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Acuma Independent Financial Advice attend the Mother, Baby & Child Show 2013on of Abu Dhabi-Dubai road

4109Acuma, one of the Gulf region’s most recognised and respected providers of financial planning solutions, is pleased to announce their participation at the fifth Mother, Baby & Child Show as they know the pitter patter of tiny feet is a costly acquisition. As the rest of the world faces an economic downturn, the Middle East continues to prosper unabated. The Middle East has a population of circa 190 million with a growth rate of 2.6%, almost 20% more than the EU and three times the USA. 22% of the Middle East population is under ten years and new births are nearly five million per annum, with an affluent population and one of the highest per capita incomes in the world.

Without a doubt, one of the most rewarding things in the world is parenthood and as a parent, you naturally want to provide the best you can. Whilst it is fun to indulge children with USD 3,085 per annum worth of nursery products, and a further USD3271 per annum on toys and games, saving for their future and education has to be considered. Here in the UAE, many expatriate remuneration packages allow for children’s education but if not, the cost can be anywhere in the region of AED 30,000 to 50,000 per annum and when a child moves on to pursue further education, they will require even more financial support from parents or a loan.

CNN Money recently reported that those without a university degree were more than twice as likely to end up without jobs and that over a lifetime, the earnings gap between a high school diploma and degree graduate is in excess of USD 800,000. There is no doubt about the freedom an education can provide, but in the UK, for example, it is estimated that by the end of the year, the average student debt will be equivalent to USD 96,0002, which could take a life time to pay off.

Looking at the UK and US, two of the more popular university destinations; in the UK the current cost, including courses and accommodation, is equivalent to USD 28,800 per year, taking into account that tuition fees have gone up equivalent to USD 14,000, and in the US it is even higher at USD 35,000 per year but top Ivy League universities can charge that alone for tuition fees. Therefore on a four year Master’s course, a USD 115,200 to USD 140,000 financial outlay is required.

Planning effectively can make a real difference, and the sooner a savings plan is implemented, the smaller the monthly investment required. Without even taking into account the effects of inflation, to achieve a USD 140,000 lump sum of money, for example, an investment of USD 400 is required per month for 18 years from the birth of a child in an Education Savings Plan vehicle, which assumes a realistic 5% growth rate. However, to achieve the same USD 140,000 in a shorter timeframe of five years, a monthly saving of USD 2060 is needed per month. There is also the option of a children’s offshore savings account.

Additional costs for travelling for both the child and visiting parents have to be factored in and don’t forget to take into account the currency fluctuations, which can impact the value of money significantly. Also, before even considering saving, review life insurance and get children added to medical insurance.

“Children are the most precious gift we can receive in life but to afford to give them the best chances and experiences, early financial planning is imperative, especially when living in a tax-free environment and having the luxury of disposable income to save” says Acuma’s Executive Director, Noel O’Leary.

Acuma check-list to plan for children’s education:

1. Consider your child’s needs at every age – Daycare and nursery can be very expensive in the UAE. Ensure you do some research to find the best option price-wise that caters for the needs of your child.

2. Talk to your employer and HR department – Many companies provide an educational allowance for children – perhaps you can discuss it as part of your package when you are next in line for a promotion or pay rise.

3. Plan for your child’s future post eighteen – Will your child be going to university and do you hope they will excel and obtain a degree? As a parent, this is something you will need to fund, or a student loan will need to be taken out.

4. Explore overseas options – The fees at universities in America are the most expensive and it costs as much as USD 50,000 per annum to send a child to a top university. The other consideration is that when a young adult reaches further education age, parents are often entering the later stages of their careers and will want to focus on retirement and not further expenses for their children’s education. If you are a European citizen, you may be in luck, as many degree courses in European countries are free.

5. Stay up to date with residency requirements and laws in your home country. Some countries require residency or proof of residency with up to three years prior to enrolment on degree courses in order to qualify for free or reduced tuition.

6. Start early – If you plan ahead and start saving early, you will achieve the desired amount you need for further education with little worry.

7. Be realistic – Consult a financial planner and discuss what a realistic amount for you to save would be, according to your income.

8. Find out if you can claim any tax exemptions for tuition fees paid and consult an IFA for help.

9. Prepare your child and teach them how to manage their finances if they are going to university for the first time as they will be expected to budget on their own for the first time. A person’s money habits are greatly influenced by their parent’s past and present financial behavior.

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