Ready for Parenthood?
You have a lifetime to work, but children are only young once.
— Polish Proverb
You might be expecting a child soon, or currently have young children. Perhaps your children have already grown up, and you’ve just become proud grandparents. Whatever the case, parenthood comes with numerous trials and tribulations. Trips to the doctor, accidents in and around the house, the changing of diapers in the middle of the night - the list goes on. Adding on to these challenges are the financial costs of parenthood. Here are some handy tips for those expecting new household members and those already managing young ones.
Budgeting
This may seem quite ‘common-sensical’, but having a monthly budget that lists possible recurring costs for your children will help prepare you for those expenses. You’ll need to be mindful of changing costs as children grow. The following visuals show these possible changes sorted by age.
Emergency Cash
We typically recommend that clients hold savings that can cover 6 to 12 months worth of expenses for possible curveballs that life might throw. Sudden shocks that require a hefty financial outlay can be stressful and can cause many a sleepless night. If you haven’t already started, it is time to squirrel away some money just in case.
Health Coverage
One of the first and foremost things you should do when your child is born is to get them covered under an integrated shield plan. Waiting too long before doing so allows the the possibility for medical issues to creep up that could automatically exclude your child from such coverage.
Life Insurance
Insurance is often seen as an unsavoury product to buy due to ‘mis-selling’ and high-pressure tactics by unscrupulous sales people. However, take the time to understand the reasons why you need coverage. Human capital is the greatest in youth and declines with age. As such, protect your earning power, and safeguard the security of your family’s wealth with death, critical illness, and total permanent disability coverage. If you have existing insurance, check to ensure that your coverage is increased to accommodate the additional costs of raising a child. In addition, if you have a hefty mortgage, ensure that you have some form of mortgage insurance to pay off that debt in the event you’re no longer around. The last thing you want to do is to have your family and young children evicted in the event of your passing.
Meeting Dreams
Every parent would want to give their children access to the best education possible and provide them with best possible life. The cost of education is constantly rising - especially for overseas universities - and far too often, parents have had to sacrifice their retirement savings in order to put their children through an education. There are many simple and consistent ways to save for such events, such as our portfolios with functions like the Regular Savings Plans (RSP), and our Million-Dollar Builder.
Legacy Planning
Typical financial institutions and banks make legacy planning seem complicated in an effort charge higher fees and sell you a host of other products. In reality, estate planning is quite simple and not as costly as you might think. Legacy planning simply details how you would like your financial and personal matters to be handled when you are no longer around. It can also include provisions on how to ensure that your young children don’t squander the hefty payday from your insurance payout, or the condition that certain life milestones must be met before passing on your wealth to the next generation.
You may feel overwhelmed by the wealth of choices available to you. If you need help in creating a plan, or sussing out appropriate solutions for you and your family, you may benefit from sitting down with us to discuss some of your options. Your children will surely be grateful for it.
