A 5,000 AED investment may seem insignificant, but if you’re disciplined, saving for your child’s education may be possible with a platform like SmartCrowd. Sure, a one-time investment of AED 5,000 is hardly enough to save up for the growing cost of education, but with discipline, this goal can be within reach.
Most parents start saving for their child’s education as soon as possible, but let’s assume that a child is 10 years old and a family wants to start saving for her university education and has a timeline of 8 years.
Here are a few assumptions:
- The family hasn’t saved up anything for their child’s future education currently.
2. The family will earn an average of 6.5% throughout the investment term with SmartCrowd.
3. The family will invest 5,000 AED every other month for a total of 30,000 AED per year for 8 years.
4. Currently, American University of Sharjah’s fees is 30,000 AED per semester; let’s assume this increases to 60,000 AED in 8 years (note: tuition tends to double every 9 years) for a total of 480,000 AED for a 4-year undergraduate degree program.
If the family invests every other month in shares of real estate, the very first 5,000 AED investment earns them rental income for 8 years or 96 months. The second investment earns them rental income for 94 months, the third 92 months, and so on. By the end of the eight years, the family will have invested in 48 properties, assuming they’re always investing in new opportunities.
Let’s take a minute to realise that if the family simply saves this amount, it would amount to 240,000 AED by the end of the 8th year. This wouldn’t be smart since the money they saved wouldn’t be working for them. However, by investing in affordable denominations and staying disciplined, the family could potentially earn a passive income of 63,700 AED by the end of 8 years.
However, as we know, one of the reasons investors are attracted to real estate investments is because it provides a regular stream of secondary income and generally tends to increase in value over time. If we assume a 3% appreciation for each 5,000 AED property per year (annual appreciation globally is at 5% currently), the value of the principal amount invested which was 240,000 AED could potentially be 274,000 AED. Hypothetically, if the family disposes of all their real estate assets in one go, their gross returns can potentially be 338,100 AED.
Although, this strategy would not be wise. To cover as much of the cost of tuition, the family should only dispose of assets as and when they need to and continue to reap the benefits of secondary income from the properties in their real estate portfolio (i.e., only dispose of assets to cover each year’s tuition of 120,000 AED and not the entire program of 480,000 AED). If the family chooses the latter strategy, they may be able to fund the entire cost of a 4-year undergraduate degree with their real estate investments portfolio.
READ: Dubai, the most fairly priced real estate market!
So is it possible to save up for your child’s education with SmartCrowd?
Well, ultimately, it’s not about SmartCrowd. It’s about being disciplined as an investor. SmartCrowd is a vessel designed to help you reach your goals. There are many investment opportunities and products that can help people reach their goals and SmartCrowd is one of them. At SmartCrowd, we simply encourage people to consider real estate investments to further optimize their earning potential and minimize risk.
*This example is not to be misconstrued for financial advice. We thoroughly encourage everyone to do research before making any investment decision. This blog was written only to showcase the potential of earnings when people are disciplined in their investments strategy and think long-term.