With longer lifespans today, there is a good chance that most of us will outlive our savings. How can we ensure that we provide for our kids and have enough money post-retirement?
A recent AIA survey showed that young families today spend at least 2.5 times more on their children's needs than saving for retirement. The result is that one in two Singaporeans will likely be short of at least 14 years worth of funds when they reach retirement. Could that be your fate? Well, it doesn’t have to be.
Everyone talks about preparing early, saving more money and investing for higher returns. That was easy when I was in my 20s - check out how I managed to save $20,000 in a year back then. But now, as a parent, I constantly wonder how we can balance our retirement goals with raising our children.
Of course, one way to do so is to avoid overspending on the stuff that you buy for your children. When it comes to toys, for instance, there’s absolutely nothing wrong with choosing cheaper ones instead of paying hundreds of dollars for wooden Montessori toys. My parents never bought me any of those, and I grew up just fine playing with cheap plastic toys.
As a mother of two young boys under three, the bulk of my expenses goes towards baby necessities such as formula milk, food, clothes and diapers. We also hire a domestic helper to assist us with taking care of our kids while we work, so that’s another S$1,000 a month inclusive of taxes, her meals, medical check-ups and the like. There’s hardly anything I can cut from that budget.
When it comes to education, we do not believe in sending our children to branded childcare centres, where fees easily go beyond S$2,000 a month. My older son attends My First Skool (which is incredibly affordable and has great teachers) as well as Heguru classes on weekends (which I credit for his superb memory). Unlike some of his peers, we’ve yet to start sending him for swimming or even piano classes. Even so, these alone already add up to another S$800 a month, and it is difficult for me to reduce those expenses any further.
It is easy to think that you just need to cut down your expenses on your kids, and save that money for your retirement. Just differentiate between needs and wants, right?
But life isn’t always that straightforward and, as parents, we often end up spending quite a sum on needs rather than wants.
You see, my husband and I may spend less on childcare compared to some of our friends, but we ended up needing to spend extra money on speech therapy for our son instead (after the doctors at KK Hospital assessed him to be developmentally slower than his peers).
On top of that, my second son may need surgery next year, and the doctor estimated it could cost us S$25,000.
Even local influencer Melissa Koh was taken by surprise when her second baby was born with a heart condition, and needed an operation shortly after he was born.
My friend’s daughter was diagnosed with cancer at a young age, and they had to spend money on her medical bills and chemotherapy treatments.
Parents with older children can easily spend more than S$2,000 a month on private tuition, especially if their child is academically weak in more than one subject.
You get the gist.
Saving money is not as easy as simply replacing wooden Montessori toys with cheap plastic ones.
After all, how much can you save when you go for cheaper clothes, toys or books?
Probably a few hundred dollars, at most.
Will that be enough for your retirement?
If you do nothing with these savings, then even your best efforts to cut down your expenses and save money will barely be sufficient for your retirement years.
But by investing and growing your savings, you might just be able to retire well.
In my household, we invest in stocks and cryptocurrencies in order to grow our money, so that we will have enough by the time we retire. Of course, I’ll admit that doing so takes up considerable time and energy, which not every parent may have.
No time to invest? Not to worry, as there are passive instruments you can explore.
For instance, simply dollar-cost averaging into a broad-based market fund can yield decent gains over the long run. If you had started 20 years ago, the S&P 500 alone would have given you 8% p.a. by now.
Some others choose to invest via robo-advisors, where they automate monthly capital injections to fund their portfolio of ETFs without having to manually purchase the underlying ETFs themselves.
There are many different ways to invest.
At the end of the day, I believe that we can be good parents without having to spend too much money, but at the same time, I will not hesitate to spend on something if my child needs it.
As we strike a balance between spending on our kids and saving for retirement, I know that our future financial security will be built on our investments and not our savings.
With longer lifespans today, there is now a good chance that most of us will outlive our savings.
That’s why we have to start preparing now, so that our children – whom we love with all our hearts – will not have to struggle with supporting us financially in our silver years.
Read these next:
5 Steps to Reaching Your Financial Goals
How Much Savings Should I Have At 35 In Singapore?
Beginner’s Guide To CPF Retirement Sums And How To Get There (2021)
7 Investments You Can Make Under The CPF Investment Scheme (CPFIS)
Guide To Singapore Savings Bond (SSB): Is This The Right Investment For You?
‘Why I’m Not Saving Up For My Kids’ University Fund’
Parental Monthly Allowance: How Much Is Enough and Fair?
How To Survive Your Overseas Exchange Programme Without Going Broke
Are Your Ageing Parents Ready For Retirement?
Retirement Planning: It’s For Your Kids Too
‘Want To Be Financially Free? Start Planning For Retirement As Soon As You Start Work’
Parents Don’t Have A Retirement Plan? Here’s How You Can Help
Joanne Peh Shares Travel Tips After Family Holiday Nightmare