you start saving, the easier it will be in the long run. If your children are still very small, you have a long time to build up the amount needed, and time will be on your side as compound growth can make a real difference.”
For example, if you started to save $1,000 a month when your child was born, a five per cent growth over 18 years would reap $350,000.
Step 2: Break down the costs
Whether they decide to study locally in the UAE, or overseas, the tuition costs by today’s standards is about $15,000-$20,000 in India, $34,135-$45,398 in Australia, $33,186-$41,657 in the UK and about $56,086-$66,134 in the US. Bobker suggests looking at your expenditure with a sharp eye to show where to cut some costs or where money is being frittered away unnecessarily. “Keep a note of all your outgoings each month and you’ll soon see where you can make savings,” she says. “Shop around, cut back on those takeaway coffees. You must still have some fun in life, but too often people are wasting money than can be put to better use.”
Step 3: Have a structured plan
Creating a sensible, structured college savings plan that you can stick too will give you the best chance of success, say the money experts. Most people save what's left over every month. Flip that strategy. Set a goal for your savings. Divide the amount you need by the number of years your child is away from university and then by 12 to see how much you should save each month. Don't try to set aside too much at once. You may fail. It is better to put aside a little each month instead.
Step 4: Free up cash
Parents can free up more cash per month for their savings fund by making the most of any lucrative financial incentives. For example, Standard Chartered’s platinum credit card gives users 10 per cent cash back on supermarket spend, school fees and utility bill payments. Also, as part of back-to-school offers going currently, the card allows 10 per cent cashback on school fees and zero per cent EMIs on fees.
Step 5: Save often and regularly
Most people can set aside a small amount of money every month for education savings, but need to be disciplined, stick with it and not dip into the funds.
With rents and utilities costs forming an average of 50 per cent of an individual’s expense in UAE, it can be a good idea to have an allocation towards a sound child educational saving plan. Parents are likely to see an increase in tuition fees as their child climbs the academic ladder, so saving unexpected inflows of money like work bonuses can also make things easier.
“Perhaps one of the best suited plans would be to go for saving plan that are offered by the premier banks and financial institutions. The best thing is they allow customised tweaks such as an additional bonus if investments work well, and coverage in case of accident or illness,” says Vijay Valecha, Chief Investment Officer at Century Financial. For example, Standard Chartered Bank has financial experts to help you pick the right plan that is suited for your child’s education needs.
Step 6: Speak to a financial adviser
Getting the advice of a qualified financial adviser can really help matters. Bobker says she regularly assists clients who haven’t saved much at all. “And so, now in their 40s and 50s – a time when they ought to be planning and saving for their own future – they spend that money on their children’s education and therefore have issues in funding their own retirement,” she says.
Even if people can only save a small amount each month, no matter what their age or circumstance, financial advisers are adept at identifying investment opportunities and strategies that can make a little go a long way. For example, Standard Chartered Bank has financial advisers to help you pick the right plan that is suited for your child’s education needs.
Have you begun to give your child a headstart? Don’t delay, start now by financing your child's education with the experts at Standard Chartered Bank