It is pretty interesting to note that parents who on one hand disagree on spoiling their children with a golden spoon, yet be willing to pamper them with the latest IT gadgets or wants. Some disagreements which we commonly hear are
Children should work and earn their own keep for their own university education. They should invest their own monies only after they come out to work in the society.
I am definitely of the same consensus that children should be brought up in a way that they are independent, mature and self-sustainable for themselves. As the saying goes, parents as educators should teach them how to fish, instead of plainly giving them fish. A child is highly dependent on his parents for survival till the time he finds work to feed himself. Throughout this 10-20 odd years however, parents have to have a hand in reducing their dependency on them in steps or phases.
Financial literacy and financial habits go hand in hand. FinLit is about understanding the value of time and money and the logic behind managing your own personal finance; financial habits is about inculcating frugality, thriftiness and delayed gratification.
In my opinions, parents in their strong beliefs in bring up their children well, sometimes fail to separate the needs versus wants. They are also probably more focused on goal-setting. I am more concerned however in the process of reaching those goals. Education, from my own experience, is more than just academic. Many people end up in careers far-off from what they majored in. It is more about the maturing process, getting interested in continued learning and discovery and networking with people who would be useful in their own careers in time to come.
Investing for my children is not about handing over that golden spoon. My focus is in the process of setting that very foundation from which they will take over and build on that wealth many times over.
The most common form that is passed down from one generation to the next is insurance policies. How many of us can dare say that our very own parents have walked us through the rationale on why they bought it for us or ensured the smooth transition of payer from parent to child? I have had a number of friends who started off their careers with sudden large annual premiums to take up on.
There are thus 2 things I am stressing here: inculcate good savings and investment habit and make this continued habit transferable and manageable.
The way and amount that I am currently contributing to my child’s SA is something that my child will be able to take up on when she starts working in future, and hopefully she will understand the logic and maths behind it.
$100 monthly contribution to CPF Special Account (SA)
In my call to kick-start your CPF retirement planning early, I had mentioned that I had started off my child’s SA journey early with a monthly $100 contribution. All conditions remaining status quo, interests earned is roughly 4 times that of total capital put in.
$200 monthly contribution to CPF SA
So recently in January this year, I decided to up the game to $200 monthly contribution. Though not exact, the end result will roughly be about a good $700K in 65 years time.
Future considerations: $300 and $500 monthly contribution to CPF SA
We know that a dollar today will be worth so much lesser 65 years from now. It could be possible that $500 monthly contribution be a drop in the pond. I believe that savings and investing has to keep up with the times as well; it isn’t something static, and your portfolio and life goals must be constantly reviewed taking into account multiple macro economic factors.
It boils down once again to starting early, starting right. Have you considered how big your little contributions could be in the future?