As a parent, you have some big decisions to make, so how do you make sure you don’t sell yourself short? SASHA GONZALES finds out what you must consider when you decide to upgrade, have baby No. 2, quit your job to be a stay-at-home mum, and more.
…HAVE ANOTHER CHILD?
You and your spouse might be ready to be parents again, but you should think about the sacrifices that you and your family would have to make.
Dr Lim Boon Leng, a psychiatrist at Dr BL Lim Centre For Psychological Wellness says you must be sure that you have the time and energy to devote to your new child, especially in the first few years of his life.
“Your personal time, your job and your time with your other child might be affected as a result,” he explains.
“You should also decide if your first kid is physically mature enough; if he’s at least three or four years old then he might not need that much attention and you’ll have more time to see to your newborn.”
Dr Lim says that once you’ve considered these factors, weigh them against the joy of having another child and see how you feel. It’s also a good idea to talk to other mums who have more than one kid – learn from their experiences and ask them if they have any regrets.
There’s also the financial cost of growing your family. If you still have your other child’s clothes, books, toys, milk bottles and strollers, then your new baby could probably reuse them.
Otherwise, you’d have to spend a good amount of money on these items right away. On top of that, you’d have to factor in insurance deductibles, hospital bills, diapers and childcare services.
According to Freddy Meindertsma, a senior financial adviser with a financial advisory firm, having another child can cost around $18,000 a year, excluding delivery and prenatal charges, or $360,000 over 20 years, excluding inflation.
Freddy says that the only way to know if or when you can financially afford another child is to evaluate your family budget. He suggests an early review of your family insurance plans.
“Your family might need a combination of a hospital, accident, life and also a saving plan,” he points out.
“Without insurance or subsidies, a oneweek stay at a private hospital might cost up to $10,000. A comprehensive hospital plan will take care of this. Complicated procedures and on-going medical care costs can snowball very quickly, making it hard to estimate the cost for medical bills.
“Non-Singaporeans and non-permanent residents also have to be mindful of maternity cover and waiting periods.
“Accident coverage will take care of illnesses like dengue fever or HFMD and a consequent stay in hospital, while a life plan would ensure your child is protected for life from a young age,” he continues.
“A saving plan would set the stage for your baby to have adequate funds when he’s ready to start university. All that said, the most important part of planning is still protecting you and your spouse, since you are your baby’s providers.”
To alleviate the financial burden of having another child, you should also check out the various government grants, subsidies and incentives available to parents, such as the Marriage and Parenthood Scheme, the Baby Bonus Scheme, the Medisave Maternity Package, the Grant for Newborns, Medishield Life coverage from birth, and Medisave for assisted conception.
When considering “extras” such as enrichment activities for your next child, you could probably get away with being more selective about what you sign him up for, says Lee Chee Kian, senior client adviser at Providend.
“He may not even need enrichment classes in his early years if you can do those activities, such as art, reading, music and sports, with him. Of course, that also means spending more time with your child, but you’ll save money and he’ll probably be better for it.
“Think about family holidays, too. You’d have to fork out extra money for one more person, so I suggest looking at your current income and cash flow to see if you can afford it.”
…QUIT MY JOB AND BE A STAY-AT-HOME MUM?
Dr Lim says that the first question to ask yourself is why you want to be one.
“If you’re making the decision simply for your child or because you want to be the perfect mother, then it’s probably not a good idea – you may end up unhappy and disgruntled,” he says.
“It can also be difficult not having a job anymore. Many people experience a loss of identity when they stop working and start to feel unaccomplished and even useless.”
On the other hand, if your reason to stay at home is one that you believe will benefit you, in that you’ll be able to enjoy a certain type of lifestyle and get to spend more time with your family as well as have more time for your hobbies and socialising, then it’s a viable one, Dr Lim says.
But remember that solutions aren’t always black-and-white. You can also consider working part-time, or going on sabbatical for a few months to see if you’ll like the idea of being a stay-at-home mum.
There are also financial considerations. Andrea Kennedy, a finance behaviour specialist from Wiser Wealth, says that you’d need to set aside three to six months’ salary in case of an emergency.
You would also have to consider how stable your spouse’s job is if you’re going to rely on just one income, and how you would feel about losing your financial independence.
