When you have a child, you get lots of advice and tips from everyone but one area that tends to be overlooked is the financial aspect. In the excitement of impending parenthood, or the crazy first few months (or years!), you can forget this essential topic so this article is designed to be a useful guide to some of the issues you need to consider.
Multiple surveys have put the cost of raising a child at eye-watering levels over their first 18 years and expats working in the UAE have the added cost of education and medical bills to contend with. Let’s look at some of the financial practical steps you need to consider.
1. Put together a budget
Don’t just create a budget but do try and stick to it. A survey in the UK found that the average cost of a baby in their first year came to £9,000 which is AED 42,700 at current exchange rates but it is very easy to exceed that figure, especially in the UAE.
Decorating a nursery, buying clothes, cots, pushchairs/strollers, toys, plus nappies and all the extras really add up. By planning and setting a budget, you can avoid over-spending.
2. An emergency fund
This is my number one priority for personal financial planning but it becomes even more important when you have a child depending on you. Life is different now with far more responsibilities so this matters, especially in when in the UAE without a safety net.
I suggest that you build up an accessible fund equivalent to six months’ outgoings. Even if this takes a while to do, start it now, and ideally keep the cash offshore.
3. Insurance
A heading that covers a few types of plans, all of which do different things.
Medical insurance: If you are on a Dubai or Abu Dhabi visa your employer must provide medical insurance for you and many will extend this to dependents. If this is not the case, you must insure your spouse and child(ren) and I strongly urge you to organise good quality medical insurance. Treatment for anything serious is very expensive and good cover is essential.
Life assurance: To put it bluntly, life polices pay out a lump sum if you die. Not a happy thought but the kind thing is to ensure that your family can manage financially if you are no longer around. Their financial security is paramount and life cover doesn’t cost as much as you might think.
Critical illness cover: This can be a stand-alone plan, or more often is added to life policies. Critical illness cover pays out a lump sum of you are diagnosed with a serious illness, with the majority of claims being for heart disease, stroke or cancer, or if you are permanently disabled. This is useful as you are more than four times as likely to be seriously ill than to die before age 65 years.
Avoid plans that claim to combine life assurance and savings as they rarely do both jobs well and you will give yourself far more flexibility by keeping these two very different needs separate.
See links at end for more information and how to start organising protection plans.
4. Wills
No one likes to think about mortality but it is a fact of life and having a new baby is a time when people start thinking about steps they need to take to really look after their family. A suitable Will is essential when you have a child, in many respects far more so than when you have property or other assets.
It really doesn’t have to be painful, or even expensive, but the right Will means that you get to say who receives your assets in the event of death rather than it being left to the law of the land and also who would bring up your children should you both die.
When you are an expat in the UAE, you have to consider the inheritance laws of more than one country and it is so important to get this right and to protect your family, and assets properly. See link at end for details.
5. Start saving
In an ideal world, you start saving when the child is no more than a twinkle in the father’s eye in order to offset expenses but you should also save for your child’s future. School fees are expensive and even you if have an employer that covers that cost, you should think about further ahead such as university.
As a new parent, you probably don’t want to think about your child growing up but if you save from their early years, it will be so much easier on your pocket in the long run. University costs will only increase and it would be great for them to start their adult life without debts or student loans to repay.
Summary
As a single person, or a couple, you can usually manage when life gets difficult but this all changes when you have children. Your children depend on you so it is very important to plan ahead so that if life takes a bad turn, they will be okay.
This does not have to be a stressful or complicated process and there are a number of steps that all parents should take, especially while living in the UAE. One of the most important things I do is ensure that families are properly protected and that starts with sensible and factual advice. If required, we can then arrange Wills, life cover, the right bank accounts, investment or whatever else you need. And once these are in place you can relaxing in the knowledge that you have do all the right things for your family.
This is proper financial advice with the emphasis very much on the advice that you need in your personal situation, not the generic selling of products. This is experienced, qualified, ethical, professional and friendly advice.
Nothing is more important than your family and we can ensure that they will be secure no matter what happens in life. Contact me for a chat to see what steps you need to take.
Links to useful articles with more information
The future of investing is… flexible
Is your family financially protected if you die? Six common errors.
Can you afford to survive a critical illness?
Sharia law, the new personal status laws in the UAE, and what they mean to you.
Where there’s a will, there’s a way to protect your family
The Benefits of offshore banking for expats
To arrange a discussion on any aspect of your personal financial planning, please email me at keren@holbornassets.com
I write articles such as this one as part of the holistic personal financial planning service and that I provide to expats, and the general consumer, financial and legal information that I provide in The National newspaper, on radio, and on the Facebook group British Expats Dubai.
Please take a look at the other useful articles on this website.
