Education is one of the biggest expenses that a parent would have to prepare for. And it’s one that’s increasingly becoming more diverse, yet also more expensive. Here are some smart planning tips to ensure that you are prepared for your child’s future.
If you ask any parent, a good future for their child is what they’re working towards. With the continuous rise in expenses though, the task of providing top-notch education along with all the other necessities and simple luxuries in life, seems daunting.
Plus, there are so many things today that are done differently than when we were growing up. However, with proper planning, you can definitely prepare for your child’s uncertain tomorrow.
Here are five things you should do to secure your child’s future.
#1 Start saving early
It is a proven fact that you end up saving more if you start saving early, thanks to compound interest. As this saving is not for the day to day expense, you end up carrying it forward each year, along with the interest. This is the principle behind the compounding.
When this happens, you end up multiplying your savings much faster if you start early. It does not matter if initially your savings are meagre. The very act of putting aside the monies would add a lot of value in years to come.
#2 Save, then spend
This technique has been adopted by very successful people. As a rule of thumb, you should earmark around a third of your income after tax for saving. The remaining goes to the day-to-day expenses as well as occasional splurges.
However, if you spend first and then save, there is always going to be something that would come up, impacting your savings. So be wise and save first!
When you do spend, find out the most effective mode of payment. If you are buying school supplies, see if using any loyalty card or app will give you any kind of cashback. Similarly, use facilities like GIRO that would ensure that your monthly payments are made on time and you are not fined for anything missed.
Don’t forget to teach your child the power of savings by opening a kids saving account for him.
#3 Be clear about the objective of saving
When you are saving money, there are two things that are relevant – investment capital and time frame for investing.
Having just one savings account where you deposit all your money is not going to give you great returns in the long run. Each type of saving warrants a specific type of investment.
For example, when you are saving for your child’s education, look at educational plans. They are so designed that you have money whenever you need to pay fees at important milestones in your child’s life. POSB’s Education Planner is a good place to start.
When you are saving to earn extra income, you can look for more aggressive investment opportunities, depending on your time frame. If you are looking at investing in something for your retirement, you would want to be safer with your investments.
#4 Diversify your portfolio
There are many places where you can invest your money. These would have different rewards. But the risk also changes with the type of investment.
A lucrative looking investment scheme might be associated with a risk higher than what you are willing to take.
A good idea is to keep the important things safe and try and take risks to earn extra income. Hedging your portfolio is advisable especially when you want good returns with a relatively lower risk.
#5 Ensure that you insure
Insurance is a bet against the future. A good investor will ensure that he invests in a policy that gives him an endowment when he needs it and makes a provision for shocks in life. So, don’t forget to insure yourself as well as your spouse.
When it comes to our children’s future needs, it’s painful to tell them that we cannot afford opportunities they would like to seize. Granted, educational loans are readily available, but wouldn’t it be great if you could ensure that this loan amount is low?
To get a complimentary assessment of your financial needs as well as help in planning for your child, contact POSB today!