Financial planning is key to facing everyday challenges

Getting a divorce was pretty traumatic. Add moving back home to Singapore from abroad with children in tow as a single parent, and it was enough to disrupt all of Ms Leila’s (not her real name) plans.

Still, it was not a disaster as she quickly got a job, though the pay was much lower than her peers because she had been away 12 years. The children started school and there were some hiccups as they were not used to Singapore’s education system. Life started looking up again.

Buying a flat was a priority among the myriad of decisions Ms Leila made in the first five years of re-homing back in Singapore.

She had some Central Provident Fund (CPF) money from previous work before she got married. That, and a loan from her mother helped with the downpayment for the flat.

Buying a life insurance policy was another step she took since she had to make sure her young children would be protected in case of an unexpected critical illness, or worse still, death.

Although she is young, she also made a will, CPF nomination and insurance nomination because she did not want to leave her children in the lurch should the unmentionable happen.

Why the size of your safety net matters

How much insurance to buy can sometimes be a tricky question.

There are mortgage protectors, accident plans, medical insurance and endowments, to name a few. An insurance agent would be ready to provide guidance, but getting an impartial financial adviser may be better.

To this end, the DBS NAV Planner — a digital financial and retirement advisory tool — turned out to be very useful.

Along with its comprehensive advisory platform for financial planning by considering the cash flow and balance sheet as well as changing life stages and financial circumstances, the digital tool provides advice on protection and retirement.

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Ms Evy Wee, head of financial planning and personal investing, DBS Bank, said the most popular features on NAV Planner include: the “Net Worth” feature, “Money In, Money Out” feature and “Invest” feature where people can learn more about investing, monitor their investments and get personalised guidance on investing.

“We are encouraged to see the “Net Worth” and “Money In, Money Out” features popular with our users, as it proves that our efforts in advocating for financial literacy and incorporating intuitive customer journeys into NAV Planner’s design have helped our users understand that the first step towards financial wellness involves a thorough look at one’s personal finances,” said Ms Wee.
 
According to Ms Wee, some 2.4 million DBS customers use the NAV Planner, with a majority between the age of 21 to 50.

Why you should keep track of matrimonial assets

Many people have the perception that dividing matrimonial assets means a straightforward 50-50 split between the couple, but this is most likely not the case.

To protect your assets, it is prudent to keep track of major matrimonial assets and your contributions to them.

Data from the Ministry of Social and Family Development shows that a larger percentage of married couples here are breaking up. Marital break-ups are also an escalating trend around the world, particularly in the wake of the Covid-19 pandemic.

Stress from having to juggle both career advancement and family needs, caring for young children and perhaps the financial and emotional stress, in addition to looking after the elderly, can take its toll on marriages.

For example, most parents start worrying — even before their children are born — about how they will pay for their children’s education. In this instance, the NAV Planner can help parents with planning for their children’s education

Parents can plan for their children’s education with the “Map Your Money” feature in the NAV Planner, said Ms Wee.

It allows users to see how long they would take to achieve a specific money goal through simulation, and browse products to help make their money work harder for them.

“They (users) can create a long-term money goal specific to their children’s education, and the tool then simulates it against their long-term cash flow and assets,” she said. 

Why you need to plan for your kids’ education & retirement

In Singapore public universities, a four-year undergraduate programme costs on average $40,000. This is about a third higher than what it was 10 years ago, and does not include miscellaneous expenses. With demand rising, it is safe to assume that fees are likely to increase further.

If you are thinking of sending your child to an overseas university in Australia, the UK or US, the fees charged by universities are markedly higher, ranging from $16,000 to an eye-watering $86,000 per year.

Factor in student accommodation, living costs and flights, and the sum could reach $100,000 for a single academic year, which is just about enough to make you wonder if you will ever retire.

It is why many parents will put off saving for their retirement and funding their healthcare needs despite concerns that they may outlive their nest egg.

Planning for our children’s education and our retirement need not be mutually exclusive.

It is not selfish for parents to consider their own retirement needs early. In fact, planning for our future as we plan for our children’s needs will lead to more sustainable outcomes.

And when we can take care of our own retirement, our children will be less burdened financially.

Why kids are not a retirement plan

With the rising cost of living, healthcare costs and the volatile market environment, relying on our children for our retirement is not sustainable.

According to a recent Singapore Department of Statistics (SingStat) report on inflation, almost every household group saw prices fall last year, except for retiree households. Those with young children enjoyed the largest decline.

The inflation rate for retiree households, comprising only non-employed people aged 65 and above, was 0.1 per cent in 2020. 

This was partly due to the higher costs of food and hospital services which accounted for larger shares of their expenditure basket, according to a SingStat report released on July 13.

In the report, higher food prices and accommodation costs offset lower costs of electricity and outpatient services for this group.

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Meanwhile, prices fell for all the other household groups — general households (-0.2 per cent), lowest 20 per cent income group (-0.1 per cent), middle 60 per cent income group (-0.1 per cent) and highest 20 per cent income group (-0.2 per cent).

Households with young children enjoyed the largest decline in consumer prices of 0.4 per cent.

This was mainly due to the enhancement of pre-school subsidies in January last year, which had the largest dampening effect on their Consumer Price Index (CPI), given that the share of pre-school education out of their total expenditure was higher than that for other household groups.

The CPI is designed to measure the average price changes in a fixed basket of goods and services commonly purchased by resident households over time.

Retiree households made up 7.5 per cent — or 102,300 households — of all resident households last year while those with young children accounted for 26.9 per cent.

The consumer price changes were calculated using 2019 as a base. The top three areas of expenditure for retiree households that year were housing and utilities, food, and healthcare.

These areas collectively made up 72.5 per cent of retiree households’ total expenditure.

Healthcare expenditure as a share of total expenditure was the highest for retiree households, at 11.2 per cent, compared with the other household groups. 

Financial retirement inadequacy — not having enough money in hand — increases the feeling of vulnerability at a time when one is least able to cope, and this is a cruel blow.

But this can be mitigated by smart financial planning and leveraging different sources of information including digital tools to ensure there are enough financial resources to lead a comfortable life.

The writer, an ex-Business Times journalist, finds the inflation report and impact on retirees sober reading.

 5 tips to enjoy your golden years

  • Place equal emphasis on kids and retirement

Planning for your children’s education and your retirement needs can go hand in hand, and is more reliable than relying on your children.

  • Prepare for your retirement

Set up a financial plan based on realistic projections, visualise your retirement lifestyle and quantify your income flows and expenses.

  • Commit to long-term investing

Investing early gives you a longer time horizon for your funds to compound and grow. Do not lose sight of your long-term financial needs.

  • Look for investment opportunities

Monitor investment opportunities that can help make your money work harder. Take note of your risk tolerance and investing risks.

  • Tap on national schemes

Use the national annuity scheme Central Provident Fund LIFE. Avail of tax reliefs by making cash top-ups to your account and that of your loved ones.

This is the third of a seven-part series in partnership with DBS

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