FINANCIAL PLANNING FOR NEW PARENTS

Financial Planning

For new Parents

www.greateasternlife.com

Financial series

issUe 01

A practical guide to a comfortable

future for your children and yourself

aUthor’s note

Welcome to another of life’s great milestones – being a parent!

At this point, I’m sure you’re excited but yet unsure of what’s in store.

Perhaps you’re wondering how to keep your financial life on track while

planning for your family’s future. We’ve put together this guide to help

new parents avoid the common pitfalls when it comes to planning for

baby.

In my experience helping young parents plan for the future, I have seen

both happy and sad stories when it comes to raising a child. Successful

parenting is often a combination of having the right plan and having the

right decision making processes in place. As the years go on, the result

of implementing that plan and making the right decisions can be seen

as the child grows up to excel in all aspects of his or her life.

We hope that by sharing some of our ideas – especially with regards to

the oft-neglected topic of budgeting – you will be able to pick up some

practical ideas that will help you make the most out of this privileged

journey of being a parent to your wonderful young child!

James Yang

About the author

James Yang is one of the top Senior Executive Life Planners at Great Eastern Life Singapore. When he isn’t training

other life planners, he is also a Certified Financial Planner (CFP

), Associate Estate Planning Practitioner (AEPP™)

and author of The Wedding Diary – a financial guide to marriage.

An advocate of balanced financial planning through effective risk protection, accumulation and investment, he has

inspired many with his radical but practical approach to financial planning. Through his holistic method of planning,

James has touched more than 500 lives and families as they relook their financial journeys.

contents

You Have A New Baby – Now What?....................................................................

Put Down A Solid Foundation...............................................................................

From Infancy To Adulthood...................................................................................

Planning For Your Golden Years............................................................................

What Do We Do Now?.........................................................................................

Are You A Super Parent?......................................................................................

3-4

5-6

7-8

9-10

MEDICAL DISCLAIMER

Please note that the material in this guide is provided by way of information

only. It is not and does not purport to be, or it is not a substitute for, nor does it

replace, medical or other professional advice, or treatment of health conditions.

Whilst Great Eastern endeavours to ensure that the contents of the material are

accurate, errors or omissions may occur and we do not accept any liability in

respect of them.

For full terms and conditions, please refer to our site at

https://www.greateasternlife.com/sg/en/terms-and-conditions.html

YoU have a new BaBY – now what?

Welcome to

parenthood!

Caring for your

new-born baby can

be a challenging

experience initially.

But practice does

makes perfect

– once you’ve

adjusted to your

new role as a

parent, the rewards

are well worth the

efforts you put in.

A short quiz

Answer the following questions:

Values

What 3 values do you hold dear?

Why are they important to you?

How can you realise these values in your daily life?

When these values are realised, what can you achieve in life?

How will you pass these values on to the next generation?

Your hopes and desires

How do you deﬁne hope?

What hopes do you think your child would have?

How is this hope important to you and your child?

Take a moment to brainstorm your response to this sentence:

When my child grows up, he/she will be …

order to gain clarity on how you will

help him/her to achieve these goals,

it’s important to define what is most

important for you and your baby.

Let your motivations and dreams be

the guiding star for your actions as

a parent.

The first thing to consider is: What

do you want for your baby? Your

precious little addition to the family

is the key to your hopes and dreams

for the future. But as a friend once

said: “Desire is useless without

direction, goals and urgency.” So, in

3 to 6 months of income for sudden

child-related expenses. If you earn

on average S$3,000 a month, then

you would want to save up S$9,000

- S$18,000 for emergencies, and

an additional S$9,000 - S$18,000

for child emergencies.

These emergency funds should be

easy to access. This is not the time

to speculate on volatile investments

– your savings safety net should be

stashed away in a savings account

or fixed deposit. The important thing

is to make sure that your funds are

safe and liquid. Bank deposits are

usually the preferred method due to

their very liquid natures. Should you

need to withdraw the money at short

notice, you will not suffer any loss

of capital.

It is estimated that a middle-

income family will spend more

than S$250,000 to raise a child to

adulthood. While that might seem a

lot, the true cost really depends on

your income, savings and goals for

your child.

When it comes to planning for

parenthood, the first step is to

make sure that you have a rainy day

fund for unforeseen expenses. As

a financial planner, I’ve heard many

horror stories. From pregnancy-

related complications to chronic

health conditions – there are many

situations where a mother has to

unexpectedly give up work during

pregnancy or after the birth. Having

the financial strength to weather

these stressful situations can provide

crucial emotional and psychological

support for your family.

