New born vs Money in pocket

I have heard many friends who are married having diverse opinion of having children these days. Two main groups of couples mainly are being grouped into "Baby focused" and "Self enjoyment focused"

Baby Focused :
These are mainly made up of couples who either wanted to complete their family structure as young as possible or just to fulfil their parents' wishes. They usually will have their baby in their first 2 years of marriage. The question here is that how many couples in this category plan for their finances before having their children? Do they know how much they need for their child to grow up these days?

Self enjoyment focused:
These group of people are mainly looking forwards to enjoy their life as a couple and also to lead a carefree life as singles. They travel, they club and they commit into luxury items to pamper themselves. Having baby could be the last thing in their mind as they may feel that that committing money into their future is better than bring up a child who may not repay you back when they grow up. Self-centred as they may be but are they really wrong ?

Sounds familiar ?

As a financial planner, i have met many different cases of Singaporeans before and after they have a family. I would like to share that having a baby isn't as simple as what our older generations are telling us. We have to accept that in olden days, having children are basically our retirement plan. Farmers need manpower to expend their fields, businesses need children to take over. In modern days, having children is just to complete our human basics and fulfil the purpose of setting up families.

However, this commitment brings discipline and financial issues. If any of these are lacking, you are bringing a lot of problems into your own life.

A very simple calculation of the cost of a child can be breakdown into below;
1. $40000 tertiary education(provide is local uni)
2. $800/mth (maid expenses for minimum 10years) = $96000
3. $400/mth (minimum living expenses for next 20 years) = $96000
4. $400/mth (other expenses e.g. diapers initial years , tuition during teenage years, such expense have to estimate at around 15years) = $72000

Grand total = $304000

Stunned by the figure above ? That's only for 1 child.

Good news is that you can pay the above liability by installment.
Bad news is that you cannot run away from this liability.

3 most important basics to plan for a family:

1. Review your personal financial commitment and goals
Be practical , ladies may have to give up their Prada bags , guys may have to bring beers back home instead. Ask yourselves , are you willing to set aside minimum $1500 a month for your child ?

2. Hospital medical insurance and personal accident insurance for children
The above 2 policies is a must buy for all parents as under my care of parents , 90% have some form of claims for their children in the policies above.

3.Savings for children tertiary education
You like it or not, this amount of money have to be set aside for your children. Unless you tell yourself that your children education is not your problem (why bring the baby to earth then?) , you have to plan for it. Setting aside inside your bank can be the worse decision you may make as you may be tempted to spend it and the interest rate is not going to help you at all. Let higher interest ease your burden to save for your future.

To summaries, having children is afterall a good thing. However, adequet planning must be done to get yourself prepared for the commitment behind the enjoyment.

Signed off, Andrew Ang
"to a better financial future"