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The 3-Step Process I Followed To Secure My Children’s Future

The 3-Step Process I followed to secure my children's futures

It all started with me wanting to give ‘The Ultimate Gift’ to my kids. The same gift my father gave me.

But I didn’t know what careers my kids would choose when they grew up, but I knew that higher education would cost a bomb.

Soham is 12 years old today, and Anjali is 7. 

When Anjali was 3, I started saving for her college education fees. This is how I went about doing it.

Step 1 - Set the right savings goal

I researched the average cost of 4 years of graduate studies and cost of living, in different countries as appropriate.

The average costs for 4 years of college (and cost of living) in these countries were as below:

  1. U.A.E. - USD 80,000
  2. U.K. - USD 160,000
  3. U.S.A - USD 265,000

Since, I had to choose one savings goal, I decided to err on the side of caution, and aim for the cost of studying in the United Kingdom (U.K.) i.e., USD 160,000 for 4 years of graduate studies and cost of living and traveling.

Then I had to allow for the effect of inflation. Like everything else the cost of education goes up each year. In fact, the cost of education goes up by an average of 5% every year.

In Anjali’s case, there were 15 years to go before she turned 18. That meant the costs would double at the rate of 5% per annum, i.e., I would need to pay USD 320,000 for 4 years of college education in the U.K.

Step 2 - Figure Out What Needs To Be Done

After identifying the savings target, the next step was to decide whether I wanted to save on a monthly or one-off basis (lump sum). 

Most parents I know preferred to put aside a small amount each month, which is what I preferred as well.

There were two ways to do this:

  1. Back calculate from the USD 320,000 and see how much I needed to save at an assumed growth rate, or
  2. Start with an amount that I was comfortable to begin with for e.g. USD 1,000 or 1,500 per month.

I have developed a simple calculator for this which you can access here.

Step 3 - Figure Out Which Savings Plan Suits Your Goal

The next step was to select the right savings and investment vehicle towards this goal, and this needs the help of a qualified and independent financial advisor. 

I did this myself, as I am a financial advisor and I suggest you save some time and effort and get qualified financial advice before you begin.

A qualified financial advisor will help you select the right savings/investment plan for your goal, and

also the term you need to save for, going forward.

These are just the basics. Then he will select where your money will be invested specifically each month or for the lump sum, and look after your savings plan for you, till you need the money.

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