Saving for your child’s education is one of the biggest investments you can make towards their future. Depending on their age and place of study, the level of contribution you will be expected to make can differ significantly, but the most important thing is to have a clear plan in place that covers the inevitable expenses that will arise in the short, medium and long-term.
Many parents think only in terms of saving for higher education, but you also need to factor in the early education costs as well. Think about the 3 key stages of a child’s education and the expenses involved at each stage.
The Annual Scenario-Sit down and calculate the estimated annual expenditure needed to cover school costs, these would include tuition fees, paid after school activities, materials e.g. exercise books, school trips. Then work out the equivalent monthly value that you should be saving in order to meet these.
If you find it hard to pay school fees in bulk you can ease the pressure by paying monthly, using a Credit Card. Some Credit Cards that offer a 0% interest-monthly instalments plan for paying school fees are: NBAD GEMS Credit Card (for GEMS schools only), Mashreq Smart Saver Credit Card and Standard Chartered Titanium Credit Card.
Primary to Senior School- the education cost goes up by a whopping 80% as children move from Primary School to Senior School or college. The tuition fee itself accounts for a 60% hike. Plus take into account the after school activities, books and trips. The starting tuition fee for a senior school student in a British Curriculum school in UAE is 62,000 per annum. If your child is in Primary School, you can start preparing for the jump in expenses in a couple of years.
College or Graduation Stage- For future higher education you can calculate approximate amounts according to the current fee structures and then take into account any increases based on the average inflation values for fees in that area. The average fee for a Graduation Course in the UK is about 60,000 pounds. Keep into account possible living expenses for students studying away from home. Add to this about 10,000 pounds for accommodation every year and you are looking at a bill of 90,000 pounds.
Take the 3-step approach to get on top of the situation
Step 1. Estimate the expense. Take a long-term view and estimate the education expenses for all your children according to their interests. Use free tools like College Education Planner on moneycamel.com to get an idea about the investment amount you will need considering the expense and inflation rate.
Step 2. Invest in a College Education Plan. Appreciate that even saving small amounts now will add up and ease the burden later on. A college Education Plan is nothing but a long-term savings plan that keeps into account safety of the principal amount and focuses at offering a high return. A Saving Plan allows you to make a commitment to saving regularly. You can choose the amount for saving and the interval at which you would like to save, this could be monthly, quarterly or even annually. A good savings plan boosts your savings with added bonuses and offers the flexibility to withdraw. It also takes care of tax liability issues.
There are many options available from various savings and investment vehicles available for education fees planning.
Some of the plans available in UAE are “The Managed Savings Account”, “Yes 216”, “Premier” and “Vista”. Step 3. Review your Plan. Assess your progress on an annual basis and adjust your calculations where necessary in order to meet your family’s needs. For example, if you have another child or you are moving to a new country, your calculations will change.
While you plan for the big expenses take this time as an opportunity to teach your children the value and importance of your savings. Encourage your child to be part of the process. It is a good idea to involve your children so they understand the value of saving in order to meet major costs such as higher education. Challenge them to work hard for a scholarship. Ask them to help make small savings towards university by getting a part-time job or setting aside a portion of their allowance. Start saving today to make your child’s future secure.
Preeti Bhambri is managing director of personal finance website Moneycamel.com
