We all know that bringing up a child in Singapore is not cheap at all. According to a survey done by MoneySmart.sg in 2013, the estimated amount to raise a single child up to secondary school is already about $276,400. Imagine what the whole cost would amount to if we were to include Pre-U Education and University fees — parents are investing easily half a million per child. They say the best gift for your child is education, though it does come with a hefty price tag.
Although bringing up a child on this island is neither cheap nor easy, it is not that complicated either. You just need a good system in place. Allow me in this article to share with you what other parents have also shared with me along the way and hopefully, their tips could be also benefit you for the next two decades to come.
1) Bank vs. Insurance:
Everyone who owns a savings account will understand that the money you deposited in the bank can be as easily withdrawn when you need it. On the positive side, that is known as Liquidity. On the other hand, your savings could be jeopardised if you do not have discipline to chuck the money aside for the long run. Then again, even if we religiously saves and put the money aside, we often find our money getting smaller and smaller because the banks’ interest rates (about 0.05%) can never beat our inflation (about 5%).
Comparatively, Insurance Endowment plans give 3.25% to 4.75% projected interest. Endowment plans make sure you save for the long haul and minimises the liquidity so as you can see a bigger maturity pay-out by the end of the savings term.
Therefore, what many parents are doing is that they put their eggs into different baskets: some in the banks, and others in insurance.
If we want to save half a million dollars, simple calculations will tell us that we will have to put aside approximately $2000 every month for 20 years, but not many of us have the discipline to keep up with this strict system. Investments are, more often than not, the tool to bring parents faster to their financial goals. A simple Investment-Linked Policy (ILP) will ensure that you contribute on a regular basis to a set of funds whereby it provides both protection and unlimited growth potential. Allow me to elaborate on ILP in the next article.
3) Life Insurance
Life insurance is the ONLY financial tool that gives you money when your family needs it most. So parents, life insurance is a must if we have children, because if an unexpected departure should occur on us, we can still ensure that our children have sufficient funds to finish their tertiary education. If nothing should happen, then we could also use the cash values as our retirement funding. Either way, everyone wins.
Besides depositing your money solely into banks, insurance provides another platform to save up for your children’s education and the other financial goals you may have. All you need is to seek for a trusted financial planner who can aid you alongside your planning and thereafter, recommending you suitable products to meet your needs. Good luck!