Part 1 - Financial Planning for My Daughter

This is the first part to a three-parts series on the financial planning I've done / will be doing for my 9 months old daughter. Part 1 details how I am saving for her, part 2 describes my attempt at making these monies work, and lastly, part 3 documents the type of insurance coverage she has.

---

While most parents are focused on sending their kids to the best schools, with many even strategizing years in advance to boost their kids' chances of admission to their choice colleges, I am more concerned about my child's financial security in the future. Though providing my child with good education is important, I am not convinced that education itself is enough to secure her future. People around the world are getting more educated, and with increased mobility, I am forced to face up to reality - The chances of my daughter being in the top 5% in terms of intellectual ability is low. Good, quality education might help, but it's no magic. I value good, early financial planning more than good, early education. I believe that kids should be allowed to be kids. They should spend their earliest years playing and exploring.

With that clarity, I set out searching for ways to help her save/invest. Let's start with saving, the all-important first step to achieving financial security.

The lowest hanging fruit to me is the $8000 newborn grant given by the government, This grant, known as Baby Bonus, is given out in tranches between 0-18 months from the birth of the child. All monies we received from the government are saved up for her. We've also deposited $6000 into her Child Development Account (CDA) and received the 1-to-1 dollar matching from the government. Simply by doing these two things alone, she will have $20,000 ($8k in cash and $12k in CDA) by the time she is 18-months-old. For those who can't afford to deposit $6k into her CDA, you can either take your time to save up slowly (the government will match $1-to-$1 as long as you make the deposits before the child turns 12), or you can use part of Baby Bonus for this purpose. [Note that for babies born after 24 Mar 2016, your child will receive the CDA First Step Grant of $3000. You only need to deposit an additional $3k to get a total of $6k from the government. More details here.] The $1-to-$1 matching is something every parent should take advantage of. Although there are restrictions to how the monies in the CDA can be used, I assure you that you will have no problem spending them, if you so wish. If you plan to send your kids to infant/child care, those will cost a bomb. You CDA account will be depleted in no time. For me, however, I am choosing to leave the money inside as emergency fund, primarily because of the 2% interest rates that CDA with OCBC offers. I will only use emergency monies for very specific purposes (medical / education), and because CDA allows for these usage, I am happy keeping my money inside earning 2% and not having to worry about yield and liquidity.

The second thing we did to jump-start her savings is to save up all her angbao monies. Even for NTUC/MotherCare vouchers we received during her baby shower, we "bought" them over using cash. Over the years, she will be receiving angbaos during Chinese New Year. All these have been/will be socked away as well.

Third, I am putting aside a fixed amount for her monthly. The money saved in the last 9 months, together with the baby bonus received thus far, adds up to be a sizable amount already. Perhaps not in the 5-digit range yet, but not for long as we are expecting to receive more Baby Bonus. While saving is important, the challenge for me now is to put these monies to work. To allow compounding to work its magic, I should procrastinate no more.

Author : F4FF

Share this

Related Posts