A bright future
A well planned approach towards our finances can make our children’s journey to adulthood that much easier and better. Mayank Singh reports

Can you put a price on the expression of pure bliss on your three year old’s face as she enjoys an ice cream. When your 17-year old jumps in ecstasy on hearing the news of having secured admission in his dream college, would a parent rack his brains at the amount of money that it is going to cost? These are non- questions for any parent. Parental love is unconditional and largely unaccountable. It is heartless and clinical to count you child as a cost centre. But it also goes without saying that financial planning for kids is the first step to give them an advantage in life.

The dichotomy of spending on your children is a conflict between the present and the future. Should you give in and buy him the RO200 plus Play station 3 that your son has been craving for or should you save for his graduation? Will the Barbie themed RO500 party on your daughter’s birthday be the reason why she will have to do her MBA in Muscat and not in New York. The only way to solve these dilemmas is to plan ahead and start investing now.

Bundle of joy
The pleasure of holding ones new born baby in an experience unlike any other feeling in the world. A smile from ones kid is enough to wipe off the blues of a bad day at office or the sleepless nights spent on carrying her around. It may probably be the best time to start ones journey on the road to financial planning. Khalil Ahmed al Harthy, Assistant General Manager, Al Ahlia Insurance, says “History has shown us that with ever increasing inflation the nominal value of money goes down and it is the ethical obligation of a parent to lift their kids from any financial burden.” The birth of his daughter Teeb a year and a half back has made Khalil committed to giving her a secure future. Aware that their expenses will increase as she grows, he has invested in a property in her name. In addition he has created an equity fund to which he contributes something every quarter. “We want her to be able to sustain herself independently when she grows up.”

Being young Khalil is aware that he can invest in high-risk, high return instruments at this stage, but he is averse to choosing risky options as he believes, “You cannot jeopardise the returns for your kids.” With a number of options available, he feels that there is a need to popularise the savings options for kids in the market.

The second coming
Most couples can afford one child and want to do the best for him or her. As financials decisions go the second child is usually the one that swings the balances. The thought of having to keep away double the amount of what you need for a child can be daunting. Often, when kids are young, one plus one does not add up to two – you could reuse and recycle and keep your expenses slightly lower. But as they grow older, two children can be a strain on the finances. But with careful planning it can be taken care just like Rajeev Singh, partner, Transaction Advisory Services, Ernst& Young and his wife Dhanashree Singh have done.

A B-school graduate and a successful account planner in a prestigious advertising agency in India, Dhanashree took a conscious decision not to go back to a job once she got married and relocated to Oman, in 1996. Her decision was driven partially by the lack of exciting opportunities and partly by her desire to be a full time parent.

The arrival of Jiya, the couple’s first child in 2000 gave her a chance to give her bundle of joy the security of a full time parent. She felt that the financial loss of not taking up a job was more than compensated by the satisfaction of looking after her child.

A first-born usually brings its own set of anxieties and the Singh’s were no exception. Says Rajeev, “We were quite anxious about her well being.” Jiya’s grandparents set in motion the process of financial planning for the baby by earmarking a certain amount of money for her. The fixed deposit has a lock in period of 15-20 years and is expected to grow into a reasonable sum over these years. Rajeev on his part has taken an equity linked insurance policy with an annual contribution. The policy gives the family the security of an assured sum in case of any unforeseen calamity plus an average to high returns on the investment.

A savvy investor, Rajeev has gone on to invest in sophisticated financial instruments like real estate trusts, energy based funds etc. “Initially it is about building up an egg nest which can be done by investing in fixed deposits and real estate. Once a certain threshold is achieved then one can look at high risk-high return areas.” Education and health of their children are the two big priorities for the Singh’s. Says Rajeev, “If she has the aptitude and potential to pursue a certain course be it engineering, medical or a vocational pursuit like learning acting in New York then she should not be held back because of the money.”

Having been through the experience once most parents are more confident by the time they have their second child. So though the birth of Arhaan, the Singh’s second child brought its own set of financial implications, the couple has gone about things in more casual and matter-of-fact manner. “Though we realise that our savings need to be higher now, we have been less fussed and the attempt has not been as conscious as in Jiya’s case,” says Rajeev. A believer that one should not bequeath all of ones wealth to ones kids while alive, Rajeev and Dhanashree are working on giving their kids a secure future through some sensible planning.

The wonder years
12-year-old Jehan, has an eye for art and design. She has recently designed the décor for her own room. Convinced about her talent, Nabeel Jawad Sultan, her father and Director, Jawad Sultan Enterprises has started taking her opinion in design matters. Says Nabeel, “What she wants to pursue in life whether it is design, engineering or medicine is her choice. The only thing that I would like her to do is to get a minor degree in business as it will help her professionally.”

An informed investor Nabeel started a Systematic Investment Plan (SIP) for his three kids Jehan, and the eight year old twins Layal and Jaifer from 2005 onwards. He has also created an equity based portfolio for his children which he manages on their behalf. Says Nabeel, “Since these investments are for you children the investment vehicles need to be conservative. If one is not a very well informed investor then one should leave the choice of investments to professionals.” He expects to earn a return 9-12 per cent on these investments. Equities and real estate are the two investment options that he prefers for his children. “My philosophy is that one should plan for the worse. As a parent the two things that one can give their children is a good education and savings,” says Nabeel.

