We speak to three experts (Pauline Yong, financial planning representative at Phillip Wealth Planners Sdn Bhd; Jennifer Geok, financial advisory manager at FA Advisory Sdn Bhd; and Aida Mokhtar, licensed financial planner specialising in Islamic financial planning) to understand the sort of finances one would incur as a parent at different life stages.
In your 30’s
At this stage of life, you’ll probably feel a sudden increase in financial responsibilities – especially if you’re planning on having your first child.
Q: Are there unexpected costs to having a first child?
P: Remember to factor in hospital fees and other expenses that may occur. In my book I Love Financial Planning, a sales executive paid RM2,500 for cord blood and stem cell banking as security for her baby’s heath. But she also had delivery complications, which led to a medical bill of RM5,000 and the confinement nanny set her back another RM3,000!
Q: How much will it take to raise a child today?
A: It can cost you anywhere between RM400,000 to RM1.1 million – depending on your hopes and aspirations for your kid. This range includes delivery costs; childcare necessities; and primary, secondary, and tertiary education.
In your 40’s
You’ve built a solid foundation, but with your kids advancing into secondary or tertiary education – you’ll need to make sure you have enough kept aside for rainy days!
Q: Should I send my child to a university overseas?
P: A three-year local university degree programme can cost about RM10,000; a local private university can demand about RM120,000. As for a university overseas, be prepared to fork out at least RM300,000.
A: To help you save up, look into education savings accounts such as the National Education Savings Scheme (SSPN), Amanah Saham Didik (ASD), and Unit Trust. There are two types for SSPN: SSPN-I and SSPN-1 plus – the difference is that the latter includes takaful coverage, which is a form of insurance. With either of both options, you’ll enjoy an annual tax relief of RM6,000, and free takaful coverage will be available for depositors whose savings are RM1,000 and above. You’ll also receive competitive dividends for savings exempted from income tax. If you’re thinking of stocks, blue chips are the safest.”
Q: Should I be setting aside an amount to help my children with the down payments of their first houses?
J: No! Many parents make the mistake of sacrificing their retirement funds to help their children buy property. Do it only if your own retirement fund is taken care of.