Buying a piggy bank for your kid might be cute and all, but we sure hope it’s not the first money issue you decide to tackle after welcoming a newborn into your home.
If you just became a first-time parent, know that your financial life is about to change drastically. And no, we’re not talking about the fact that you need to buy cutesy outfits for your new baby.
Fail to pay attention to the following money issues early on and you could find yourself headed for a worse disaster than Junior flunking the PSLE.
Review your insurance coverage
Insurance tends to be the sort of thing you can do a lot of research about at the start, and then rest easy for a couple of years before it comes time to review your existing policies.
Well, when you welcome a baby into the family, that’s when it’s time to update your existing insurance coverage.
If you didn’t have a life insurance policy before because you didn’t have any dependents, that’s the first thing you should look into when you have a child. You also want to ensure your child obtains sufficient medical insurance—he might not exactly be at risk of dying of old age anytime soon, but stuff happens, and you want to ensure you’re not bankrupted should medical issues arise.
Pick a guardian and write a will
You might already have picked up matching outfits for you and your kid to wear in the first ten years of his or her life. But there’s no set-in-stone guarantee that you will be around. Your boss might finally drive you to your grave, or you might get murdered while crossing the border into JB for a massage.
Unlikely though the above scenarios might be, write a will detailing who will be your child’s guardian if you die, and providing for him or her financially.
It’s easy to overlook this when you have a spouse who you will assume will be there to look after your kid even if something were to happen to you, or take it for granted that the laws of intestacy will see to it that your money goes to your child. Don’t!
This is not something you should leave to chance just because you’re lazy.
Open a Child Development Account
Everybody in Singapore has heard of the Baby Bonus, but lots of people don’t know how it actually works. The money doesn’t just fall from the sky the second you give birth. You need to open a Child Development Account (CDA) and deposit money into it. The government will then match your savings dollar-for-dollar by crediting money into that same account, up to the maximum allowed for each child.
What this means is that you need to complete the paperwork to open a CDA account (you can start doing this 8 weeks before the birth of your child), and then start transferring money into it from your own savings. You can choose to open your CDA at DBS, OCBC or UOB. The banks differ in terms of the interest rates and benefits (such as discounts at certain retailers) they offer, so do your homework instead of signing up blindly for a random account.
Set up a regular savings plan for Junior
If you think the money in your CDA is going to provide for all your childrearing costs, you are sorely mistaken, unless you expect your kid to make his own money to buy toys or earn his keep on your family farm.
One of the biggest costs you’ll need to anticipate is the price of higher education, even if you believe your newborn baby is going to grow up to be a PSC scholar and have all his educational expenses paid for by the government.
Bear in mind that degrees at the local universities are getting quite expensive, and there’s a chance your child might go abroad for higher education.
Setting up a regular savings and/or investment plan for your kid can be a good idea. Some people choose to do so by purchasing endowment plans that will have them premiums in exchange for insurance cover and a cash payout after a number of years.
If you’re the sort of parent who’s at risk of accidentally losing Junior’s university fund to your mahjong kakis, the above product could be for you.
What financial preparations are you making/have you made for your first child? Tell us in the comments!
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