How Much Should I set aside for my kids?

As a parent, my key responsibility to my kids is to provide them till they are big enough to fend for themselves. This would include a roof over their head, necessities and a typical education (i.e. primary/ secondary school and local tertiary education), medical when needed. Whether I will leave them a legacy when they are big enough is not my responsibility. If I've taught them well enough and done my part, they should have the skills to survive and adapt to however the circumstance is when they are adults.

Hence, when we plan for our kids, we look at looking after them till an age of 25. Why 25? Most of my kids are boys. And there's national service, which adds 2 years before they could complete their tertiary education. Hence, assuming the JC route, plus 4 years of University, that would be up till age 25. With my youngest being 2 this year, I'll need to ensure they are cared for till 2044.

What if I'm not there? 

Then at least, I must make sure there's enough finances to help them through their childhood till age 25.

These are the things I look at: 

- home

- expenses (to live and to be educated)

-  medical needs

Home is taken care of with Home Protection scheme (HPS). 

We buy medical insurance to take care of the big ticket medical stuff. 

Then there are expenses to live and be educated. To do such an exercise, we made a very rough estimate that in 2021, each child needs $2000, or $6000 in total per month.  We'll support them all till 2044, and assuming inflation/ increase in expense per year is 3%. With that, we sum up all the total amount of money needed to reach this amount.

Year	monthly expense	annual expense	Amount needed
2021	$6,000.00	$72,000.00	$2,478,705.86
2022	$6,180.00	$74,160.00	$2,406,705.86
2023	$6,365.40	$76,384.80	$2,332,545.86
2024	$6,556.36	$78,676.34	$2,256,161.06
2025	$6,753.05	$81,036.63	$2,177,484.71
2026	$6,955.64	$83,467.73	$2,096,448.08
2027	$7,164.31	$85,971.77	$2,012,980.34
2028	$7,379.24	$88,550.92	$1,927,008.58
2029	$7,600.62	$91,207.45	$1,838,457.66
2030	$7,828.64	$93,943.67	$1,747,250.21
2031	$8,063.50	$96,761.98	$1,653,306.55
2032	$8,305.40	$99,664.84	$1,556,544.57
2033	$8,554.57	$102,654.78	$1,456,879.73
2034	$8,811.20	$105,734.43	$1,354,224.94
2035	$9,075.54	$108,906.46	$1,248,490.52
2036	$9,347.80	$112,173.65	$1,139,584.06
2037	$9,628.24	$115,538.86	$1,027,410.40
2038	$9,917.09	$119,005.03	$911,871.54
2039	$10,214.60	$122,575.18	$792,866.51
2040	$10,521.04	$126,252.44	$670,291.33
2041	$10,836.67	$130,040.01	$544,038.89
2042	$11,161.77	$133,941.21	$413,998.88
2043	$11,496.62	$137,959.45	$280,057.67
2044	$11,841.52	$142,098.23	$142,098.23

As of 2021, I'll need to set aside close to $2.5 million for the kids. Well, me and my partner don't have this amount with us. To achieve this amount, my partner and I buy life insurance to help cover the shortfall. To get the most coverage for the least cost, we chose term life insurance.

Scoring Quick Wins in Reducing Expenses

I shared  my monthly expense here, and one of the reason for looking at expenses is to see if there are any quick ways to minimize them. 

The best way is minimize recurring cost.

One of the items that my partner and I were looking at is mortgage. And seems like now is a good time to look at mortgages since interest rates are rock bottom, and I've just received an email from the bank about repricing. As a side note, 2 years back when I was doing a refinance, I thought interest rate was rock bottom at about 1.8%. Today, interest rate has fallen even more, and we are getting a new interest rate at a low 1+% interest rate. It's a no- brainer to do a repricing or refinancing. 

We only checked with 1 other bank, and the rates are about the same, so I would really prefer a repricing rather than a refinance. The bank also waived the repricing fees (subjected to some terms of course). You can read more about the differences between refinancing vs repricing of housing loan here.  We needed a clause to waive penalties if we sell within the lock-in period, as we might move one day (not bound by minimum occupation period any more LOL), which the bank include in the agreement. 

Repricing was really hassle-free. No visit to the conveyancing lawyer, unlike the previous time when we did a refinancing. No need someone to come to my place and do a valuation. After agreeing on the terms, and reading the agreement, we only need to login and click to accept the repricing and we are DONE. 

When the new rates kick in, we would start saving a low few hundreds off our mortgage, without cutting back on life. 

Nice.

We Spend Way above the basic standard of living. How Luxurious' our life?

In October 2021, a study was done by National University of Singapore Lee Kuan Yew School of Public Policy (LKYSPP) and Nanyang Technological University (NTU) which found that in a family of family of four, with parents, a pre-teen and a teenager, needs at least $6,426 a month to afford a basic standard of living. You can read more about the article here.

I did a short study on my own household to see whether my family is spending above or below this $6426. My family is quite different from this case study. We have one more person, and the kids' demographics (currently all preschoolers) are different. Also, there are a few differing categories that we have. But I still feel it is a way to see how we fare against this "basic standard of living".

