Having children changes our lives forever, in ways big and small. Before the grand arrival of our bundle of joy, we mentally prepare ourselves for sleepless nights, a messy house – and an (incredible) rollercoaster ride! Our advice for mamas-to-be? Don’t sweat the small stuff!
What would be extremely beneficial though, is to get the big (and crucial) stuff sorted early on. Start financial planning early to align both your and your partner’s financial expectations and goals. We know it’s not as fun as choosing your nursery room colour, but trust us, you won’t regret planning ahead! According to a Prudential Relationship Index report, money and children were among the biggest sources of arguments amongst couples. Research also shows that financial planning supports sound money habits (talk about killing two birds with one stone!).
Financial Wellbeing: Part 3
Financial Planning for New Families
Whether you are considering expanding your clan, are currently pregnant, or have young children at home- read on for practical advice and answers on how to plan your finances by Julian Ng, the co-founder of Malaysia’s first homegrown robo-advisory platform, Akru.
With 50% of respondents in 2021 Malaysian Financial Literacy Survey admitting that they cannot survive more than 3 months with their savings, it’s a good idea to know how much money is needed to be set aside when (and if) you decide to have kids!
I am not sure if I am ready to have children. How will my budget change once I have kids, and how much do I need to set aside for each child?
Julian: Living expenses will definitely go up (for example: healthcare, food, clothing). Apart from that, there are the long-term educational needs. Not only will you have to pay for ongoing education according to age, but you will also have to save for further studies. Parents will also have to get life insurance, so that the kids can be financially supported if any breadwinner dies. In order to protect financial assets which support the family over the long-term, it’s also advisable to get health insurance for parents.
According to AIA, estimates reveal that the total cost of raising a child in Malaysia lies between RM 400,000 to a whopping RM 1.1 million, with the costs depending on various factors at different stages of life. We know that sounds overwhelming, so where should we start?
Julian suggests using budgeting apps, getting insurance, and goal setting with a robo-advisor to find out how much to save for longer-term purposes.
Raising kids can be expensive. How do I manage my finances with kids?
Julian: As having kids is a major financial decision, as well as an emotional one, we concur with makchic that family planning is important. Generally speaking, the fewer kids, the better the financial wellbeing. Of course, general wellbeing is the other part of the equation.
Husband and wife should divide income-earning responsibilities, taking care of kids and share wealth. Career and income potential are important to achieve financial wellbeing, while quality upbringing for the kids should never be ignored.
Expense budgeting is also important. You can use budgeting apps to track monthly expenses that would open up ideas as to how you spend (or should spend) for your current costs of living.
Buy health and life insurance for parent breadwinners and if possible, health insurance for children. However, insurance should be to cover serious illnesses. Don’t sweat the small illnesses, which you can just pay out of pocket.
Save for the long term for both parents’ retirement and children’s education. A goal-setting robo-advisor can help to clarify things. Put 3 to 6 months expenses as emergency funds in fixed deposits, or cash management accounts.
While it’s certainly nice to have options available for financing our children’s education (such as our government Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN)), we do need to be aware of the future repayment burden.
In 2018, unpaid student loans via the PTPTN amounted to RM39 billion, and in 2021, only 17.7% of borrowers were paying according to schedule. Julian shares ways on how to start early to reduce students’ future burden and reliance on such loans.
I want to save for my children’s education, but it seems impossible. Help!
Julian: That’s why budgeting is important.
An education goal, set up under a robo-advisor can tell you how much you need to save to provide for future educational needs. You provide today’s educational costs, and we inflate and recommend a savings plan for you. This also ties to what hopefully is your career advancement, which makes the savings more affordable.
The bad news: education inflation is very high. The good news: market returns are also high, there are cheaper alternatives like scholarships, cheaper countries, online courses etc. The face of jobs is changing profoundly. The current go-to courses might not be relevant in 10 to 15 years.
To hear from Julian himself on the topic of saving for your children’s education, check out the video below:
There are so many aspects of financial planning for a new family, such as figuring out the best ways to make your money grow, or having to manage existing money struggles. Check out these interrelated topics in our first and second instalment in our Financial Wellbeing sessions with Akru.
If you would also like to find out more tips on saving for your family, keep watching this space to catch our final session with Akru. Let’s start planning a financially secure future for the ones closest to our hearts, #makchicmumtribe!
This is a sponsored post by Akru.
Akru is Malaysia’s first homegrown robo-advisory platform, providing an always-on, easy-to-use product in your pocket, and empowering you to invest in diversified portfolios with exposure to global investments. If you are interested to know more about how Akru can help you begin your investment journey, sign up here.
Get RM20 in your account by using our MAKCHIC20 promo code when you start investing with Akru. Using this code helps support makchic.com. Disclaimer: makchic may earn a small commission through the referral link above, without additional cost to you.
