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By Tan Yi Lin
 
There is a saying that money isn’t everything, which is why we have taken you through Part 1 and Part 2  of this three-part series, before discussing how to assess your financial readiness for a second baby.

While money is not the sole factor, financial stability is important when it comes to raising a family. In Part 3, Ms Anne Tay, Senior Manager of Financial Services from Anne Tay and Associates, discusses some key financial considerations when planning for a second child.

1. How do I know whether I will be able to afford a second baby?
You will have to build up your savings. You can start by doing a stock-take of your income and expenses. “Firstly, determine your current monthly household expenses,” says Anne, “Next, look at your family take-home income i.e. income less CPF contribution and less annual income taxes. From take-home income less household expenses, you should be able to determine your savings.”

Anne goes on to list three key steps to increasing your family savings:

a) Enhance income
This could include switching to a new job that pays a higher salary or taking on an additional part-time job to supplement your income. You can also consider investment products that give you a higher return than your savings account, but make sure that whatever investment you undertake matches your investment risk profile.

b) Reduce expenses
Anne suggests areas where you can cut down on daily wastage and expenses:
  • Organise each shopping trip by making a list of items to buy, so as to reduce impulse buying and additional trips; compare prices of similar products before purchasing; use cash instead of credit cards to better manage finances.
  • Have more meals at home; cut down on entertainment expenses.
  • Take public transport more often.
Record your monthly expenditure and analyse your spending habits. This will give you ideas on how to further reduce expenses.

c) Take into account economy of scale
Anne shares with readers that there could be economy of scale when it comes to spending on more than one child. As such, the cost of raising two children may not necessarily double. Items which the first child has outgrown, such as the cot, stroller, clothing and toys, may be handed down to the second.

Also, with your second child, you will be more experienced in making choices and be less likely to be enticed into buying unnecessary items for the baby.
 

2. How do I plan financially for my children’s education?
Anne advises parents to plan early for their children’s university education.


A three-year programme at either the National University of Singapore (NUS) or the Nanyang Technological University (NTU) today is estimated to cost about $60,000, although tuition fees may vary depending on the type of degree programme chosen and the number of requisite years to complete the course of study (e.g. four years instead of three.) In 20 years time, the figure balloons to a projected $160,000. An overseas university education today costs $120,000 to $200,000. Imagine what the figure would be like in 20 years time.


With sound financial planning, parents will be able to better manage the cost of university education for their children.


According to Anne, endowment insurance plans are popular with parents planning for their children’s university education. When the endowment plan matures, the plan will pay a lump-sum that you can use to fund your child’s university education. Endowment plans will also allow the lump-sum to be claimed even if the person who is paying the premiums (usually the parent) passes on before the plan matures.


Another option is to build a unit trust portfolio to fund your child’s university education. However, Anne cautions that the portfolio must be carefully constructed to weather financial crises and to supplement this with a term insurance plan for protection.

 

3. Are there government grants available to help cope with the cost of having children?
There are a number of government grants and incentives available to parents expecting a second child. More details can be found here

 

Conclusion
Mulling over the pros and cons of having a second child – and how soon after the first – can go on forever. At the end of the day, if you and your partner would really love to have another baby, there may be no time like the present. If the both of you can agree on how to manage things on the home front and your family’s financial situation, the best advice may be to listen to your heart and welcome the joy that a new child brings to the family.

 

After all, while there is a saying that money isn’t everything, there is also wisdom in the phrase, “Love doesn’t divide; it multiplies.”

 

I Love Children would like to thank Ms Anne Tay for her professional input. This concludes the three-part series on “Planning for a Second Baby”.

 

Look out for the other 2 earlier articles in this 3-part series:
Part 1 – Planning For A Second Baby: Part 1 – Are You Ready? 
Part 2 – Planning For A Second Baby: Part 2 – Is Your Body Ready?

 

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