The first step is to create an

adequate savings safety net for your

family. Not only should you have a

cushion of 3 to 6 months of income

for emergencies, you should have an

extra safety cushion of another

Now you know what

you want for your

child, the question

is how will you

get it? Reaching

a goal requires a

plan – and in this

case, you need a

ﬁnancial plan for

your child’s future.

While money alone cannot raise a

child, your child’s success is directly

related to the relative advantages

you help confer. A strong financial

foundation will provide the necessary

platform to help your child get

started in life.

PUt Down a soliD FoUnDation

From 5 to 18

Here’s when you need to help your

child develop to his fullest potential –

from preschool costs to enrichment

classes, these can add up to a

pretty heavy financial burden. There

is also the potential to overspend –

spending more money on education

and enrichment doesn’t guarantee

success for your child. It’s also

important not to neglect his

emotional and physical development.

A good rule of thumb is to limit your

spending to no more than 15 per

cent of your household income.

If you are the sole breadwinner

in the family, perhaps you could

consider encouraging your spouse

to re-enter the corporate world or

take up a part-time/flexi-time work

From 0 to 5 years

During these years, the most

common expenses (other than the

usual food and diapers) are health

care and child care. One way to

avoid huge expenses is to take out

an insurance plan that will cover you

for any unexpected expenses. Think

about insuring yourself against hefty

medical bills, and ensuring that your

precious champion can get the best

medical care should the need arise.

A solid critical illness plan offers a

lump sum to tide you over should

you lose income while taking care

of junior during his illness and

recovery. A disability plan will provide

a monthly income to help with

permanent care if your baby has a

severe disability

The next step is

to ﬁgure out what

expenses you will

have. When it comes

to budgeting for your

child, one way is

to break down the

expenses by each

stage of development:

Your child’s growing

years (from 0 to 5),

learning years

(5-18) and adulthood.

Let’s look at

each segment in

more detail:

From inFancY to aDUlthooD

Great Eastern Life offers coverage such as Smart Protect, LifeSecure and SupremeShield.

Please talk to your Great Eastern agent or contact us www.greateasternlife.com/contact for more details.

arrangement to help with

the expenses.

Another way to cope with these

expenses is by beginning the

savings process earlier. Saving up

and investing a lump sum before

your child reaches this stage will

let reap the rewards of cash back

and bonuses

From 18 onwards

This is your child’s most important

milestone – getting a tertiary

education. Twenty years from now,

university fees could be in excess of

S$100,000! And if your child heads

overseas, she/he would also need

money for other expenses such as

accommodation, food, travel etc.

When it comes to such a huge

investment, the best thing you can

do is partner up with Mr Time and

begin the budgeting and saving

process as early as possible, so

compound interest works for you.

• If you start when your

child is born, you will have to

save S$1,748.97* a year for 23

years (total S$40,226) to save

up S$100,000.

• If you start when your child is

10 years old, you will have to

save S$4,640.27*a year for 13

years (total S$60,323) to save

up S$100,000.

• If you start when your child is

15 years old, you will have to

save $9,109.14* a year for 8

years (total S$72,873)to save

up S$100,000.

As you can see, the later you start,

the more it will cost you. So do

consider investing as early as you

can! And do consider endowment

and investment-linked plans which

can help you get started

The Prime Rewards programme from Great Eastern, for example, provides annual cash back of up to 14.3 per cent for the next 10 years after the fifth anniversary.

If you do not have a lump sum to invest, consider the Annual Cashback Endowment instead.

Assumes 7% interest rate

Suitable plans of this type from Great Eastern include Prestige Portfolio, Smart Invest and Smart Protect.

but this is not a wise choice. As we

learned earlier, time waits for no

man. The longer one delays saving

for retirement, the more one needs

to save. Hence, it’s better to start as

early as you can, in order to better

answer that sensitive question

of retirement.

Use your CPF

One way to achieve your retirement

goals is to enlist the help of your

CPF Ordinary Account (OA). If

you have a combined household

income of S$10,000 (2 adults

earning S$5,000 each), you can

contribute up to S$2,300 a month

to your OA. Assuming you set

aside a reasonable amount for your

mortgage repayment, you should be

able to set aside S$1,000 a month

towards retirement if you get a

modest home and don’t overstretch.

This will let you accumulate your first

half-million before the age of 60!**

But if you let Mr Time and a higher

Does this sound stressful? It does!

That’s why it’s important to make

sure your children avoid that burden

by ensuring you have adequately

planned for your golden years. Old

age can be a financially draining

time with hefty medical bills and

expensive nursing care, so make

sure that your children see you as

an asset and not a liability, by

saving up and investing for your

own future too.

