This post is to share with you 6 more advanced financial strategies as a new parent that I realise are seldom mentioned.
Strategy 1: Max out your child's CDA dollar-for-dollar matching
The Cash Gift by government will automatically be given to you. However, the CDA dollar-for-dollar matching requires you to firstly put in the amount before the matching amount comes in.
As shown above, the matching is different depending on your child order.
If this is your first child, it is $3,000 in matching.
If you do not have a lump sum to contribute in, at the very least contribute in a monthly fixed amount to work towards the maximum limits.
Have you decided on which CDA account to use?
If you haven't, check our post here!
Strategy 2: Top Up your child's CPF Medisave account
Before we start, do you know that ALL Singapore Children will be given up to $4,000 in medisave by the government? This amount is given automatically.
If your child is not a Singapore Citizen at birth, the grant amount will depend on the date that your child becomes a Singapore citizen.
The idea of topping up your child's medisave makes sense because it can also be used to pay for vaccinations in polyclinics and also various hospital treatments.
It can even be used to pay for medical insurance (Integrated shield plan) that you buy for him/her.
Furthermore, it has at least 4% p.a. interest!
Hence, if you have spare cash, top up now to enjoy compounding effect.
The current medisave cap which is basic healthcare sum (BHS) for 2019 is $57,200.
Strategy 3: Buy more life insurance for you and your spouse
You may have bought some life insurance when you without children.
Previously, if you were to be down with a critical illness, you needed a policy to provide for your expenses.
As your role expands to being a parent, your financial responsibilities have also increased correspondingly. You are your child's main source of financial support.
Now, your child' expenses and future education can also become jeopardised. If it is $2,000/month needed for 20years, this amount will easily be $500,000!
Hence, consider increasing your insurance coverage NOW. Your family's real insurance needs have changed.
Look to insure not only critical illness but also death coverage.
Strategy 4: Take Charge of Your CPF Distribution Now
Your CPF may be your most reliable asset for distribution upon your demise. It cannot be taken by your creditors (if you have) and it cannot be squandered off for anything else.
Do you know that Nomination of CPF is not compulsory but FREE.
Without 2 wiling guarantors, your CPF cannot be distributed if you have young children. Hence, without nomination you may incur additional cost, longer processing time (up to 3 years) and extra hassle.
The longer timeline is due to the court processes in determining entitlements to claim and the distribution process under the Intestacy Succession Act (ISA). Notwithstanding the withholding of your CPF, all other assets of yours will also be frozen till the probate process is completed.
These delays deprive your family the cashflow needed for expenses.
Hence, make your CPF nomination at the soonest. It cannot be distributed by a Will.
Strategy 5: Writing a Will and appoint a guardian
Besides nominating your CPF, having a Will written takes care of other assets and matters.
These include your house and bank accounts. Your insurance claims proceeds will also form part of your estate.
You can even leave instructions of how money will be spent. Like to use the term plan insurance payout for the mortgage loan specifically.
Your executor may not know what your insurance plan is for!
But even more important is an appointment of a guardian for your child
You may be wondering why this a legal guardian is needed for your child?
There was a major car accident in Malaysia during Christmas a few years back and both parents passed away leaving behind a young boy. This accident happened when we were starting TheAstuteParent webpage and left a deep impression in me. You can read up on this case with this link.
In the event both you and your spouse are not around anymore, the powers of a will can appoint a guardian for your children.
It is really important that your child is going to be taken care by someone you trust, don't you think so?
Strategy 6: Buying critical illness insurance for your child early
Insurance need NOT ONLY be on breadwinners to replace income.
If you get to know about sick children, you would know the sacrifice taken by the whole family.
Buying critical illness insurance for your child is important and it gets you a peace of mind.
And my suggestion for you is to do so as young as possible, the younger the lower the premium. It is also just in case your child gets any health conditions or major sicknesses along the way.
One strategy for critical illness insurance is to buy it through a "limited-pay wholelife plan". It is a plan that you can complete premiums and pass it free to your child when he/she grows up.
It is a plan that generates more value over time.... something that you can see as an asset.
These are my 6 more advanced strategies.
Which have you not implemented yet and found the most useful? I'd love to here from you.
Last updated on October 15th, 2019 at 12:33 am