Dear Friends of GEN,
I am going to write a little bit on the cost of bringing up a child and of course, a topic like this is more suited to those who intend to have children, will be having children soon or already have terrible twos moving speedily but unsteadily across your living room floors currently.
A recent headline in the Straits Times highlights the school fees for pre-tertiary education in Singapore. It doesn’t say much except that as a Singapore citizen, we pay much less and will get a much better chance to get our children to a school of our choice compared to permanent citizens and foreigners. While I’m not yet a parent, I have given this topic serious thought as its part of my job to talk to people about the financial commitments of bearing and raising children.
Most parents after the birth of their baby will immediately call up a financial planner and say “I need to buy insurance”. That’s well and good but unfortunately, in most times, the real needs of the baby are not considered first. In some cases, the financial planner is also unsure so the standard recommendation is an endowment program for education needs. The parent wants to buy what is convenient so any plan that I can pay for “a few years and then stop” is interesting. Better still, “don’t use cash better”.
Unfortunately, the needs of the child are not directly related to the convenience of the parents. You can buy what is convenient for you but when the time comes for the baby to become a teenager, the demands are pretty much the same…direct, determined and loud. On your part, whatever you intended to provide will hopefully be enough.
Jokes aside, when a baby is born, there are basically 3 areas to start planning for. They are school fees, medical protection and living expenses. Everything else such as development courses, holidays to enrich life experiences…etc are nice to have but not what I would call basic necessities. In the article attached, I have explained in more details the considerations for these 3 areas. Do read if you want my 5 cents worth.
If we work out the numbers, the cost to bring up a child from birth to when they are financially independent is at least $200,000. Consider if the living expenses on an average of $500 per month for 20 years, it is already $120,000 not counting inflation. Thus, contrary to what some financial planners advise, I always ask clients who are single to consider life insurance for the sole reason to repay their parents this financial debt. I give this advice even if the parents are wealthy for how affluent the parents are should not be a factor in the decision to repay the debt.
My feelings for this topic are enhanced recently. Three months ago, my wife discovered she’s expecting and yes, I am going to father a baby tiger or tigress come June next year. I guess like every excited parent-to-be, it’s about having a healthy baby. More than that, I think it’s also about gratitude. People celebrate Christmas and the New Year Holidays in a variety of ways. Perhaps this year, you can consider spending some time with your parents if they are still around or if they’re no longer here, do something that would have made them proud.
Article by Lee Meng Choe
The writer is the Executive Director (Distribution) of GEN Financial Advisory