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Save for your child's higher education right now

dubai - Parents must bring their child's future education higher up on the financial priority list

If there is one topic that will get any parent going, it's the cost of education. At any dinner party, park bench, school pick-up, kids' birthday party, just drop the topic into a conversation and, like a Mentos mint dropped into a glass of coke (if you haven't tried this before, you should), it will fizz up and froth over, and before long, there will be rockets shooting out of it.

Here in Dubai, school fees increase incrementally, year on year, as your child gets older - presumably this is because the amount they need to be taught gets more expensive to teach? And don't even get a parent started on the cost of nursery.

Hence why, when it comes to saving for university fees, many parents are simply not ready yet - they are only just mentally, and more importantly financially, managing the cost of school fees and nurseries for their children, let alone being able to plan for university.

However, with University World News' recent report on the issue of rising fees and economy-crippling levels of student debt in many countries, whether your child is 15, five or even just five months, saving for further education is something that shouldn't be put off.

Both the British universities' minister Jo Johnson and the Australian government recently announced that they would be lifting the cap on university fees (in the UK, this will come into effect from autumn of 2017 onwards). Finance experts in the US predict that, by 2033, a four-year degree will cost as much as $100,000.

Granted, Germany has just done away with tuition fees, joining some other European countries (namely France, Sweden, Denmark, Norway, Finland and Iceland) in offering either very low or totally free university courses. However, there is still the living costs to be saved for.

Added to this the rate of inflation between now and when your child starts their degree, the savings you are making today need to be substantial enough to still be substantial in the future.

Sure, you can simply open a checking account for your child and put a little bit away when you can - that is a good start. But with most savings accounts offering annual returns of between 0.5 and three per cent, you could get more bang for your buck - or more ding for your dirham - if you stash that cash into a dedicated savings account.

Taking a rough average of the savings accounts featured on compareit4me.com, if you open an account with Dh1,000 and plan to save Dh1,000 per month, and that savings account offers you returns of two per cent per year, by the end of the first year, you could have Dh12,240 in that account. By the end of the second year, Dh24,725, making you an extra Dh725.

However, with the beauty of compound interest, if you continued to put in Dh1,000 per month, by the end of the fifth year, you will have saved Dh63,477, as opposed to Dh60,000 in a checking account. And by the end of the 10th year, Dh133,781, as opposed to Dh120,000 - meaning you will have made back nearly Dh14,000 over 10 years.

So, parents, bring your child's future education higher up on your financial priority list, because thanks to compound interest, by starting to address it now, you could end up saving yourself a great deal of money and stress in the future. As Einstein famously said: "Compound interest is the eighth wonder of the world. He who understands it, earns it. And he who doesn't, pays it."

The writer is CEO of compareit4me.com. Views expressed by him are his own and do not reflect the newspaper's policy.