Webinar: Family finances — sowing seeds for the future

About the session

Young Singaporean families have different personal finance considerations when it comes to managing downside risks and long term investment goals. Also, being time-strapped as corporate individuals, they have limited attention and energy to spend on researching and executing investment initiatives to better plan for family finances.

In this webinar, You Ning, Endowus Co-CEO and CFO, together with Dawn Fiona Cher, SG Budget Babe, talk about their changing priorities as they set their financial goals as young parents. They also share insights on how to maximise government grants for children, and how they execute their strategies despite their busy schedules — to invest for a better tomorrow.

3:02 Overview of topics

5:24 Protecting your financial downsides as a parent

10:04 Inflation risk as a financial downside

11:05 Financial goals as a parent

16:40 Dawn's money experience growing up

21:11 How much money do we need for retirement?

24:55 Being discerning about tips from forums and social media

35:30 Topping up your kids' Child Development Account (CDA) as a priority

37:05 Start investing early; how cost matters

40:48 Stock picking and active investing as a parent

47:08 Passive investing as a parent

51:02 Time in the market versus timing the market; diversification

58:20 Setting investment goals for children

1:05:22 Q&A

Excerpts from the webinar

Managing your financial downsides as a parent (5:24)

Dawn: The most important thing before any of you even start investing is to first take care of your downsides. If you do not clear off your debt, especially the high-interest debt like credit cards, and if you don't take care of your insurance, you might end up having to take out money from your investment portfolios in order to pay for expenses when unexpected events happen.

The way I approach insurance is basically to "outsource" the biggest financial risk that I wouldn't want to pay out of my own pocket. For me, that will include hospital bills, which can go up to, say, $20,000. So I make sure that not just my husband and I, but also our child and our parents, are covered. At the end of the day, we have to balance our funds to use to take care of ourselves, our parents, and our child.

Think about what insurance coverage is necessary for your family — look at what you can "outsource" to an insurer. Of course, also make sure that the insurance premiums are affordable for you, because "outsourcing" such risks would also come with fees. Personally, we didn't opt for term life insurance for our child because we didn't feel it's necessary. But that may be important to some folks depending on your circumstances, so please speak to your financial advisor about that.

Having an emergency fund (7:33)

Dawn: With Covid-19, we saw that many people and businesses did not actually maintain an emergency fund. But you never know what might happen — for example, if you're laid off from your job or have to take a pay cut, you could suddenly get a burst pipe in your home and have to pay for repairs, or your fridge breaks down and you must get a new one. Without an emergency fund to fall back on, you could end up drawing down from your investments, and that may be at a time when markets are performing poorly.

You Ning: How do you think about how much rainy-day money to set aside?

Dawn: It really depends on each person's expenses. The general consensus is to save about six to 12 months of your salary or living expenses. For myself, we set aside enough money for 1 year because we have more liabilities to consider, given that my husband and I have seven dependants in total.

You Ning: I think six to nine months would be a good number for most people. For me, I'm quite fortunate to not have to take care of my parents so it's just my immediate family, and both my wife and I work. Thinking about the number of people you have to take care of and your recurring expenses, would be a good framework to decide on the size of your emergency fund.

Topping up your kids' CDA as a priority (35:30)

The Child Development Account (CDA) is a special savings account for Singaporean children. You will have up to 12 years to save in your child's CDA, and the government will match your savings in the account within two weeks.

Dawn: The very first thing you should do as a parent, if you can afford it, is to top up your kids' CDA. We're very lucky in Singapore because the government does dollar-for-dollar matching. For me, I've used the baby bonus to top up my child's account so we got the maximum $3,000, and right now in his CDA there is already $9,000 plus (including interest). That's the first best thing you can do for your child, and the easiest, lowest-hanging fruit. I topped it up as early as possible because I want to let the money compound more quickly with interest.

Setting investment goals for children (58:20)

You Ning: I wanted to start investing early for my kids because of the power of compounding. Endowus allows you to set up multiple goals, for example one for retirement and one for buying a house in the next five years. I set up two additional goals for my kids (for their college funds), with 100% stock portfolios, and basically every month I put aside a few hundred dollars into the goals via automatic transfer from my bank account. Personally, I'm happy to tolerate the volatility because we won't be touching the money, and every month until my kids are old enough for university the money will compound and earn market returns. Hopefully by the time they're old enough to go to university, start a business, or follow their passion, they have enough financial resources to do that.

Dawn: When investing, you will need to understand what your preferred approach is. If you feel you're not the best at stock-picking and you don't have the time and energy to identify investment opportunities, you can ride on the shoulders of giants and "outsource" your investments to someone else to manage it for you at a low cost. In that case, the passive approach might make more sense for you, rather than active investing.

The first questions to ask yourself are: What is your goal, and how much time and effort are you willing and able to put in? How much do you know about investing? If your answer is: "I don't know much", or "I'm very busy and have no time", then I would suggest that you read up a little more and potentially consider the passive approach. At the end of the day, it has to work for you.

To find out more about financial planning strategies for new parents, refer to this article.

To get started with Endowus, click here.

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