Most new mums and dads welcome the birth of a baby by doing up the nursery. But great parenting is not just about buying that new crib. There’re financial expenses and responsibilities that you have to manage as well.
Mr Paul See, Founder of Priority Wealth Pte Ltd, has more than 20 years in the financial services industry under his belt and a father of two children, explains: “A new addition to the family means your family responsibilities have changed. With proper financial planning, you will have better control over what goes out of your wallet.”
As new parents or parents-to-be, this would be the best time to take stock of various responsibilities and at the same time, chart a roadmap to reach your financial goals. So take a moment and consider these five money-wise to-dos.
1. Set up a budget for baby’s expenses
Besides start-up costs like hospital delivery, it’s important to factor day-to-day expenses on doctor visits, wet wipes and nappies. Having a budget in mind will guard against overspending on unnecessary items.
It is not necessary to go through the trouble of opening a separate bank account to cater to these expenses, unless you want to track in detail how much you are spending on your child. However, such tracking may be useful for those who tend to overspend. It may also serve as a neat way of accountability for parents who prefer to split all expenses equally or according to a pre-determined ratio.
For those looking for a convenient way to create and manage a budget, this Budget Calculator is a great option.
“I wish I didn’t spend so much on the stroller. After a year, we’ve only used it a few times as my daughter preferred to be carried!” ~ Yiting, mother of 8-month-old Marisa.
There are endless insurance plans out there, but it is not possible for you and your child to be fully protected unless you have deep pockets. Mr See explains: “The important thing about insurance is that should something unforeseen happens, there is financial protection and/or coverage that can help you and/or your dependents. So in a way, buying insurance is buying a peace of mind.”
So, seek a financial planner to review your own insurance needs, then look into coverage for the child. Ultimately, you need to be properly insured so that you don’t burden the next-of-kin.
3. Save for your child’s university education
One of the key concerns of many Singaporean parents is their children’s education. A good education is the best gift you can possibly give to your child to secure their future. To do so, you have to start planning as early as possible – and not leave it till your child is at pre-university level.
Buying an endowment plan to for your child’s education is a lower-risk product with both protection and savings elements. It ensures you save consistently and provides you with a sum of money upon policy maturity.
It is best to commit to an endowment plan early. Mr See explains: “For example, if you have the endowment plan in place when the child is one year old, you have 18 years to save towards his or her university education. But if you buy the plan when your child is nine years old, you have only nine years left to meet that goal.”
“My wife and I started an endowment plan for Joel when he was 6-months old so that we don’t have to worry about his university fees. We hope to do likewise for number 2!” ~ Elroy, father of 2-year-old Joel with another on the way
While putting your child first might be important to you, remember to plan for your retirement as well. Mr See says: “I believe many Singaporeans are marrying and having children later. As such, having a child may compromise their financial goals for their own retirement. So it’s also important to still work toward your retirement goal.”
Save in a disciplined manner, regardless of how small the monthly amount may be. Mr See suggests: “If you are paying personal income taxes, try to make voluntary contributions to your CPF account via the Supplementary Retirement Scheme (SRS). This is a tax deferral scheme that encourages you to save in a disciplined manner while enjoy tax savings each year.”
“Even though we are expecting twins, we hope to still put a little a month into our retirement fund.” ~ Yong Shen & Yi Hui, expecting twin boys
Wills are not just for the elderly or the rich. Once you become a parent, it is necessary to do up a will to designate a legal guardian for your child should both parents pass on prematurely. If not, the court will decide on your behalf.
Beyond that, you can also designate a trusted person to handle your finances after your death. This will help ensure your child is provided for – no matter what happens.
I Love Children would like to thank Mr Paul See, Founder of Priority Wealth Pte Ltd, for his professional input.