Tips for Juggling Retirement Planning and Spending on your kids
Raising children is an all-consuming endeavor. Other than making sure your child eats his vegetables and gets to school on time, you also have to think about whether he is able to perform acceptably at school, and worry about whether he will be able to cope with the high cost of living when he grows up. Beyond just coping, you want your child to succeed, and excel in life.
Parents in Singapore are willing to go to great lengths to secure their child’s future.
But what if this is done at the expenses of the parent's retirement goals?
In fact, in a recent survey by Nielsen commissioned by Income1, 21% of parents’ expenses are allocated to their children, with a large chunk (68%) of that spending being put towards education, tuition and enrichment.
While both saving for retirement and for children’s education and developmental needs are both top financial priorities for parents, the former was a higher priority at 86%, compared to the latter at 65%1. It is god to see that 81% of parents have started saving and planning for retirement1. Yet, only 6% were confident that they will be able to maintain their current lifestyle when they retire and have a comfortable retirement. This shows the great lengths parents will go to secure their child’s future - It takes top priority, even though they know the importance of both retirement planning and their child’s educational and developmental needs.
In order to fulfil your role as a parent as best you can, it is important to take care not only of your kids, but also yourself. You do not have to give up one for another. There are ways to balance both priorities. Here are some tips for juggling retirement planning and spending on your kids.
Think twice about whether your kids truly need that extra class
Some parents take a more-is-better approach when enrolling their children in tuition and enrichment classes. While well-intentioned, it is easy to see how this might not lead to the best situation for kids (as over-scheduling can lead to exhaustion and more stressed out children) or parents (as the cost of tuition and enrichment classes takes its toll on your wallet). When it comes to deciding whether or not to send your child for that extra tuition class, think twice about whether your child truly needs (and will appreciate) it.
There is a gap between how much parents spend on their children’s tuition and enrichment classes, and how much their children think they should be spending. The study found that a good 44% of child-related expenditure went towards tuition and enrichment. Meanwhile, youths felt their parents should only be allocating 17% to these classes1.
This gap indicates that parents could be more selective when enrolling their children in tuition and enrichment classes, not only in the number of classes kids are enrolled in, but also when choosing tuition or enrichment providers - the most expensive may not always be the best.
Lynn Yeo, a 34-year-old corporate communications manager, is one parent who doesn't believe in spending too much in this area. She does not have plans to enrol her 3-year-old daughter in any tuition and enrichment classes at the moment and maintains that it is important to consider her child’s interests and needs before doing so. At the moment, she does not think her child will need extra classes if her school is doing its job.
A similar approach is taken by Christine Yeo, a 40-year-old lawyer and mother of two sons aged 6 and 3. Her elder son is currently enrolled in Chinese speech and drama through his kindergarten’s vendor. “I consider largely the child’s inclination and interest before enrolling him in classes,” she says.
While her children are currently not enrolled in tuition, she says, “I might consider if my child’s school teacher tells me that he needs it”.
Consulting your child when selecting tuition and enrichment classes can be money and time-saving, as opposed to signing them up without taking their views into account. Money saved can then be put to better use elsewhere, such as for your own retirement needs.
Encourage your children to become more financially savvy and self-sufficient
Parents often focus on education as a key way to secure a bright future for their children.
But it is important to remember that good academic qualifications and a high-paying job do not guarantee financial savviness. A child who is aware of the importance of managing his finances is more likely to succeed, regardless of the amount he earns. It’s also a plus when a child is able to consider their parent’s financial position when making decisions, easing a load of potential financial stress.
Samuel Siew is one such example - The 24-year-old SMU student says, “I wanted to pursue my university education overseas, but I didn’t want my parents to be scrimping and saving here in Singapore to support my higher costs of living overseas.”
There are many ways to introduce your child to the world of personal finance and foster an attitude of self-sufficiency.
For Christine and her husband, the process of educating her children about personal finance has already begun.
“We teach them the habit of saving their money,” she says. “We reward them for helping out with the household chores, hence they learn that you’ve got to work for your own money. Every penny they earn is put into their personal coin box. If they want to buy a toy or something special, they need to use their money.”
34-year-old private tutor Betty Chen, who has two sons aged 3 years and 7 months, has many ideas for her children when they are older.
Like Christine, she does not believe in buying her children everything they ask for. Instead, she intends to encourage them to save up their pocket money, which they can then put towards buying things they desire. She is also a believer in introducing the concept of investing early on.
She, too, feels it is important her children understand that earning money takes effort. She intends to get them to help out with the chores at home in exchange for cash. Another idea she has is to “teach them where money comes from by sharing with them what papa and mama do to earn it.”
Focus on inexpensive ways to bond with your kids
Some parents choose to shower their children with lavish holidays, heaps of toys and the latest electronic gadgets in order to bond with them and reward them for studying hard.
However, giving your children the gift of your time and undivided attention, will do much more to strengthen the parent-child bond than the latest gaming console.
For Betty, regular visits to the library are an economical activity she and her sons look forward to. “We don’t buy books anymore!” she says. Other than the library, she also enjoys taking her children to neighbourhood playgrounds and making toys out of recyclable materials, which enables her to teach them craftwork at the same time.
Lynn and her daughter read together and indulge in episodes of Peppa Pig, while Christine enjoys taking her kids to the park for picnics.
As these parents have shown, there are many inexpensive ways to bond with your children that do not cost an arm and a leg.
Start planning for retirement early
Parents tend to de-prioritise their own needs when their children are younger, and slowly shift their focus back to their own needs when their children are older or have started working1. Many parents tend to have the perception that is it too early to think about retirement when their children are young, and that they can wait until their children are financially independent.
Of the three parents featured in this piece, only one has started planning for retirement.
The truth is, however, that the earlier one starts planning for retirement and investing in appropriate products, the higher one’s chances of success at enjoying a comfortable retirement.
Based on their projections of how much they will need in when they stop working, 80% of parents will not have enough savings to last through retirement1. The burden for financially supporting them is likely to fall on their children - 66% of youths had factored in the cost of looking after their retired parents.
A 2017 investment poll2 was equally pessimistic, with 64% of the Singaporeans surveyed worrying about their retirement savings running out before their death.
This does not bode well for parents or their children. Only 8% of youths were very confident that they will have the means to support their elderly parents financially, while as many as 70% were prepared to have to make sacrifices to their lifestyles in order to do so, such as by settling for a smaller home1.
48% forsaw having to put aside their personal hobbies and interests, while 44% expected to make job-related sacrifices, such as by working extra jobs or giving up overseas job opportunities1. 25% even thought that this will affect their marriage prospects1.
As parents, we work so hard to give our children the best future possible, often neglecting our own needs by prioritising theirs. However, by prioritising their needs above our own may cause our children more than what we think we’re giving. Start your retirement planning today, and empower your child to take freely take the steps he wants in the future.
One easy way to get started is to sign up for a good retirement plan that will help your money grow over the years. Learn more about how to plan your retirement as a parent today.
1The research was conducted by Nielsen and included quantitative and quality studies. It covered over 400 parents between 30 and 55 years old and some 200 youths between 19 and 25 years old.
This article is meant purely for informational purposes and should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income insurance advisor.
This advertisement has not been reviewed by the Monetary Authority of Singapore.