Do You Have $670,000 to Raise A Child in Singapore?
Lifestyle | 15 Aug 2019
A recent study quoted that raising a child in Singapore costs at least $670,000 – equivalent to the price of a condo with a 99-year tenure. What does this mean to young couples?
With the already rising cost of living, this exorbitant fee that can deter many young couples to have children in Singapore. Recently moved into your newly-furnished BTO flat and planning to have a child? According to the SmartParents study, the entire course of raising a kid from prenatal to adulthood will cost a Singaporean at least $670,000. This could be one of the many reasons to explain the plummeting birth rates in Singapore, as we hit a plateau with the lowest number of babies born in 8 years.
Rather than shunning from forming your own family unit because of financial constraints, there are many ways to beat the cost-of-living pressures and raise a kid at the same time.
How Can I Plan My Finances Properly?
For a general rule of thumb, young couples are advised to follow the 40-30-20-10 rule when budgeting. Never heard of the 40-30-20-10 rule? CPF Board Singapore explains here:
Source: CPF Board Singapore
1. Spend less than 40% of your salary on loans
Regardless of private housing, resale or BTO flats, newly-wed couples will most likely take up a loan. Not only that, car loans and personal loans are also financial liabilities that could impede financial planning for a family.
Spending around 40% of salary on loans is advisable to avoid going into debt during the course of raising a child. Think being in debt is a far-fetched scenario? Think again. According to Credit Counselling Singapore (CCS), more parents are going into debt for kids’ education, as education becomes the top priority for Singaporeans. More than half of Singaporeans are actually willing to go into debt to fund their child’s university or college education! Ensure that you clear off as much incurring debts as you welcome new addition to the family.
2. Less than 30% of your salary should go into your expenses
Treat yourself at the end of the workweek. We’re all for #TGIF! Be it going out for a lavish meal with your other half, or paying your monthly gym subscription fees to stay in shape, you deserve it. Monitor your spendings with useful budgeting apps such as You Need a Budget, as known as YNAB. Build a smarter financial future for you and your family with simplified tracking apps and stay on top of your spendings.
3. Save at least 20% of your salary for financial goals
You already know this: interest rates are low in the banks. What you want to do is grow your money. In a perfect sense, the best way to save is when you invest. Of course, investments come in many forms. We do not encourage young families to kickstart high-risk investments unless you have the financial liberty to do so. Ideally, low-risk investments such as endowment plans are great products young families should consider. Many individuals also consider endowment plans as “forced savings”.
PolicyPal partners Singapore Life to release a short-term endowment plan that guarantees a return rate of 2.25% for a 3-year term plan, and a return rate of
2.38% for a 5-year term plan (tranche closed) – all for just a fixed single premium of S$5,000. This is easily one of the most competitive endowment plans in the market right now. Read Seedly’s review here.
This endowment plan is especially suitable for young couples because of its free withdrawal option. Unlike other plans, this plan allows free withdrawal under conditions such as medical reasons, life stage events, and financial reason. We’ll delve into life stages events:
- If you get married, you may choose to withdraw for free to fund your wedding preparations.
- If you become a parent, you may withdraw for free to settle urgent medical fees for your newborn.
- If you purchase a new house, you may opt for free withdrawal to pay your loans.
This plan complements young couples who wish to save for their child’s future while not knowing if they can afford to do so due to life events mentioned above. Good news, you can purchase this endowment plan simply on mobile!
4. Save at least 10% of your salary for insurance coverage
Your family comes first. The greatest gift is health, and like what the saying goes, “your health is an investment, not an expense”. Dedicate 10% of salary to health insurance coverage, critical illness and personal accidents. When the family unit becomes bigger, it can be a challenge to monitor all insurance coverage of your family members. PolicyPal allows the buying and managing of insurance policies – all in one app. Simply scan and upload your insurance policies and you can manage your insurance policies anywhere and anytime!
Raising a Child in Singapore Just Got Easier
With good financial planning, you can raise a child with ease. Do you agree with the 40-30-20-10 rule? Reach us at [email protected] and share your thoughts! If you are interested in our endowment plan, you may wish to reach out to us via email too! Alternatively, download our app and start upsizing your savings now!