He has also been working on inculcating financial discipline and awareness in his kids. Thus Jehan and Layal know their bank account numbers. Whenever they break an expensive toy, the loss gets deducted from their savings while the money that they get on Eid and other festivities from elders gets added to their respective accounts. Goodies like a playstation or an expensive gift does not come easy as they have to convince dad about the acquisition. Not an easy task as Nabeel takes upto three weeks before relenting to any demand.

While he is a stickler for financial discipline, when it comes to co-curricular activities Nabeel is more than happy to indulge his children. Jehan goes for dancing lessons, Layal takes piano, violin and bale classes while Jaifa has gone in for Karate and football. “These are important to develop their personality and so one should allocate a certain part of ones finances towards these expenses.”

Early teenage
“I spoil my children by buying them everything that they want,” confesses David Aziz, Director – Automotive Products, Mohsin Haider Darwish. He rationalises this by adding that subconsciously this is an attempt to make up for the time that he stays away from his family due to the demands of his high-pressure job. So while he is planning to fulfill the latest wish of a pink laptop that his 13 year old daughter Tara has made his wife Ban Aziz has been telling him to be more prudent.

Though an indulgent parent David is conscious about the need to be financially cautious to give his children a good future. A firm believer in the power of compounding he has opened a savings account for all his children from the day they were born. A certain amount of money is debited from his bank to this account every month. As his financial standing has grown he has increased the amount that he debits each month to these accounts. There are times when he asks his bank to top up these accounts with additional sums either to take care of prevailing inflation or just because he has some cash to spare. “We review our financial plans on a yearly basis and see whether they require any changes,” says David. The yearly exercise is when David and Ban do a status check of their financial necessities and optionals like going on a holiday or buying big ticket items.

The arrival of a kid is the biggest joy in any parent’s life but it also brings in its own set of challenges from financial expenses to other commitments. “When Tia (their second child) was born my wife was a senior school teacher in science in UK. But once we factorised the amount that we were spending on their day care and crèche facilities, she felt that it was not worth continuing and she gave up her job to give our children a good growing environment.” Financial planning for kids is thus a moving goal post wherein ones plans needs to change with each kid and as they go through different life stages like toddler years, pre school, school, pre teens, teenage years etc.

With just four to five years left for Tara to go to college, David and Ban are aware that they need to have a corpus to fund Tara’s dream of becoming a doctor. “Tara wants to follow in the footsteps of her maternal uncle and aunts all of whom are reputed doctors in the US and UK,” says David. A medical degree in the UK, though does not come cheap – it entails a yearly expense of £10,000, so by the time one is through college it could amount to £60,000. Though there are student loans that the UK government gives out at preferential rates, David is not keen on availing one as it would mean Tara beginning her career mired in debt. The Aziz’s are confident that their savings over the years and some investments in mutual funds, equities and properties will enable them to give their children a good education.

Seeing people in Oman living beyond their means David feels that with banks and other financial institutions being too eager to give loans it is important for Omanis to be more aware financially. “While borrowing money it is important to take into consideration the financial implications like knowing whether one can repay the sum without jeopardising ones kid’s future.”

The last mile
“It is important to make children realise early in life that the sun does not shine everyday,” says Mohammed Mubarak Al-Shikely, Senior Manager Marketing, Oman Air. While Mohammed has been trying to inculcate the values of patience and thrift in his children, he has also been investing sensibly to take care of their future.

A savings plan has been initiated for his five kids – Mubarak, Soud, Faiz, Ahmed and Salwa. He consulted a number of companies like HSBC, Alico, BankMuscat before selecting the ones which suited the needs of each of his children. Apart from these he has made some real estate investments as a cushion for them. “Property never lets you down,” says Mohammed. His recently built farm house in Seeb proved to be a grounding of sorts in financial affairs for 13-year old Mubarak and 12-year old Soud. They were interested in knowing how the house was built, the material cost etc.

Though Mohammed has some investments in stocks, he sees them as instruments for short term gains and not as an option for his children’s future. As Mubarak steps into teenage years his career choices seem to change almost every day. Says Mohammed, “One day he wants to be a pilot, another day a doctor and then an engineer.” But with Mubarak a few years away from a college education the Shikely’s have plans to send him abroad to get a university degree. “We want him to go abroad as the experience of living on ones own is a learning process. It is more about developing oneself beyond the classroom.”

Like most other parents, the Shikely’s do not see marriage as a big expense. They believe that it is a discretionary expense which varies from person to person. “If it is a choice between saving for a kid’s education or his marriage then it is not even a close race,” says Mohammed. Finally he feels that parents looking at financial planning should not jump at the first piece of advice that they get but check out the various options in the market and that expenses should be prioritised in their order of importance.

Parenting is full of paradoxes. Even as we wait for the child to cross her next milestone we start missing the precociousness of the earlier stage. As they wean themselves away all we can do is gather all the special moments we have had with them and air out their warmth every now and then. Finally, if we have given them a financially secure future then it is all worth it.

 

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