Written by Dave Tung | 21 Dec 2018 |
They say that having children is life’s greatest joy. What can compare to the experience of bringing another human being into the world, nurturing them, and seeing them grow into adults and go off into the world?
There’s also that indescribable bond between parent and child, a relationship that is unique to any other.
While having children can be a wondrous experience, it is also a very costly one.
Having a child is not just an emotional commitment; it’s a financial one as well. As parents, it’s your responsibility to provide for your children until they are old enough to financially care for themselves.
This usually amounts to about 20 years of financial responsibility for your child.
What does that mean in dollars?
There is no universal standard cost for raising a child, as there are too many variables involved. For instance, it’s often likely that the more well to-do a family is, the more disposable income they have to spend on their children and their needs.
That said, it is possible to crunch some figures and get a rough estimate of what it would cost to have a child.
SmartParents has put together a comprehensive estimate of how much it would cost to raise a child in Singapore.
Here’s a summary of the costs associated with each stage of a child’s life:
You can refer to their infographic to view the breakdown of costs in each age range.
The grand total cost of raising a child in Singapore amounts to at least $670,000.
Your eyes aren’t deceiving you; it takes more than half a million dollars to raise a child. And that’s not even taking inflation into account.
That number must look daunting, especially if you merely consider it in relation to your monthly income. You might be thinking, “How could anyone afford to have a family?”
With some planning and smart financial decisions, you’ll be able to shoulder this seemingly astronomical price tag.
Here are six tips on how you can handle the costs of raising a child.
Starting a family is one of life’s big milestones, and if you know that you’re on the path of doing so, it would be prudent to start planning early.
Start building some savings as soon as you can because you’ll be spending before your child even arrives into this world. As stated in the estimate above, the costs of pregnancy and delivery can amount to $8,000.
And that’s only the beginning!
If you can get your finances sorted before the baby arrives, all the better. Answer important questions such as:
With good planning, you don’t have to deal with financial anxiety during one of the most important moments in your life.
Like any financial goal, the earlier you start working towards it, the more advantageous it is.
If you don’t think you’re financially ready to have a child, then it would be smart to start taking steps to accumulate savings. You can do this by putting aside a stipulated amount every month into a high-interest savings account.
Alternatively, you could plan to put some money towards medium-term investments that you can cash out as your child grows older and your expenses increase.
The sooner you begin saving, the more you can take advantage of the power of compound interest and make your money work harder for you.
If a normal pregnancy and delivery already costs around $8,000, imagine the financial impact if there are complications. You would have to pay for such medical expenses out of your MediSave account or even your own pocket.
Prenatal insurance can help mitigate some of the financial risks of a complicated pregnancy or delivery.
Such policies usually offer a one-time payout in the event of pregnancy complications and some also cover the baby for congenital diseases. Some of the pregnancy complications that are covered are Pre-Eclampsia/ Eclampsia, Abruptio Placentae, and Postpartum Haemorrhage requiring Hysterectomy.
The scope of coverage varies from insurer to insurer so it’s important to check the policy coverage.
Imagine what would happen if either you or your spouse — or even both of you — suffered an early death and your child had to grow up without you. Aside from the emotional effects of that loss, there’s also the financial side of things to worry about.
Who will take care of all the costs involved with raising your child to adulthood?
That’s why it’s important for you, as parents, to be insured, particularly so during the years when your children are financially dependent on you. They rely on you for shelter, food, education costs, daily living, and more.
Without you, who can take on this large financial responsibility? Life insurance can help cover this financial gap, in the event of your untimely demise.
If you’re unsure about how much life insurance coverage is enough, read our article on how to calculate your life insurance needs.
With sufficient life insurance coverage, you can rest easy that your child’s financial future is taken care of — even if you’re not around.
The costs of higher education is one of the big-ticket items associated with raising a child. This is particularly applicable in Singapore, where a higher proportion of the population has gained higher education.
According to data from SingStat, the number of Singapore Residents aged 25 years and over with a university education rose from 77,000 in 1990 to almost 815,000 in 2016.
And it’s safe to assume that a tertiary education will continue to be a valuable asset in Singapore in the future.
So how can you help save for your child’s future education needs? Aside from a normal savings account or investments, some parents opt for an endowment plan to help them achieve this financial goal.
Endowment plans are structured to provide both savings and insurance coverage, which kills two birds with one stone when it comes to securing your child’s financial future. You can put some money towards their education and also get yourself covered so that they are taken care of, if something happens to you.
As endowment plans have grown in popularity as a financial instrument for saving for education needs, the plans in the market have evolved in various ways to meet this need.
Some insurers offer plans that are marketed specially as education endowment plans, and they are structured to pay out over a specific period (typically over the course of a three or four year university course) so that each payout can cover the costs of each year of education.
The low-risk and predictable nature of an endowment plan makes it particularly suited as a way to save for your children’s future.
The estimated costs of raising a child hold the assumption that your child is healthy.
But what if they’re not?
That’s where health insurance has a role to play. Of course, we all want our children to be healthy and well. But illness and medical conditions can arise, and getting medical help can be expensive.v
While MediSave does provide a safety net, it would be much more effective if you bought health insurance for your child. Children who are Singapore citizens are covered under MediShield Life but the coverage has limits.
Buying a private integrated plan for your child will provide more coverage, which means less out-of-pocket expenditure in the event that they fall ill and need to be hospitalised.
Getting health insurance for them while they’re young also has the advantage of guaranteeing their insurability, no matter what medical conditions may arise later in their life.