Important Points to Know While Building a Corpus for Child Education Plan
For the parents in UAE probably the topmost priority when it comes to financial goals would be saving enough for the higher education of their children. The reason behind this is that they have more reasons to worry about the costs of education as compared to the parents that are living in other parts of the world.
The HSBC study declares the UAE school fees to be the second-highest across the globe. To support this further the study conducted by Khaleej Times says that educating a child in the UAE costs about AED 1 million.
The following are some important points to consider when you are likely to choose and invest in the best child education plan for your child/children:
Decide Where Your Kid(s) Is/Are Likely to Study
When the parents talk about their kid’s further education, especially in the cases of parents with younger children, they are not very sure about where their child wants to go or the kind of education to opt for his or her further studies.
Honestly, which is quite fair since the future is pretty difficult to predict. However, it is important for parents to be fairly clear so that they can start making child investment plans early, and then opt for the best child education plan for their child(ren).
By planning ahead, visualizing, putting up child investment plans in place, and providing them with great opportunities, you can form a future for your child instead of merely waiting for things to fall into place or magically happen.
A good spot to begin would be shortlisting the most favored destinations or countries that fall right in your budget. It is difficult to get an exact amount as that varies from one child to another, but it is possible for you to find a rough figure that you can decide on the basis of. Once you have shortlisted the countries, you should then choose the one that has the highest education cost as the savings goal for your child education plan.
This procedure will help you in arriving at a fixed number.
The Time Duration At Hand
Once you have come down to the final decision of the destination your child wants to go to pursue his or her higher education, then you need to get onto determining the time you have in hand to save up for your child education plan.
For instance, if your child is about 5 years and is likely to attend university at the age of, say, 18 years, how much time do you have at hand? If you thought to yourself ’13 years’ then you are most definitely correct, mathematically. But in real life, do you really have 13 years?
The human brain is wired in a way where it puts off working events that are to occur in the future, so by thinking of your child’s graduation to be something that is to occur after a very long time, you are actually causing your brain to put it off to later. So, in reality, you really do not have exactly 13 years.
Let’s put it together – you receive one salary in a month, obviously! Right? So a year has 12 months, and 13 x 12 equals to 156 months, so you actually have 186 salaries at hand and not 13 years.
As every month along with the salary passes by without you making any savings for any child investment plans, you are making it tougher for yourself. When you manage to start early, you have enough time for your money to add on and multiply.
We can see inflation as a really hungry monster. It bites on and eats on one’s savings for all of its meals. As inflation rises, every Dirham you save is a smaller percentage of future goods and services. This is what makes it essential for you to factor in inflation when calculating the fee of the potential university’s fees and then accordingly invest in child plans or investment plans that yield a return that is higher than the prevailing inflation.
However, the inflation is likely to vary when we compare where you are now and where your child wishes to pursue his or her studies, in such a case, it is important for you to account for the inflation for the desired destination.
The Right Time to Start Investing
The rate of return on your investment plans along with the period of your investment determines the rate of your money’s growth. The longer you have your investment, the higher will be the growth of your funds. The best time to invest is here and it’s NOW!
Attitude towards the Investment Plans
As a potential investor, you will have many options at hand from which you can choose when we talk about the child's plans to invest in for your kid’s further education. The reward as well as the risk factor varies differs from one investment to another. You should carefully review the risk factor involved in a particular investment before going ahead and opting for it.
Many investment plans are withdrawn by the investors early because they do not do their share of research before opting for a plan and later find out that it is not a plan that suits their needs and requirements.
In order to keep afar from any such situation, obtain a copy of your shortlisted plans’ terms and conditions, go through them thoroughly and understand the scope as well as the limitations that a particular plan holds.
In UAE, there are generally 3 kinds of investment plans for child education, they are:
- Capital protected with a fixed bonus
- Capital protected with a variable bonus
- Market-linked investment plans
Based on your financial goals, the time horizon at hand, and your appetite for risk, you should opt for the one that deems fit. Always remember, it is your responsibility to choose the option that is the best and you cannot blame anyone else if you choose a plan that does not suit your needs.
It is good to opt for some sort of protection for your life along with investing for your child’s education so that even if you are no longer around, the financial goals are met. The most suitable plans for protecting the savings goal you have for your education would be term plans and endowment plans.
It is important for you to set an education goal that is practical, and you can consult an expert if you are unclear about the child investment plans that suit your needs the best.