When a new bundle of joy is added to the family, new parents may feel overwhelmed and unsure whether they have all angles covered for their little one. Here is some helpful information about how to prepare for your child’s financial future.
All parents want the best for their children – healthy and nutritious food to nourish their growing bodies; top quality education to enrich their minds; fun and engaging toys to encourage their creativity; a safe and comfortable place for them to call home.
So it is also important for new parents to plan their child’s journey through life and be prepared for any unexpected bumps along the way.
If you have a new addition to your family and are wondering how to begin planning for your young family’s financial future, here is place to start: by learning what not to do. We share 5 money mistakes new parents make which you should be careful to avoid:
1. Not making use of grants given
Starting a family may come with a few expenses, so new parents should take advantage of all the grants given by the government to help ease financial costs of raising a child.
Singaporean babies can benefit from the Baby Bonus Scheme (which now includes a cash gift for all Singaporean children) and government matching savings into their Child Development Account (CDA) that can be used for their early education, medical bills, optical needs and other necessities from approved institutions.
Take time to read through the policies and create a plan for how you plan to use these grants and support from the government in your child’s development.
2. Overspending on unnecessary items
Okay, this can be hard for many of us, because there is always something just “so cute” or “so perfect” that we must have it for our little one.
But take a moment and think, do you or your baby really need that overpriced contraption to warm up wetwipes? Or that expensive diaper disposal unit which claims to stop odours? What about that well-known teether toy that is all the rage with celebrities?
There are some parents who find it hard to draw the line between necessities and novelty items for their little one. Don’t be one of those parents. Before buying those adorable shoes for your one week old baby who can’t even walk yet, it would be a good idea to ask around for a baby checklist from your experienced friends and family.
This will save you from overspending on unnecessary items and cluttering up your storage space in the long-run.
3. Not having life insurance for yourself
Thinking about your own death is not a happy proposition for anyone. But as a parent you need to ask yourself this “What If” question. You need to make sure that your family will be well taken care of and your child’s education and healthcare will continue even if you are no longer there to provide for it yourself.
Accidents may happen and it is only responsible that you take care to insure yourself so that your loved ones are provided for should the unfortunate were to occur.
Term plans are a fairly affordable way in which you can protect your family. How these plans work is that you first choose an amount that you want for your family – the Life Insurance Association of Singapore suggests 10 times your annual salary. Next, you choose the scenarios you want your family to be financially protected against, which are typically death, critical illness, terminal illness, and/or disability.
There are also some innovative variations available in the market these days. For example, Aviva has recently launched two term plans. One is MyFamilyCover which pays your family a monthly income, rather than a lump sum, so they do not have to worry about the payout running out prematurely. The other one worth mentioning is Aviva’s MyProtector-MoneyBack that actually refunds the premiums you have paid if you do not make a claim!
What other money mistakes do new parents tend to make? Read on to find out more.