Juggling finances for three generations can be tricky. Ms Ho Lee Yen, Chief Marketing Officer at AIA Singapore, tells us how to succeed.
Your financial situation and needs change as you go through different stages of life. Now that you have a family, you need to start saving so as to build the financial resilience of your family, grow your nest egg and ensure a secure financial future for your love ones.
Many people fail to adequately plan their finances so that they will have enough money to meet the major financial obligations and commitments that they will encounter over the course of their lives.
This is why financial planning and growing your savings for your three-generation family should be a priority. Singapore is seeing a fast-growing group of people — the sandwich generation — whereby working adults are caring for their ageing parents who depend on them and concurrently supporting their own children. These responsibilities pose daunting financial challenges.
If you are in the sandwich generation you need your money to work harder within a limited budget so as to better manage the financial demands of looking after three generations of people – you and your spouse, your parents, and your children.
Here are 10 easy tips to follow as you and your partner plan for the financial security of the family.
1. Assess your financial status
with budget and financial apps. The apps will keep track of your daily expenditure, and help ensure that you spend within your budget. Through the apps, you will also be able to better understand your financial status and determine the amount of cash you can set aside to invest and grow your wealth.
2. Seek professional advice.
Get a financial adviser to help access your financial gaps and recommend suitable financial solutions to grow your wealth. Seek advice from your financial adviser periodically as you and your family’s financial needs are also constantly evolving, especially during significant changes in your life – for instance, when you are starting a family or having a second child.
3. Start saving early
and build a well-diversified investment portfolio. Ensure that it is well diversified and that the asset mix reflects your risk appetite, needs and circumstances. Besides saving your money in a savings account or fixed deposit, you can also consider placing your money/cash in investment-linked policies (ILPs), stocks, bonds, currencies, and commodities. Have a mix of short-term, medium-term and long-term assets which suit your needs, responsibilities and wants.
To save for the long-term, you could consider purchasing an ILP, which plays a dual-role in allowing you to grow your wealth while providing protection. Review your investment portfolio for potential adjustments twice a year as your financial priorities and financial markets may change over this period.
4. Plan early for your children’s education needs.
According to a survey, saving for children’s education is a top priority among Singaporeans, with a significant proportion saving from the birth of their child.
With the increasing cost of education, you should start planning as early as possible – ideally from the time your child is born, to allow you more time to save and achieve your goal.
Consider whole life and endowment plans to give your child protection, savings and cash value. AIA’s Smart Growth (II) is one. It is a limited-pay regular premium savings plan that allows you to pay off your premiums in 12 years, while helping to save for your child’s university education and keeping him/her protected.
5. Ensure that your parents are adequately insured
against unexpected medical bills, should they be hospitalised. This is so that you are able to finance their hospitalisation/medical expenses via reimbursements from their health insurance plans, without depleting your life savings.
The Healthcare inflation rate in Singapore was forecasted to be 8.4 per cent in 2011 while the average hospital bill in Singapore has almost doubled between 2006 and 2010.
As the elderly may be prone to accidents, you may want to insure your parents with a personal accident plan, such as the AIA Prime Assured, which provides coverage until the age of 85. This policy focuses specifically on benefits relevant to the silver population. It also covers Alzhemier’s and/or Parkinson disease.
6. Start thinking about your retirement goals,
such as when you would like to retire and the lifestyle you would like to lead then – as soon as you start working. To get you started, you could use the AIA Retirement Calculator to find out whether you are on track for your retirement, as well as the retirement amount you will need to maintain your desired lifestyle.
7. Reduce your monthly expenses.
Look for ways where you can cut down on your daily expenses or look for cheaper alternatives to fulfil that desire. Take two short vacations a year instead of a long exotic one, or go for staycations. Shop during sales. By reducing your expenses, you will be able to set aside more cash to grow your savings.
8. Be debt-free.
To grow your savings, you will need to clear your non-mortgage debts so that your family will not have to deal with outstanding debts should anything unfortunate happen to you. Non-mortgage debts include education loans, renovation loans, car loans and credit card bills – always ensure that you don’t roll-over the outstanding balance to the following month as this will incur payable interest, which could reduce your savings.
9. Educate your children
on financial literacy. As the adage goes, “Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime.”
Teach your children how to save and manage their finances so that they can distinguish between what they need and what they want. One way to start empowering your children to become regular savers is by setting up a piggy bank and getting them to drop a dollar into it every day.
10. Prepare a will
to ensure that your wealth is well-documented and to facilitate a seamless transfer of your legacy to your loved ones. Review it with your lawyer and financial advisor. You should update your financial adviser as soon as there are changes in your circumstances or financial needs. You should also update your will once you have made any changes to your asset portfolio. This will ensure that you have adequately provided financially for your family.