Planning is key to ease burden of saving for your child’s university education
In the face of climbing university costs, preparing for your child’s higher education has never been more critical.
From tuition fees to living expenses, the financial burden of university can seem overwhelming, making early and strategic planning essential.
By understanding the true costs, exploring savings strategies and maximising savings, you can lay a solid financial foundation for your child’s future without compromising your financial well-being.
Understand the costs
University comes at a hefty price tag for most families these days. According to Edarabia, tuition fees for undergraduate programmes in Dubai typically range from about Dh40,000 ($10,900) to Dh100,000 each academic year.
In the US, public universities have an annual fee ranging from $8,000 to $35,000, while private universities can charge between $25,000 and $55,000.
On average, these costs are only expected to rise. From 1980 to 2020, the cost of an undergraduate education in the US went up by 169 per cent, according to Forbes.
Start by looking at the US Department of Education’s net price calculator to see what you can expect to pay for tuition.
It is important to understand college costs. Here is a breakdown of those beyond tuition:
Room and board: On-campus or off-campus housing, including rent and utilities, as well as meal plans, form a large chunk of student expenses.
Books and supplies: The cost of textbooks can be surprisingly high, with some books costing more than $200.
Transport: Commuting costs for students living off-campus, and travel home can be costly.
Medical expenses: Some universities require health insurance, or there could be out-of-pocket expenses.
Miscellaneous: These include student services and facility fees and activity fees.
Understanding all these helps families plan more accurately.
Starting to save early for your child’s education is a powerful strategy that can significantly reduce financial stress. By initiating a savings plan when your child is young, modest monthly contributions can accumulate into a substantial fund. This not only eases the burden of student loans but also offers more flexibility in choosing institutions.
Early savings can also instil a sense of financial responsibility in your child as they witness the efforts that go into securing their future. Starting also early allows parents to take full advantage of savings vehicles.
Savings strategies
There are several child investment plans in the UAE that can help you. Companies such as Zurich and Life Insurance Corporation offer plans that accrue returns that can be paid out at certain times in a child’s life. Here are a few effective savings methods for a child’s higher education in the US:
529 college savings plans: These are tax-advantaged savings plans sponsored by states, state agencies or educational institutions that are designed specifically for future education costs. There are two types of 529 plans – prepaid tuition plans and education savings plans.
Coverdell education savings accounts:
These accounts allow families to contribute up to $2,000 a child per year for education expenses.
Savings bonds: Series EE and Series I savings bonds are lowrisk savings products that can be used for higher education.
Additional funding sources include scholarships and grants, work-study programmes and part-time jobs, as well as federal and private student loans (as a supplement, not primary source).
While not specifically designed for education savings and subject to taxes, Roth IRAs, as well as Uniform Gifts to Minors Act and Uniform Transfers to Minors Act, can also be used.
Saving for your child’s university education requires early planning, strategic saving and continuous adjustment.
By embracing a variety of savings methods, you can build a diversified portfolio that caters to their financial capabilities and educational goals.
The landscape of university education financing is dynamic. Staying informed and flexible allows you to optimise your savings plan effectively.