This way, you are also setting

yourself as an example of self-

responsibility and self-reliance.

Your children can then learn from

your good example, and lead a

fruitful and financially prudent life

as well.

Young parents might be daunted by

the many expenses they face while

saving up for the many expenses

outlined above. Many initially choose

to avoid the important but less

urgent issue of retirement planning,

While saving up

for your children’s

education and future

is important, you

should not neglect

your own ﬁnancial

planning. Traditionally,

parents relied upon

their children for

retirement security.

As such, you might be

sandwiched between

taking care of

yourself, your children

and also your parents

– all on one source

of income.

Planning For YoUr golDen Years

Assuming you start saving at the age of 30 at the prevailing CPF OA interest rate of 2.5%pa.

interest rate work together to

compound your returns, you could

be better off! For example, if you

save into an investment-linked policy

with 7% net compound interest, this

can raise your returns to more than

S$1.2million within the same period.

Supplement with insurance

Have you wondered what would

happen to your family if you stopped

bringing home the bacon? As I once

jokingly told a couple – you are the

ATM machine that produces the

money! So it’s important to make

a plan when that ATM machine

stops working.

Here is where life insurance steps in.

Life insurance ensures that there will

always be sufficient funds to achieve

your family’s goals, no matter what

happens to you – whether it’s an

untimely death, or a severe illness.

Consider essential products such

as life insurance, critical illness

coverage, and personal accident

insurance to ensure that sudden

twist of fate doesn’t harm your

family’s future. Other plans can help

protect your income through the

good times and bad times

In my opinion, the best love letter

you can write to your family is a life

insurance policy. Not only does it say

that you love them, but the results

speak for themselves!

Great Eastern Life solutions for such coverage include Supreme Term, Supreme Protect or Smart Protect, and PaySecure. Please talk to your servicing Great Eastern

agent or contact us at www.greateasternlife.com/contact for more details.

as Certified Financial Planner

(CFP

) or Chartered Financial

Consultant (ChFC™). These are

industry-recognised awards that

signify academic excellence in

financial planning.

• Interview and assess the

financial planner’s logic during

your first meeting with him

or her.

• Figure out if the financial planner

is more motivated to close a

sale or if he or she is genuinely

interested in understanding your

goals, concerns and constraints.

Stay away from those who are

after a quick buck.

• Ask about his or her experience.

Someone with a long track

record or who has received key

industry or in-house awards

might be able to deliver a higher

level of service.

Many people make the mistake

of working with the first financial

planner they meet, or simply rely

on a planner introduced to them via

family or friends. This planner may

concerns – there isn’t one perfect

solution that fits everyone.

This is where a professional financial

planner makes a difference. He

will discuss your concerns and

aspirations, before helping you

develop a plan that will cover all

the angles. A good planner will be

able to flag any potential problems

with your financial plan and make

you aware of any blind spots. No

professional financial planner will

force you to accept some template

solution, but on the contrary, will

work with you to develop a unique

plan that fits your very specific

needs and wants.

Your planner should be someone

you are comfortable with and who

you feel is always a good listener

and sounding board for your

thoughts and ideas.

To find a financial planner that suits

you, try the following:

• Look out for planners with

professional certification such

We hope that

this guide has

brought you some

fresh insights

into parenting

life, and that you

now understand

the importance

of budgeting and

planning for

your child’s

ﬁnancial future.

Before you start turning ideas into

action, don’t forget that different

families have different needs and

what Do we Do now?

not be the best one for you – it’s

important to take the time

to evaluate a potential financial

planner before placing your trust in

him or her.

When in doubt, always get a second

opinion. Talk to more than one

potential financial planner before

deciding who to work with – pick

the one that you trust and are

comfortable talking to.

The saying goes: “A thousand step

starts with the first”. I would also like

to add the following: “A thousand

step starts with the first right step!”

Go on, get some great advice and

have a great time parenting!

important, but it’s good to

set aside some funds for

the future.

5. When your little one asks for an

expensive toy:

a. I pay first to avoid

embarrassment, and then pray

that I can pay off my credit

card on instalments.

b. I scold my child – there’s

no sense in buying such an

expensive toy!

c. I take the time to explain to my

child that sometimes it is worth

waiting for a sale. I encourage

him to make a plan to save up

for this purchase, so that he

learns to appreciate the idea of

finding and creating value for

things in life.

6. At the mall, you are torn between

choosing a child makeover or a

mind-mapping learning course.

