Today’s Motherhood

Question:

My daughter is been diagnosed with “Down’s Syndrome.” What is your financial advice for me to ensure that I have enough financial resources to provide for her after my spouse and I have passed on?

MSN (Mom with Special Needs)

Guru Foo:
I can understand the need for you to plan for your daughter. Many parents will be focusing on building up wealth to provide for their child with special needs, should their children outlive them.

There are 2 options that you can consider:

1st option (investment strategy)

This is the most common method.

For investment portfolio strategy, parents can choose to invest in a various mix of asset classes. From real estate, shares to unit trust. However, we cannot be making the right investment decision all the time. The timing of when parents choose to withdraw their investment, also determine the amount left for their child because of market condition.

2nd Option (Insurance proceed strategy)

This strategy is considered simpler. Parent’s can simply insure their own lives, so that when they passed on. The amount from their insurance proceed will be given to their beneficiaries. The only drawback, is the commitment to the insurance premium.

Creating a Trust

Consider using a Trust company to manage your funds, after you had passed on. A Trust company is a corporation who administers financial assets on behalf of another.

There are private companies who provide such services and our government also help set up a Trust company, specially just for parents who has the intend to provide financial assistance to their children. For more info: http://www.specialneedstrust.org.sg

When creating a Trust, parent’s should be mindful of the various cost of setting up a Trust. The higher the cost, the faster your funds will be depleted. If you do not need a very complicated Trust. You can use your existing or any future insurance policies to set up a simple Insurance Trust. It is of no cost; however, you will need to find a Trustee who, you believe can fulfill your wishes, unlike a Trust company who manages your funds as part of the company’s services.

For creation of Insurance Trust, go to Life Insurance Association Singapore (LIA) for more info: http://www.lia.org.sg

Which Strategy Should I Choose?

You should consider both as an option. Have a balance view. You may wish to mix both strategy together, taking advantage of the market condition (Strategy 1) and the advantage of creating a tax free and worry free estate (Strategy 2) for your love ones.

Do you have question for our experts? If you have, please go to our Ask The Experts section for financial advice.

Dear Gurus,

I understand that children get hospitalized often when they are young. I’m thinking if I should get hospitalization insurance plans for them, since I have the option to extend my company group insurance to my family.

Angeline, 28

Guru Foo:

Angeline, it is wise of you to know that the probability of children getting hospitalized in their younger days are higher. It’s just like how I will advise my clients: “Which will you rather pay? Insurance premium or hospital bills?”

It is wise of you to opt for your company group insurance extended to your family as you can enjoy coverage at a group rate. Do find out if your company hospitalization insurance is portable. If it is non-portable, it means that you and your family will not able to enjoy the coverage once you leave your company and by then, some of you and your family may have experienced changes in your health and will become not insurable.

If it is non portable, do consider taking up some form of individual insurance coverage.

Guru Ed:

As Guru Foo has mentioned, having a portable insurance is more important than an affordable insurance, because if it is not portable, it only gives you a sense of false security that you are protected. But once you are not the employee of the company, all your coverage is lost.

Since the liberalization of our Medisave account in Singapore, many insurers are providing child hospitalization insurance plans at an affordable premium payable via Medisave. One of the insurers even provide free coverage till the child turns 20. All the insurers have the option to add a rider payable by cash if you feel that the basic plan is insufficient. It is important that you have a comprehensive and portable medical plan that you truly own.

Do you have any questions on finance or insurance for our experts? If you have, please go to our Ask The Experts section for financial advise.

Question:
How can I teach my children to be prudent about money?

Mummy knows Best

Answers:

Guru Ed:
Thank you for asking! It’s my area of expertise! Having 3 young children of my own, it has always be an area of concern for me.

Firstly, for some saving money tips, take them to a bank to open their own savings account.

Secondly, ensure you bring them to a place to choose their own “piggy bank” to ensure that they have an ownership.

Lastly, lead by example, make sure you as a parent also save at least 10% of your income, showing them that you can save too!

Guru Foo:
If your children is of a very young age whereby “money” is nothing has no meaning to them, then , you may wish to consider what Guru Ed has suggested. Inculcate to them, the value of money by starting a saving habit.

If your children already have the ability to count their money, then you may want to start them off with a budget.

On top of that, you can also consider teaching them about making money, for example, making handy crafts to sell to make some pocket money for themselves.

With the money, perhaps you can teach them about value of money, like giving it to charity to help others in need or to save it to buy things that they want rather than to ask for it. Earn it, not ask it.

Do you any questions on finance for our experts? If you have, we welcome you to go to our Financial Expert section to submit your questions.

Question:

Dear Money Gurus, I’m a mother of another new born. Currently, my insurance advisor is telling me to start a Life Insurance plan for both of my boys. But since the birth of my new born, I do not have a lot of spare cash now. What are your advise?

Cashless Mom

Answers:

Guru Ed:
Congratulations! I can understand why you are at a cross road now. Money is never enough. Should you start a life insurance policy for your child? I will suggest that you may wish to consider a education endowment plan instead. Such plan will generate an average of 2.75% - 3% p.a of returns which is far better than to put it in the bank.

With a rider of waiver of premium, you can be assured of your little boys education, should any unforeseen circumstances happen to either of the parents. Budget within you r own means. Start small, rather than not to start at all.

Guru Foo:

Dear Cashless Mom, you are not alone in this situation. Many young parents do go through the same phase. May I ask what your priorities are for your children? Providing coverage for them while they are young or building up their education funds?

Major mistake for parents is to start buying insurance policies for children, while neglecting their own coverage. Remember, parents are the money making machine. It should be protected 1st. Perhaps, you can start a simple SAVE-AS-YOU-EARN scheme, until you are comfortable with your finances, then you can consider to start either a life policy or saving plan, according to your priority then. The key is to start the habit of saving and protect the potential income of your family.

Go to Ask The Expert Section.

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