I want to start a family. Does having children change my retirement plan?
Congratulations! And the short answer is yes.Speak with a professional financial planner from Manulife Singapore to find out about ideal plans for you and your family.
So you and your partner have been thinking about having kids for a while, but you aren’t entirely sure how plans change once you have an addition to the family. Well, the good news is that you’re not alone. It’s pretty tough to plan every detail of the life journey with a child involved because there are many things to consider ( like if you might want to give them the best shot at possibly pursuing their passions in an extra-curricular activity ). That said, here are four non-negotiable changes in you and your partner’s lives that you’ll need to consider.
1. Retirement age
You need to be clear that having a child means supporting them till they are old enough to start working and earning their own keep. In the context of Singapore, that will be when they are about 25 years of age. Knowing this, you’ll need to be realistic about the age you actually can stop working, which may end up being a little later than you initially planned. For example, if you have a child when you’re 35, you’ll probably need to keep earning money till you’re 60).
If you start planning early (like now), there are financial and insurance instruments available that may help you build up your wealth, but you have to be aware that there are risks involved. That way you might still be able to kick back and relax at a slightly earlier age, if you so choose.
2. Family income
You’ve probably already had this conversation with your partner because whether one of you is planning to stop working and take care of the child makes a big difference to how much the family will be able to spend and save. However, plans sometimes do change so both you and your partner should still work towards building up a contingency fund of about six to 12 months of your combined income. This will ensure there’s a sufficient buffer in case one of you decides to stop working for a period of time after your child is born.
It’s important to remember that when you’re planning for your child’s education, you’ll need to carefully take into account prevailing inflation rates in Singapore. This is because a large amount of your child’s education fund will be spent on his or her university studies (which will be around 18 years away) so the number you’ll be faced with might be significantly different from the one you just Googled the other day. If you’re looking to enroll your child in private institutions, even higher costs will be incurred.
But because you’re thinking about it now, you have the opportunity to plan the right steps on just how to build that education fund. Check out this handy Education Calculator to get a better sense the amount you’ll need.
4. Assurance for the future
You obviously want the best for your kid (which is why you’ve read up to this point), so consider whole life insurance policies. These insure your children for their entire lives (once the required premiums are paid) and also some come with annual cash returns (until the policy is terminated). In essence, if you’re able to afford the premiums for such a policy, it can give your child yearly returns all the way through to their retirement. However, as always, a conversation with a professional financial planner regarding this, as well as the other points above, will definitely help shed some light on what is the ideal plan for you and your family.
For more ways to get ready for life including your retirement talk to a friendly financial planner from Manulife Singapore today