Which would you choose for

your child?

a. They are both good

programmes so I go for both

– even though doing so busts

my monthly budget.

b. I make a quick decision

to choose just one of the

never have time for it.

c. My budget is perfect; I hardly

ever touch my money.

3. My attitude towards credit

cards is:

a. Spend first, think about the

payments later.

b. I use credit cards, but

sometimes find myself

wondering how and why I

spent so much.

c. I use credit cards to take

advantage of the perks

available. I also use my

credit cards to help track

my expenditure, as each

card company sends a

detailed statement.

4. When it comes to retirement

planning, I think:

a. What retirement planning?

I cannot even cope with my

expenses this month!

b. I know it’s important, but

I just cannot find the time

or resources to plan

for retirement.

c. I know I should think about

retirement planning early,

as time is our friend. Current

expenses are equally

Take this short quiz

and ﬁnd out if you

are a super parent

when it comes to

your family’s

ﬁnancial health.

1. If I were to receive S$30,000,

I would:

b. Use the full sum as down

payment for a brand new car.

c. Discuss with my spouse what

debt or expenses we would

like to repay.

d. Seek the advice of a

financial planner.

2. This is my idea of a budget:

a. Budget? What budget?

I spend my money on the

items I want now!

b. I try to make a budget, but I

are YoU a sUPer Parent?

two courses.

c. I take the course materials

home and discuss the merits

of each with my partner, while

considering how much I can

afford and which programme

appeals more to my child.

7. It is now the school holidays

and your teenager has been

spending all his time at the

movies or hanging out with

friends. You think:

a. Children nowadays

experience too much

stress;my child should enjoy

life while he can.

b. Life is expensive; he should

get a holiday job to help out

with the family expenses.

c. Time is a precious resource; I

hope my child knows about

the varying value he can

create out of the things

he does.

If you answer …

Mostly As: You are your child’s own fairy god parent!

Your child’s wish is your command! Does this sound familiar? Perhaps you have overly focused on your

children’s short-term desires and wants, while neglecting his long-term needs. Stop making haphazard

decisions, and start budgeting for the various immediate, intermediate and long term needs of your children –

there are no magic wands or instant miracles when it comes to parenting!

Look at your overall goals and objectives for your family and start planning your savings and investments.

Don’t forget to protect yourself by planning for your eventual retirement. If this sounds a bit overwhelming,

consider chatting with a financial expert to figure out how to get started.

Mostly Bs: Super Parents in the making!

You’ve made some wise decisions, but also some wrong ones. Perhaps it’s time to take a second look at

what you can be doing better.

Have you considered the aspects of your financial life that could hamper your child’s progress? For example,

being sick or poorly prepared for retirement can add a lot more financial stress on your family, thus reducing

the resources available for your child.

Having a proper budget is key. The next step towards improving your financial situation is to budget

adequately for your personal goals – planning your next holiday, saving up for retirement and making sure you

have adequate life and health insurance.

Mostly Cs – And the Super Parent Award goes to … YOU!!!

Congratulations! You seem to have everything well taken care of.

Perhaps you found yourself nodding in agreement while reading this guide. Perhaps you even have ideas to

share – do write to me if that’s the case!

While everything might be smooth sailing now, consider having your goals, milestones and plans evaluated

regularly. When life throws you a curve ball, you want to make sure you’re on track for your goals, no matter

what changes.

great starts small.

live great.

Great, meaningful changes to our lives oftentimes have small beginnings.

At Great Eastern, we are more than just a life insurance company – we are

a LIFE company. We champion these little changes, which change life for

the better. For a better, healthier you. We want to encourage you to live

great, every day, and created this series of guides to help you do just that.

Want to view them all? Simply go to www.greateasternlife.com/guides

We’re regularly growing the list of topics for you.

REAP THE BENEFITS

These guides are part of the Live Great programme, which was created to

help you live and feel well. Join us at https://www.greateasternlife.com/sg/

en/personal-insurance/live-great/overview.html to find a host of wellness

tools, handy mobile applications, health and wellness tips, invitations to

expert talks and exclusive privileges to help you along your

Live Great journey!

LET’S TALK ABOUT LIFE

Want to learn more about protection and retirement solutions from Great Eastern?

Do get in touch with your Great Eastern Life Distribution Representative, or

or in part without permission is prohibited.

The Great Eastern Life Assurance Head Ofﬁce

1 Pickering Street, #13-01 Great Eastern Centre Singapore 048659

Company Limited (Reg No. 1908 00011G)

Any Questions? We are happy to help!

Line : 6248 2211

Email : wecare-sg@greateasternlife.com

Website : www.greateasternlife.com