When you start planning for a family or have a little one on the way, your priorities change. You start thinking about things that never crossed your mind prior to this important phase in your life.
A bigger home and car, daycare, preschools and primary schools, healthcare… these are only a few of the matters that may run through your mind.
With all these new and exciting considerations on the horizon, you will most certainly also need to re-think your finances. In this context, financial planning becomes important – and we at theAsianparent know this.
This is why theAsianparent Insights team spoke to Singaporean parents to find out exactly what they think about financial planning for kids and how they implement it.
Based on data collected from over 500 parents, The Kids Bright Future Report 2015 reflects the financial planning behaviour of parents in Singapore. These insights are great for savvy parents and parents-to-be looking to improve long-term systematic investment planning for their children.
Financial planning for the kids: nearly half of parents who get savings plans for their kids opt for educational plans as well.
Overall, nearly half of parents surveyed were astute financial planners, with 49% holding both a savings accounts and an education plan for their children. While 88% of Singaporean parents open savings accounts for their children, only 47% invest in an educational plan for them.
Parents are most concerned about financial planning for their kids in the first three years.
When do most parents start thinking about financial planning?
The study revealed that parents care most about financial planning when their kids are between 0-1 years of age. This concern tapers off when their kids turn eight. A whopping 67% of saving accounts opened and educational plans signed happen before the child turns one year old!
The 2-3 years age-group is also important as 24% of parents create a savings bank account and 21% opt for an educational fund during this time.
Expert advice: SAVE EARLY
Experts recommend that saving early will give you better returns in the long run. To understand this, look at the idea of compounding. The interest you earn can be added to the savings and you will get even more interest on it, and the faster would your investment multiply.
Singaporean parents’ top three banks for savings accounts and monthly savings for their children.
Factors to consider when choosing a savings account
Regarding savings accounts, 71% of parents found good interest rates to be the key factor in their decision.
This is why OCBC, the #1 preferred bank for savings accounts among the surveyed Singaporean parents, has been running the OCBC Mighty Savers®Programme for over 9 years! This programme teaches kids the importance of saving and pays up to 0.80% p.a. interest instead of the standard 0.05% p.a.! All you need to do is deposit a minimum of $50 per month into the OCBC Monthly Savings Accounts held jointly between you and your child, not make any withdrawals in the same month and maintain a CDA account with the bank.
And how much do parents usually put into these accounts? Almost half of the parents surveyed save less than $100 a month. 29% save between $101-200 per month. Very few parents save $201 and above.
With the OCBC Mighty Savers® Programme, your child can already get up to $9.50 in interest in a year even if you belong to the less than $100 a month group (assuming he saves $99 regularly each month for a year, with no withdrawals and is an OCBC CDA holder). This may not seem like much to you, but it’s definitely huge for your child and a great learning opportunity – Regular savings without withdrawing for a whole year would give him great returns!
Thus, a saving of $99 per month for just three months and made a withdrawal of $50 [at the end of the 3rd month] and continues to save and makes no withdrawal for the remaining 9 months, would give him an interest of $0.12 (at 0.05% p.a.). But when he saves for an entire year regularly without withdrawing, the interest earned is $9.50! (at 0.8% p.a.)
Other factors that go into choosing a savings account are:
- No monthly service charge (57%)
- No minimum initial deposit (47%)
- Free gift/promotional offer (43%)
- Ease of opening an account (39%)
Here’s another tip: look out for any hidden expenses, service fees or annual fees when you open up an account. After all, a penny saved is a penny earned. With the OCBC Mighty Savers® Programme, there is no initial deposit or a monthly balance to maintain. Your child will also get to track his transactions and account balance easily with a monthly e-statement.
Singaporean parents’ top three providers for educational plans and sources of information.
Factors to consider when choosing an educational plan
When choosing an education plan, 81% cited guaranteed maturity benefit as the key decider. Other factors to consider include:
- Good interest rates (70%)
- Duration of plan (52%)
- Low premium (42%)
- Cash benefits (31%)
These factors lead to OCBC to be the most preferred bank for both opening savings accounts and educational plans for their kids followed by POSB. DBS came in third for a savings account while Prudential came in third for an educational plan.
For more information on educational plans, 74% of parents turn to financial advisors/insurance agents, followed by:
- Family and friends’ recommendations (42%)
- Online reviews (25%)
- Brochures (19%)
Expert advice: DIVERSIFY
It is a good idea to diversify your investments for your kid’s financial future. Banks and financial institutions do that in a ‘low-risk-fair-returns’ way via Education plans. You should look at the maturity as well as the interest rate when you decide to take a plan. The plans should mature when you need the funds, say, for the college education.
Always read the fine script well before investing.
More about the OCBC Mighty Savers® Programme
OCBC has started this new initiative to inculcate the habit of saving in children since 9 years ago. There are many advantages of opening a joint OCBC Monthly Saving Account for children up to the age of 16. For a limited time, you could earn $25 as a cash gift when you deposit $50 every month for consecutive 6 months using GIRO. In addition, you earn attractive interest rates on the account.
On top of the 0.05% p.a. rate of interest, you can earn an additional 0.35% p.a. for the OCBC Monthly Saving Account when you deposit $50 every month without withdrawing any money. This will ensure that the account remains untouched for your kid to use. You earn additional 0.40% p.a. rate of interest when you hold an OCBC Child Development Account, bringing the total interest to 0.80% p.a.!
There are a host of other services like a priority queue for children at Sunday branches on Sundays and The Mighty Savers® Mobile Game app, all aimed at teaching your kids the importance of saving.
Find out more about the Mighty Savers® Programme and apply now to start teaching your child the importance of saving money!
We hope you have found these insights useful. Armed with this knowledge, you now know where you stand among financially savvy parents in Singapore, and can better plan for your family’s future.
Share with us what you do for your kids’ financial futures by posting a comment below!