We are definitely not living any luxurious life, but the expenditure is way, way, way above  this basic standard of living. 

Our Monthly Expenses in detail

Here's a breakdown of our expenses:

Annual Fixed Expenses ($5090 per year or $1922.50 per month)

Insurance (per annum) - $ 5000 (or $417 per month for 5)

Property tax (per annum) - $90 (or $7.50 per month)

Income tax (per annum) - about $18000 for the 2 adults  

Monthly Fixed ($7555.90)

Mortgage - $2400

Broadband - $39.90

Mobile plan - $16 (me and my partner. Use RedOne Amazing 8. It's amazingly just $8 per month per line.)

Parents allowances (4 pax) -$2800

School fees - $1500 (childcare for 3)

Enrichment - $800 (for 2 kids. Note: one is still too small)

Monthly Variable ($2690)

Groceries and food - $500

Milk/ Coffee/ Beverages - $100

Diaper and wet wipes - $80, typical Drypers from Qoo10 (affiliate link) and cheap wet wipes at just $12.90 for 10 packets

Utilities - $160

Transport -  $80 ( public), $1300 (car)

Snacks/ discretionary food expenditure - $100

Toiletries/ detergents/ etc. - $40

Entertainment - $30

Allowance for repair/ others - $300 

Total - $12,168.40

This is way, way, way, way above the basic standard of living, 

How Luxurious is my life then?

I have a car, which my partner bought. I guess its a great luxury, considering the cost of public transport a month is about $80 if I go fully public, and kids below 7 (prior to primary 1) ride free. The cost of a car including mortgages, petrol, insurance and maintenance is so many times more expensive!

But, apart from that, my feel my life is plain standard.

I live in a HDB flat. A typical 4 room flat of 93 square metres- not luxurious.

I eat mostly at home, with occasional hawker food. And restaurants are once in a blue moon - during celebration. I've eaten enough restaurant food while travelling for work and don't have great desire for them. 

Every other stuff that I spend on are quite ordinary. 

My partner and I don't fancy any type of entertainment, except for reading books  on Libby and watching Youtube videos, Disney+,  and occasional snacks such as eating potato chips while reading or watching. We do go cycling on and off on our cheap bicycle (about $80 each bought from taobao). 

Comparing against benchmark is a good exercise. At least I know I'm spending way too much. Note to myself to optimize my spending. 

Oh my gosh, why am I spending way above standard amount when I'm living a standard life. 

OCBC 360 vs UOB One account - Are you still optimizing these accounts?

OCBC 360 and UOB One have have changed their interest rates, and the requirement to meet maximum interest for quite a number of time since I've signed up on them. Honestly, I have lost track of what's required of me until recently. 

I got charged an annual fee for OCBC  Plus! Visa credit card recently. Like everyone, I immediately  tried to apply for waiver. I tried online and was  immediately rejected, so I tried via phone and was rejected as well. The automated call also advise me that it will not be reviewed.

So...

I called up the bank to ask why. And I did. And I realize why... I didn't meet the annual minimum spend. Turns out, I need to spend $2500 per year for the annual fee to be waived.  So I requested to cancel the card, and the annual fee will not be charged if I cancel. Of course I cancelled it. And, I have no more credit card with OCBC.

Do I need a new credit card with OCBC? I took a look at OCBC 360 account and realized credit card spend is no longer a requirement for higher interest. YEAH - though I realized the interest had dropped quite a lot since I last saw it. Anyways, since I credit my salary, which also result in an increase in balance of more than $500 each month in that account, I'll get about 0.98% p.a for the first $75000 according to this website.  This yield more interest than the recent Singapore Saving Bonds' interest (if you consider the first 6 years).

Then I went to check my main credit card - UOB One. I consolidated most of my spend on the UOB One credit card as I wanted to get my UOB One interest and the cashback. I recalled (in my memory) that the $500 minimum spend was the first requirement for higher interest, which was why I spent more on that card. This still remains - see here for detail.  I also made 3 giro applications with UOB One, so I got an EIR of 1% for the first $75000 for now. 

Will I go an extra mile for this interest? If the interest is 3%, maybe I will. But at the current interest rate, the bank account is just something for me to park my spare cash. I won't try to meet minimum spend on my credit card as well unless I'm just close to $500. If you get at most $75 per month of interest, you don't need to spend more than that right? 

The interest amount is a good to have. But at my current stage of life, they don't change my life enough to make me spend time and effort on this. 

I wonder when I will check the interest rates of these accounts again. 

It's Friday. 

Have a good weekend.

This is more important than cost, location when buying a BTO

Buying a home is a big purchase. Most people talk about location, mortgages, prices and so on when purchasing a BTO. But after applying for one, getting it, and forgoing it during the wait, I can be certain that locations, prices and so on aren't the key factors.

I applied for a BTO and got to select one many many years back. It was those days when BTO just took about 3 years, but the one that we end up choosing had a 5- 6 year timeline because of its height and also location. In terms of the BTO that we had gotten (and of course forgone years back), it was great. Location - checked. Price - perfect (you can't get a 5- room flat any cheaper in that location than a BTO. LOL), Facing - perfect (no west sun, and so on).  

