With proper planning, helping your ageing parents shouldn’t put a strain on your own finances.
A lot of personal finance advice revolves around how to prepare for your retirement. However, thinking about your parents’ retirement should also be a part of your long-term financial planning. If an emergency happens and your parents’ CPF proves to be insufficient, you and your siblings need to be their financial safety net. The last thing you want is to dig into your savings or take out loans to do so.
With the right planning, helping your ageing parents shouldn’t put a strain on your own finances. Here are some easy ways for you to provide financial support to your parents without going broke.
1. Early Preparation
Preparing for your parents’ retirement is a cooperative effort, which means you have to sit down and discuss what needs to be done. Your parents must understand that while you want to give support, they too have to play their part.
If you can afford it, taking out an endowment plan for them could accelerate the growth of their retirement fund. Over 10 to 20 years, compounding returns from an endowment policy can provide a lump sum that will supplement their CPF.
In the event that they are forced to retire early (e.g. retrenchment), this can double as an emergency fund. Alternatively, if things go well, it can allow them to retire early by choice.
Preparation is not only limited to making sure that their bank account is healthy. You can also keep your parents active and in good health, by getting them services such as gym memberships, enrolment in healthy lifestyle programmes, etc.
Medical complications, such as cancer, diabetes, heart disease, etc. are some of the greatest challenges to any retirement plan.
2. Split the Bill
They say it takes a village to raise a child, but the same could be said about taking care of your parents.
For those of you with siblings, work out a way to share the financial responsibility. This is not simply about being fair: if one party bears all the responsibility, any adversity affecting that party will also shut down your parents’ financial lifeline. By spreading the burden, you reduce the risks faced by your parents.
Move into these responsibilities at a gradual pace. Not many 20-year-olds can immediately jump in and take over the mortgage.
For those of you just starting out at work, take over the weekly grocery shopping or the monthly utility bills. If you have more to spare, you could top up your parents’ CPF so that they are able to reach the minimum retirement sum (around S$160,000).
Once your income is high enough, consider helping with a portion of the mortgage repayments. This doubles as a way to learn how mortgages work, and about strategies such as refinancing.
By taking over their regular payments, not only are you extending their savings but your working parents could also divert more to their retirement fund.
3. Proper Insurance Coverage
Accidents are inevitable, and you need to reduce the financial strain of these unfortunate events as much as possible. One way is by getting adequate insurance coverage for your parents.
If your parents are in good health, then count your blessings and take advantage of that situation: buy an adequate policy now, because having pre-existing illnesses will raise the premium rates later.
Children can also take over the liabilities of their parents’ Medishield Life premium payments (contact the CPF board for more details). You should do this if your parents are no longer working.
It might be prudent to consider Critical Illness coverage beyond basic hospitalisation coverage, as this would allow you to pay off for prescription medication and alternative treatments.
Also, there are insurance packages designed specifically for the elderly. For example, NTUC Silvercare Insurance is made for those above 50. Not only does it cover medical and home care; in case of an accident, it provides for rehabilitation and caregiver services.
4. Take Advantage of Discounts
Financial help doesn’t always mean that you have to provide for your parents out of your pocket. There are many schemes and discounts that cater for the elderly, and your parents can enjoy a lot of savings from their daily expenses.
Once your parents reach their 60th birthdays, they are eligible for senior citizen concession that allows for discounted prices on buses, MRT and LRT rides. Aside from cheaper transport, cardholders can enjoy 2% off their total bill at NTUC Fairprice on Tuesdays. Some retailers just provide a discount for being a senior citizen. Giant provides a 3% discount on Tuesday as long as you are over 60.
Ensure that your elderly parents are aware of these discounts. While authorities make efforts to inform them, there are still cases of senior citizens who do not retrieve the information (or necessary cards) from the mail. And if they get the grandchildren to run down to the store for them, they might be paying full price.
Alternately, you can do the groceries with a cashback credit card and enjoy savings in the form of rebates. The Citi Cash Back Card, for example, gives 8% rebate on groceries, as well as petrol or dining.
Regular medical costs can put a large dent to your parent’s savings, but it doesn’t mean that you have to suffer the brunt of it. Medical and dental subsidies are now available for the Pioneer Generation regardless of monthly household income.
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By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.