Planning for your child's future (page 1 of 2)

For the last six years, Liverpool Victoria has completed an annual survey to calculate the cost of raising a child.

This year's survey shows that parents should expect to spend Dhs1,162,500 to raise a child until the age of 21.

This is equivalent to Dhs55,375 each year, or Dhs150 a day, per child. Putting it another way, the average expatriate will have to put aside nine or 10 years wages, per child, just to raise them to the age of 21!

As you would expect the survey has shown an increase year on year, with a 4% increase compared to last year's figure and a 38% increase since the first survey, which was produced in 2003. Figures such as these could certainly be the deciding factor between having a single child or several children.

Compounded costs

It's not just about keeping kids dressed, fed and entertained that parents need to think about. The rising cost of a university education, coupled with spiralling house prices, mean many children will still be reliant on the 'bank of mum and dad' long after they turn 18 or flee the nest.

As most parents will already know, childcare and education remain the biggest expenditures; these are estimated to cost parents Dhs323,000 and Dhs301,500 respectively.

As a result of the current economic downturn, many parents are now feeling a drain on their finances and are forced to reduce their spending, making decisions based on what is happening now with little thought for the future. As a result, many parents are having to lose the second car, downscale their accommodation or go without an annual holiday just to cover the next year's school fees.

But, despite the economic downturn, the cost of schooling in the UAE continues to rise at what, to those who are not lucky enough to have education costs included in their employment contract, is a very alarming rate. Indeed, many schools are increasing their charges by the maximum permitted level.

Fees at the 10 most expensive schools in the UAE will range from Dhs63,500 a year to Dhs92,000. All but one of these most expensive schools are in Dubai. Such fees take the education costs for those in the UAE much higher than the Dhs301,500 calculated in Liverpool Victoria's survey.

Cutting extras

Inevitably the first thing to go is the extras, the luxuries such as holidays, short breaks and leisure activities. There is also the option to buy second hand or indeed sell some outgrown or unused items in order to raise money.

Of course you could argue that further education is not obligatory, but on the other hand can your client afford not to educate their child? Surely a child's education is the best investment a parent could ever make. But it is not only the cost of education to bear in mind, whether it is incurred through private or further education; there is also the added cost of uniforms and clothing; books and school trips.

Consequently, action has to be taken and the earlier it is taken the less painful it will be. The solution is the old adage 'invest today to be ready for tomorrow'.

Children's Saving Plans

Parents take out children's savings plans for a number of reasons; some want to save for a deposit on their child's first home, others wish to save for their child's wedding or allow the child the opportunity to set up a business when they come of age.