Last time I gave an overview to the subject of savings and investments. This is a large and potentially complicated area of financial planning, and this month I will focus on planning for your children’s education. While in some countries this cost is met by the state, increasingly parents are having to fund their children’s education, or at the very least contribute to the cost.
Certainly here in the UAE the vast majority of expatriates will have to pay for their children’s school fees, and indeed it is likely that they will also have to fund any university fees as well. The school fees vary greatly dependent upon the institution, and the choice of school will obviously have an impact on the amount that will be required to pay for the education that your child receives.
While the fees that are levied are closely monitored in the UAE by the Knowledge and Human Development Authority (KHDA), the fees have and are likely to increase in excess of the rate of inflation, and so the real of cost of education is only going to increase. In addition, secondary and university fees will be more expensive that primary education.
Therefore it is vital that school fees are taken into account as part of your overall financial plan so that you are not faced with some potentially difficult financial decisions in the future. When considering your options, and formulating a plan, I would recommend that you consider what parts of your child’s education you wish to plan for. School generally starts around age 4 or 5, so this does not leave much time to start planning unless you are very organised! Also as this education is generally the least expensive, often this can be funded from general income.
If wish to prepare for secondary education, then you will have at least ten years to put a plan in place, and obviously for university, you will have up to eighteen years to prepare. These timescales should allow you build a significant amount of money that can cover most if not all of your child’s education costs.
As with most aspects of financial planning, the sooner you start planning, the easier it is likely to be to build the amount of money that you need. It can be quite difficult to work out how much you are likely to need, and for what course you may end up funding, but most colleges and universities publish their current fees and so with some inflation assumptions, you can start to work out how much you will need.
Once this is established, we can assist with calculating how much you will need to contribute on a regular basis to build the required fund. How much this grows by obviously depends on a number of factors, such as your attitude to risk, and what investments are selected, which is no different from other forms of financial planning, but once you know what you are aiming for it helps to focus the plan. Even if the exact amount is not met, there should still be a significant sum accumulated that will help towards the fees that will need to be paid.
With the right plan in place, and as many unknown factors removed from the equation, your children’s education solution can be tailored to your needs, and the earlier it is started the more time and therefore the more change you will have of meeting yours and indeed your children’s goals.
As with all financial plans, this should be reviewed on a regular basis and revised as and when necessary. Next time I will look at retirement planning. If you have any queries please do not hesitate to contact me at jthomas@acuma.ae or on 0508543983.
