If you are a parent, it goes without saying that you aim at providing the best education for your children right from their early schooling years all the way to their higher education. It is, therefore, the requirement for funding Your Child’s Education makes it crucial to prepare yourself financially for the education-related costs since we live in a world where costs determine quality. Do not worry, we have come up with this guide, articulated with useful steps to help you plan your savings and investments to create a corpus for your child’s education and a prospering future.
In today’s day and age, education has proved to be the most important aspect of a child’s life. Thus, planning for something so significant comes with its own set of confusions. When is the right time to start? What aspects must one consider while saving for a child’s higher education? How does one begin? Should we just target an approximate amount and start saving? We have got the answers to all of your questions because parents in UAE need to have a strategic plan to ensure that they are financially prepared for funding their children’s education. Reports have shown that parents in UAE tend to spend more on their children’s education as compared to the global average. So, here are a few tips that you should keep in mind to consider when you are planning for funding your child’s education.
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Determine the costs beforehand
While there are other factors that need consideration, you need to determine a base number before you begin saving. Even if many parents are aware of the need to create a corpus for education, most parents find it difficult to estimate the costs they would incur on their kid’s education. There are two factors that make an estimate difficult – first, it is a long term goal and second, they do not know which course the child will opt for. Understanding the current cost of education depends on where you live, the level of education your child might want to get, and the type of college he/she might want to go to. Also, it is extremely important to determine whether your child will study locally or abroad. It is significant to keep in mind where the prospects want to send their kids for education, as the fee structures are different in different parts of the world.
Start saving money regularly
Once you have estimated the requirement, find out how much you would require investing each month towards it. The sooner you start investing in your child’s education, the better. As with any other investment goal, time and compounding interests are your best friends and most valuable asset. The earlier you start saving regularly, the less you will need to save in the long-run.
Do not ignore the rate of inflation
Inflation means the rate at which the value of money deteriorates over time. The costs of education are expected to rise faster than the costs for other services. Accounting for this higher cost as a result of inflation is essential. Every country has an inflation rate that can help you determine the correct cost of education post-inflation. If you are saving for education in a different country, then you must take the inflation rate of that country into consideration.
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Create a budget to be financially prepared
Budgeting is one of the most important tools in the arsenal of someone planning to save money for the future. It allows you to approach the huge future costs efficiently by planning and saving for it over the years. With a good budget, you can avoid unnecessary expenses and ensure that you save enough to be financially prepared for planned and unplanned expenses in the future. By creating a budget you can also keep your debts in check.
Protect your child’s future
When you plan it well, there is a high chance that you will accumulate the desired corpus. Many times you may start small but as your income increases, you can make up for the shortage in the past. However, do not forget to buy adequate term life insurance for yourself. Even in case of an eventuality, the education of the child must happen as per plan.
Remember to invest carefully
Saving money and investing are two different things, but equally important. Putting money into a savings account or money market account keeps it liquid but you won’t see as much growth in interest as you would by investing in the stock market instead. In terms of investment vehicles, stock funds historically have almost always exceeded other investments over periods of ten years or more. But, don’t just park your money in a fund or two and leave it. Review the performance of the funds at least annually, and make adjustments as necessary for under-performing funds. A financial planner can not only provide advice on your savings plan but can also manage and monitor investment performance and send quarterly statements. If you are managing your own investments, be sure to account for the time that you have left to invest.
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Being a parent is tough. There are just too many things to manage all at once. You probably spend a lot of time worrying about your children’s health, homework, and social skills. Then, there is the thought of their future. With education getting costlier, it is becoming increasingly important to start early and work towards ensuring that you are well prepared to manage the higher education costs without burdening yourself with loans or worse where you have to ask your child to compromise. You definitely do not want the lack of funds to come in the way of realizing their dreams. It’s probably best to start saving for your child’s education as early as possible. However, to save effectively you need a plan and a reasonable estimate of eventual costs. We hope that this article helped you to figure out how you can fund your child’s education and reach your other financial goals at the same time.