How do you plan financially for your new family? Ms Ho Lee Yen, Chief Marketing Officer of AIA Singapore, shares some pointers.
Valentine’s Day is the time of year when couples come together to show their love and appreciation for each other. Besides spending romantic moments together, celebrating life-long partnerships is also about fulfilling our promises of ensuring that our loved ones are financially and emotionally taken care of every day, through the good times and the bad.
We have all heard it before: communication is key to a healthy relationship. As a married couple, it becomes even more important to have quality conversations, and this includes planning for the next stage of your life — starting a family, and raising children. But what does this really mean and how do you get started?
Have quality discussions about finances with your significant other. Being on the same page regarding your needs and expected standard of living will enable you to work hand-in-hand to plan for a financially secure future so that you can achieve your dreams and aspirations together.
Assess your current financial status and investment portfolio
(a) Start with a check-list to be clear about the outstanding debts you have as a couple. Work out the sum you need to pay off your non-mortgage debts such as renovation loans, car loans and credit card bills.
Always ensure that you do not roll-over the outstanding balance to the following month as this will incur payable interest, which could eat into your savings. This is to ensure that your family will not have to deal with outstanding debts should anything unfortunate happen to you.
(b) Have an open and honest discussion with each other on the types of financial or insurance plans you already have. This is to help both of you understand what you do not have, and what either or both of you should be getting coverage for –- from medical insurance to income replacement.
(c) Track your daily expenditure to better understand the available budget that you can set aside to protect your loved ones and grow your wealth. It is now easier than ever, with convenient tools such as budget and financial mobile applications.
(d) Once you have a clear idea of your existing financial status and your investment portfolio, do a fact-find together with a professional financial planner. The fact-find process helps you to identify your goals, clearly establish priorities such as short-, mid- and long-term plans, and to understand your risk appetite, risk profile and time horizon. Through this thorough process, the experienced financial planner would then be able to assess suitable financial options to help you attain your financial goals.
Remember: communication is key. Before making any decisions, review your options together with your spouse, agree on the amount of coverage you will require as a family and be comfortable with it. The financial planner may be the expert, but your spouse is your companion on your life journey.
In addition, make sure that you are both comfortable with your financial planner, as he/she will be your key administrator in the event of any unforeseen circumstances. You should be able to trust him/her to handle the administrative details so that you can focus on what really matters to you, especially in difficult times.
Set Up Priorities
As you welcome your new-born baby, you move to a different stage of life and your needs and priorities evolve.
(a) As you start a family, it is no longer just about two individuals. You want to ensure that your other half remains financially secure in the event of any unforeseen circumstances. For a start, besides having health insurance to cope with any unexpected medical bills, couples who do not have any protection coverage should look to having basic protection insurance coverage. This is because you want to be assured that your loved ones will be able to cope even with loss of income due to illness or accident.
To ensure a secure future for your family, you can consider a term insurance plan. This is a good option for those looking for pure protection coverage over a fixed period. The premium outlay for such plans is low, as they do not accumulate cash value. Plans such as the AIA Secure Term Plus offers you high protection at affordable premiums.
(b) We want the best for our children and for them to grow up healthy and well-prepared for the future. The arrival of a newborn is cause for celebration and also a time for you to start planning ahead.
Your first priority is to ensure that your baby is covered with a medical plan such as a Medisave- approved Integrated Shield Plan (IP) to complement MediShield, or MediShield Life which will automatically cover all Singapore Citizens and Permanent Residents from the end of this year. This ensures that your family is financially protected if your child is hospitalised due to an illness or accident, and you can focus on what actually matters: getting your child back to good health.
Plans, like the AIA HealthShield Gold Max plan, can be purchased using CPF Medisave (subject to the CPF Medisave withdrawal limit). This provides you with more choices, like increasing the level of protection beyond medical care provided at C or B2 wards of government hospitals. It also offers lifetime protection against unexpected medical bills.
Next, with the ever increasing cost (Kids’ education ‘the best investment’, Straits Times, 14 September 2014) of education, it makes sense to start saving for your child’s education as early as possible. Consider endowment plans, which provide the little ones with protection and savings.
Review your Financial Portfolio Regularly
Regularly review your financial portfolio as your family’s financial needs evolve. Catch up with your financial planner at least once or twice a year. This ensures that you remain adequately protected and are on track to achieving your goals at the different stages of your life.
Achieve your Goals with Sound Financial Planning
Marriage is a lifelong commitment that must be nurtured from the beginning. Spend quality time together each day and have conversations about anything — from your day, to your children, your desired living standards, financial plans and expectations for the future. Be on the same page every step of the way and focus on what’s most important, from spending time with loved ones, to travelling the world, to achieving your dreams and aspirations together.