Start a fund early for child's university fees

This week's situation comes from Brian Solis, a marketing executive based in Dubai and originally from the UK. Solis' monthly salary is Dh28,000 and his monthly outgoings about Dh18,000. His dependents include a wife, a two-year-old child and a baby due next month. He has no real savings but has Dh100,000 in the bank.

Solis, who moved here eight months ago has used up most of his savings in establishing a new home – he rents an apartment in Dubai Marina – and paying rent up front for six months. Well aware of the relatively high cost of education in the UAE, it is his priority to begin saving now for the education of his children. He would like to know the best way to put aside enough to pay for his child all the way to university.


You have a young and dependent family, so the first priority should be their protection in the case of your death. You should ensure you have enough life cover to make certain your family can survive for several years in the tragic event of your death. Generally, a good rule of thumb might be ten times your annual salary as life cover. You should also consider income protection if circumstances dictate that you become unable to work.

Although you have Dh100,000 in the bank, some of this may well be required to meet rent for the next six months. However, any remaining amount will also serve as an emergency fund, which would be quickly available should you or your family require cash at any time. It is always sensible to have a relatively small amount of cash in the bank to cover emergencies, particularly when living as an expatriate without the support structure of family and friends you might have in your home country.

You are correct to be thinking long term with education planning for your children as this can become very expensive. By starting a fund for this now you can keep premiums fairly low as you can save for a number of years before the funds are required. Because you are funding the education early you can afford to invest in mutual funds that offer growth over the long term and will historically beat being invested in cash over the long term. There are a number of regular savings policies available in the market offering a considerable number of funds covering all asset classes. These policies would allow you penalty free switches and can be tax friendly should you return to the UK. You will also benefit from dollar cost averaging, which means even when stock markets are low you will buy more units in each of your chosen funds. When markets rise you will have greater growth as you hold more units.


- Independent Financial Advisor Gavin Smith analyses readers' portfolio for Emirates Business. He is Area Manager for consultants PIC, a member of the deVere Group of companies. Write to him at money@business24-7.ae

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