You’re going to be a parent. Congratulations!
You’re no doubt prepared for sleepless nights and endless crying, but have you thought any further ahead? Before the mad rush of child-rearing begins, you may wish to sit down and think about what the next five, ten, fifteen years will bring.
Key to your long-term family plan is a sound financial base. As the big day approaches, and in the chaotic months that follow, take care to make these eight financial moves. The window during which they’re best made won’t remain open forever.
1. Set Up a Formal Household Budget
If you’ve yet to do so, lay out a formal household budget that accounts for the entire universe of your family’s income and expenses.
Your budget should include everyday expenses such as food and household supplies, as well as big-ticket items that may not hit immediately — such as primary and secondary school tuition, the cumulative cost of which can easily stretch into the tens of thousands of dollars per pupil.
Even if you’re not paying those costs right away, you’ll want to begin saving for them immediately, and you’ll want your budget to have enough room to absorb the hit when the time comes.
2. Find a Trusted Financial Services Partner
As your household finances grow more complex, find a trusted financial services partner capable of addressing your family’s unique needs. Look for a partner with proven experience and expertise. Independent firms like a Singapore based trust and corporate services provider understand the challenges and opportunities facing individuals, families, and businesses based in Singapore.
3. Expand Your Emergency Savings to Six Months’ Income Equivalent
Your family needs a safety cushion. Ideally, this reserve should amount to six months’ household income. If you earn S$5,000 per month, you’ll want to have at least S$30,000 in the bank. This sounds like a daunting task, to be sure, but small savings contributions can really add up over time. Later, we’ll identify money moves you should make to trim expenses and raise your savings rate.
4. Make Regular Contributions to Your Child Development Account
Opening a Child Development Account (CDA) is not as difficult as you may think. The initial process takes just minutes and could produce a substantial windfall for your new child.
That’s not the end of the story, however. Once your CDA is open, you’ll want to contribute as much as your budget allows during the 12-year contribution window, keeping in mind that you’ll receive matching contributions up to S$6,000 for your first and second child.
5. Consolidate Existing Debts
Many parents-to-be have existing personal debts. While there’s no shame in this, it’s better to take proactive steps to address debt now than wait until after delivery.
6. Prepare for Difficult-to-Contemplate Situations
No one likes to contemplate the unthinkable, but your family’s financial preparation wouldn’t be complete otherwise. Should your child fall seriously ill, for instance, you may wish to have critical illness coverage to absorb some of the cost; should you pass away early, an endowment plan can provide for your child until they’re old enough to support themselves.
7. Buy in Bulk Where Possible
Your household spending is going to increase with a little one in the picture; this much is inevitable. Help defray the cost of basic necessities, such as nappies and baby food, by buying in bulk wherever possible. If you’re fortunate enough to have sufficient storage space, consider making and freezing meals in advance — which not only saves money but time too.
Set the Next Generation Up for Success
When they’re little, your children will look up to you no matter what. In their eyes, you simply won’t be able to do any wrong. You’ll know that this isn’t the case, of course, but they’ll take some time to figure it out.
As your children age, the dynamic will change, and you’ll want to be in a position to demonstrate that you’ve been doing right by them for as long as they can remember — perhaps longer. Making the proper financial moves at the proper time is critical to this effort; the consequence of the steps you take to ensure future generations’ success simply can’t be overstated.
So, don’t delay in your efforts to set the next generation up for success. Begin today, and look forward to a brighter, more fiscally sound tomorrow.