So what? How perfect it was in price, location, facing and so on, I didn't get it at the end of the day. 

The timeline didn't fit my life and after a few years o waiting, I was seriously not going to waste my time waiting for it. I have a plan, and that home that I bought doesn't fit my plan. 

For those who think that living with parents/ in-laws is okay, consider seriously whether when you have kids in tow, can you all still live peacefully under one roof. If you have kids during this period, is there space to house a helper (or even a confinement nanny) if you bunk in in others' home?

For those that are thinking of renting, why not get a resale flat now? Anyway, if the BTO has a 5-6 year timeline, you would have completed the MOP by then. And if you are still eligible to buy a BTO by then, then sell your resale flat. You could potentially have negative or near zero rent if you manage to sell at (or above) the price you buy at (adding in interest rate and renovation). Maybe still cheaper than renting. (I'm not property expert, so please don't take my word for it. Do your own research. )

I find it funny that many people revolve their plans around the timeline of the BTO flat. (I was one funny person anyway). But seriously, you have your own life, which you should plan based on your goals in life, not the timeline of your BTO that you happen to get. You choose something that follow your timeline.

 

At the end of the day, you can buy a car to make up for the location.   

You can earn more to make up for the cost (of course choose something within your budget).

In short, you can always earn back the money that you spent.

 

But...

You can never earn back TIME.

She Got A Paycut taking childcare leave

It's first April, but this is no April fool joke. My friend recently shared with me the Paycut she was subjected to when she took childcare leave.

For parents of Singapore citizen, you get 6 days ( per parent) if your child is less than 7 years old and you have worked with your employer for at least 3 continuous months. If your youngest child is between 7 to 12  years old, you get 2  days per parent. More information, see the official website from Ministry of Manpower here.

As typical corporate warrior, my friend takes childcare leave before annual leave. Well, childcare leave cannot be brought over to next year and cannot be encashed ( if your company allows encashment of leave). So as usual, she took her childcare leave first before annual leave.

However, last month, she noticed that her pay was cut... 

Well, her pay was cut not because of her company, not because of anything that she did at work. Rather it was because...

Of another clause in childcare leave. If you have 6 days of childcare leave per year, the employer pays for the first  days. For the next three days, your employer will get reimbursed by the government. 

If you were to look at MOM website on childcare leave, you will notice that for each day, payment is capped at $500 per day including CPF contribution. 

She earns more than $500 per day, hence this explains the pay cut when she took her childcare leave. When I asked her why did she take so long to find out about this, and she mentioned that she was not subjected to this cut in her previous company. To be fair, for the first 3 days of her childcare leave, her employer paid the full amount. It was from the fourth to sixth day( when the company claims from MOM) is she them subjected to the pay cut.

This reimbursement from MOM is done by the employer ( usually HR) behind the scene. Apparently most employers just pay the difference. But there are some that pay the exact amount they get from MOM. 

So, if you are a high income earners, and took all your childcare leave without any paycut, thank the government and your employer for the last 3 days of your childcare leave.

Have a great day!

Fourth Child ?

My youngest turned one a few months back. As I see how his elder brother and sister enjoy playing and being his leader ( I simply mean bossing him around), I thought for a moment whether it would be great for him to have another sibling.

This was a a decision that I made for my eldest and second one. And the decision came easily then. 

But for this time round I was hesitant.

True enough the baby bonus, and CDA benefits are great for 4th child. Though there will be no additional tax benefit for me since I hit the limit. But, these benefits to me, are ' side effects' to my decision. They are never part of my decision.

During the pandemic, I got lots of time with the kids. But I also realized it was just tough to give all of them attention at the same time. My kids learnt less than I could teach if there were fewer kids, and I spent less time due to significant distraction by another ( e.g. diaper change, or just another kid making too much noise, etc.). To me, more kids would be sacrificing the current attention that I can give to any one.

I am getting old. When the kids are at home, whole day, I am exhausted by afternoon. Cannot imagine having more kids.

Another big consideration I have is space. Everyone needs space. Currently all my 3 kids share a single room. And there was once my daughter mentioned that she likes to be home when the brothers are away, as at least, she can play her own toys ( without them being snatched away suddenly). The time will come when the 2 boys want their own space too. I am considering a home with 4 bedrooms. Most new 5 room hdb flat just don't have 4 true blue bedrooms. The 4th room in a five room flat is just an extension of the living room. Perhaps it is big enough for a table but not for a bed with table and storage space. I looked at some condos, but the price for 4 bedroom is out of range for me. What's more, the living space is small. To me, moving to a condo is considered a downgrade if I have to forgo space. The swimming pool, the garden at the condo are  places that belong to just me. While there will be less people competing for such space compared to the public park or pool,  it is not my space.

 I looked at landed and cluster houses too. They are big enough. Now it becomes, whether I want to trade my freedom ( to be able to quit my job when I feel like it) for more physical space. 

Next factor is also related to space. But now it is car space. My sedan can only fit 5. Having more kids would mean a change in car ( or not having it). Not something that I would want to I'm the near future...

So, I guess I will stop at 3.

Main factors that made this decision was space and time.