Start early on, allow your children to dream and yourself an easy retired life
As Warren Buffet put it aptly, “Someone is sitting in the shade today because someone planted a tree a long time ago.” Diapers and car seats will eventually give way to important financial concerns such as your child’s education. Early planning will help ease the nightmares and ensure that you do not compromise the dreams of your children.
In case you are wondering why your education bills are soaring through the roof, the UAE is the fourth most expensive place in this world for education. Now, pat yourself for being able to sustain in such an environment. But then, would it hurt to plan a little better?
Interestingly, the cost of education in the UAE is almost half of the GDP per person (about Dh102,760 per annum)! Countries such as Canada, Singapore, Japan and even Germany come a little later in the list. Australia and the US top the list.
Spending on education constitutes a major portion of household budgets in our part of the world, so, it is imperative that we start saving early on.
When should we start saving for education?
How about saving from birth? Well, no time is early to start saving for a child’s education. You need to chart out expenses and set aside a disciplined amount every month if not every week! Regular savings will hedge you against inflation in its own way. It will ensure that you are not forced to take huge loans. Let us take baby steps and let the investment grow with your baby. It would be surprising to see that while your baby grows into a fine young lady or a gentleman, your small investments will mature into huge life savers. The time is by your side right now and you should make best use of the power of compounding.
Account for small expenses
While we remember to save for the education fees, we generally tend to ignore smaller lifestyle expenses, day care, preschools, commuting, hobby classes and so on. Well, did we just scare the young parent in you?
Don’t worry, a little stitch in time will save nine. Let us list out all what will need our funds. The silver lining is the fact that with your upbringing and education, the child will start supporting herself/himself sooner than you imagined.
While you plan for the best, you should also be prepared for the worst. This is not negativity that we are trying to instill into you on the very first day of the week, but better be safe than be sorry.
Expect the unexpected
Most of us forget to plan for the unexpected. Many events in life gobble up the floor beneath you and bring the ceiling down. It is very important that we insure these unforeseen circumstances adequately.
The last decade has seen so many pink slips floating around that many will vouch that insurance for loss of job should be made mandatory! We all need that emergency fund which will help you sail through tough times.
Other such unfortunate circumstances can be an untimely death for which life insurance is a must. The purpose of life insurance is to make sure you can continue to take care of the kids even after you are gone. It should be accompanied with health insurance, critical illness insurance, disability insurance and accidental insurance.
As Abraham Lincoln said once, “…you can not escape the responsibility of tomorrow by evading it today.”
Responsible financial planning is indeed a lifelong commitment. In the absence of commitment, there are false promises and hopes. If you are still not convinced about early planning, let us give you one last food for thought. According to a research, taking into account the annual inflation rate of say 10% for the next say 10 years, parents with new-born babies could be easily looking at a total spending on their child to the tune of 5 million Dirhams.
Contributions to the content have been made by Gurleen Kaur, a Financial Consultant who devotes her time to her company www.hareepatti.com. She can be contacted at [email protected]