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29 March 2024

How just Dh128 a day can send your kid to US

Published
By Sandi Saksena
The recent schools’ ‘report card’ has quite a few readers thinking about what the price of a good school education is and are we really getting our money’s worth. 
What you pay is what you get! School fees are always being hiked, thanks to inflation, our ever faithful companion always by our side.
This is just school fees and a majority of parents of school going kids are in their ‘earning years’.
Those of us with college going kids are also in our ‘earning years’, however, retirement is also looming on the horizon and here we are dishing out hefty sums to cover so many costs which go way beyond tuition fees and books.
According to an article in the New York Times December 3, 2008, The College Board (www.collegeboard.com), published college tuition and fees have shown an increase of 439 per cent from 1982 to 2007, while median family income rose 147 per cent. 
This study, says the cost of room and board has also continued to rise and at many colleges dwarfs actual tuition.
At four-year public institutions, tuition, room and board on average now total $13,589; at private colleges, $32,307.
Mr. Smith who is 36-years old asked me for savings plan for college fee plan for his two kids Alan and Debbie born 2004 and 2007. 
He hasn’t quite decided where his kids will attend university but says he would like to plan for the US.
He was prompted to take this step because he is amazed how much nursery school costs. Knowing he cannot count on an inheritance, a lottery prize, and since he admits his luck in speculation is not an option, he has chosen the ‘boring’ way of budgeting, saving and investing…
Common sense prevails!!
Keeping above cost in mind with an escalation of 3% per annum Mr. Smith will have to save and invest US$ 974/- per month for a period of 12 years at an average return of 10 %. 
What is interesting to note that because the kids are 3 years apart, in 2025, Mr. Smith will be spending a whopping US$ 79,840 because all expenses will be doubled. 
After an exhaustive fact find on his present income, expense and liabilities he was quite concerned about the amounts he was expected to keep aside. 
However he says that there are two ways to get money, one is your income/salary and the other is your money at work for you.
Medium to long term investing in different monetary vehicles like, savings bonds, in mutual funds etc is a way to do this.
He has set his goal, to see his kids graduate from a prestigious university. 
For this he needs to work smarter and harder.  
With the contribution of US$ 974 of Dh3584/- per month in mind he decided to break down the contributions to a weekly and then daily basis to an amount that was approximately Dh128 per day. 
This he said was an amount he could keep aside for his kids’ everyday! 
Not a large amount if you come to think of it! 
Don’t wait to start, irrespective of where your child goes to university it’s never too early to start saving and investing it’s never too late, either. It’s better if you start early for a lot of obvious reasons; your health, capacity to earn, unanticipated events like disability and death. 
Newborn to 10 years
You’ve got 8 to 18 years to accumulate funds. Consider investments that have the potential to grow. Many mutual funds will accept small monthly investments, and there’s a tremendous variety to choose from. 
Ages 10 to 14
You now have 4 to 8 to years to invest. Don’t panic, consider a balanced investment portfolio 
Over Age 14
Look at investments for income and liquidity; this is intended to provide moderate growth without sacrificing stability and liquidity. You can move into either fixed-income securities, savings bonds (highly liquid funds that pay better than current interest rates), or other savings vehicles timed to mature when tuition is due.    
To parents concerned about providing the money for their kids’ higher education Mr. Smith quotes, ‘Good plans shape good decisions. That's why good planning helps to make elusive dreams come true.”  
The writer is a Financial Planner and Member of the Million Dollar Round Table.
Do you have a question for Emirates 24|7’s financial expert. Write to her at financialplanning101@yahoo.com