This Father’s Day is particularly special, as it is the first year I will be celebrating as both a son and a soon-to-be dad. Like many Asian families, my dad was the primary breadwinner, diligently working to secure our future. While he may not have had as much playtime with us, he has set us up in ways we did not fully appreciate at the time. He got us medical and life insurance, began saving for our university education from a young age. These actions, done quietly and selflessly, have empowered us in countless ways.
Inspired by his example, I am committed to providing my daughter with the same head start. Here is how I am planning for her financial future:
Building a Safety Net
- Parental Insurance: Before considering insurance for our children, it is crucial that we as parents are well-insured. This ensures that if an unforeseen situation like death or major illness occurs, our family will not be forced to scramble for financial resources. A Term Plan can cover this efficiently and cost-effectively.
- Maternity Insurance: As early as the fourth month of pregnancy, maternity insurance safeguards both mother and baby against pregnancy complications and congenital illnesses. However, in my opinion, the key feature of Maternity Insurance is the Guaranteed Issuance Option (GIO). GIO allows parents to purchase life insurance for their baby even if congenital illnesses are present. There is also Maternity Insurance that offers GIO for purchasing an Integrated Shield Plan that covers hospitalisation costs for our children.
- Integrated Shield Plan: Once our daughter arrives, an Integrated Shield Plan becomes vital. This plan covers hospitalisation and specific outpatient treatments, ensuring she receives the best medical care without straining our finances. Acquiring this plan early ensures coverage even if she develops new illnesses or medical conditions later.
Financial Planning for the Future:
- Critical Illness Coverage: Securing lifetime critical illness insurance for our daughter while young locks in her insurability during peak health. This is particularly relevant considering the recent announcement of the Cancer Drug List by MOH in 2022. Treatments not on this list may not be covered by existing insurance, potentially creating a financial burden. Critical illness insurance provides a lump sum payout in such situations, offering crucial financial support.
- Beyond Finances: Wills and Guardianship: While financial security is important, it is only half the picture. Having a Will allows us to prepare for the worst-case scenario: both parents passing away. This legal document allows us to appoint a trusted guardian for our daughter’s well-being and a trustee to manage the financial resources we have set aside for her future. It is important that we appoint someone that we trust and have agreed to take on this role.
- Education Planning: My wife and I aim to support our daughter’s education through university. Today, tuition fees and living expenses for a local non-medicine university are around $100,000. Factoring in inflation over the next 18 years, we estimate needing around $185,000. Based on our time horizon and risk tolerance, my wife & I plan to invest in a Growth Portfolio (80% in Equity & 20% in Bonds). At Providend, we use a 5.8% p.a. planning return for such a portfolio. If we start saving from our child’s birth, we need to save $500 monthly. However, if we were to delay until she finishes primary school, we now have a shorter investment runway to invest. Hence, we can only invest in a more bond-centric portfolio which I assume to return about 5.0% p.a. We will now need to save about $2,200 monthly to save up the same amount. Therefore, it pays to start saving early.
Looking back, I am incredibly grateful for my dad’s foresight and sacrifice. By following in his footsteps, I hope to provide a strong financial foundation that empowers my daughter to chase her dreams and live life to the fullest.
I would also like to take this opportunity to wish my father a very Happy Father’s Day! Here is a photo of my father and I at Upper Pierce Reservoir on one of our walks. He is 65 years young this year:
This is an original article written by Alvin Neo, Client Adviser at Providend, the first fee-only wealth advisory firm in Southeast Asia and a leading wealth advisory firm in Asia.
For more related resources, check out:
1. Money Conversations, Growing Up
2. I Am a Wealth Adviser, Seeking for a Review of My Own Wealth Plan
3. The Legacy of Two Matriarchs
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