“I would try to find part-time or flexible work versus leaving the workforce altogether,” Andrea says.
“Or you may wish to retrain yourself in an area that allows you to freelance or work from home. Too many people regret quitting their jobs once they start to experience financial or marital problems.”
You should also ask how leaving the workforce would affect your career if you do decide to go back to work when your kids are older, says executive career coach, Alka Chandiramani.
“You may want to think about the possibility of being told that you’ve been away from the workforce for too long and have not kept abreast of software advancements and the like.
“You may also want to consider the possibility that a lot of changes would have taken place by the time you returned to work or that you might have to work for someone younger than you. These are all legitimate factors so you should ask yourself how you’d feel about them and deal with them.”
To improve your chances of resuming your career later on, Alka suggests keeping up-to-date on industry happenings, being active in the community, and brushing up on the skills that are relevant to your line of work.
You may also want to talk to women who have returned to work after staying home to be with their kids, to find out what it was like for them.
…SEND MY CHILD TO UNIVERSITY?
Singapore has among the best universities in the world. Plus, studying locally is a lot cheaper than getting an overseas education.
To figure out whether you can afford to send your child to a local university, you’d need to find out how much the course costs per year and take into account the fact that that amount will probably be higher when Junior is ready to start his tertiary education.
The good news is that you have time on your side, so you may want to start saving towards that goal now, says Lee.
If you are thinking about sending your child overseas for his degree, you’d need to plan carefully, says Rob Howland, a senior financial planner at AAM Advisory.
“The average cost today for a one-year course, which includes tuition and living costs for a foreign student, ranges between $65,000 and $85,000, depending on which country your child wants to study in. You can expect these costs to increase by five per cent per annum.”
Rob adds that the sooner you start saving the less you’d have to put aside every month as time progresses.
“In this regard, it’s very similar to taking out a mortgage,” he points out.
“The monthly repayments over a 20-year payment term are much more affordable than trying to pay down the same debt over a 10-year term. Starting a bank savings account for this is one option, but there are also other vehicles designed for this expense that’ll make your money work harder for you.”
Kennedy also advises you to be rational and flexible if you do decide to send your child overseas.
“You would have to factor in your child’s living and social expenses as well – you don’t want him to be eating instant noodles every night while his friends are out enjoying a meal!
“And bear in mind, there’ll be many factors over which you have no control, such as exchange rates and investment returns, so you may not want to completely commit to the idea of a particular university.
“It’s also important to keep all options open to avoid disappointment if your child doesn’t get into the school of his choice or you can’t afford your top choice.”
…HAVE A HOLIDAY EVERY SIX MONTHS?
When deciding whether you can afford to travel twice a year, look at your income and current expenditures. After all, you don’t want to come home after a relaxing time abroad only to be faced with credit card bills you can’t pay off.
Rob says that most people spend what they earn every month and save on an ad-hoc basis, if or when they do have anything left over.
“But by prioritising saving as something that must be done each month, like paying rent or tax, you’re much more likely to reach your personal and financial goals, and still be able to enjoy life along the way.”
To help you achieve your twice-yearly holiday goal, set up a special savings account for it. Work out how much you need to save for each trip and put aside a certain amount every month until you have enough. This will help you stay within budget so you’re not saddled with debt when you return home.
Family holidays can also test your patience, so ask yourself if you can afford the emotional stress of twice-yearly trips. To minimise problems, Dr Lim says to keep the holiday simple and relaxing.
“It’s your family’s time to have fun, bond and recharge, so plan the break carefully and try to enjoy yourself while you’re away. Worrying and fussing defeat the purpose of a holiday, which is to rest and have a good time.”
…MOVE TO A BIGGER HOME?
“When you consider the taxes, refinancing and moving costs, purchasing a new property can be costly,” Freddy says.
“So the question to ask yourself is whether it’s worthwhile moving or if you can make improvements to your current property. Depending on your circumstances, it might make more sense to renovate your existing home rather than move house.”
There are also many factors when considering home upgrading, he adds. First, you don’t want to overcapitalise.
“Overcapitalisation is when you spend more money on the house than it increases in value. Always keep in mind how your renovations may appeal to potential buyers later, and if they will pay more for these features. Personal style and preference often get in the way of smart investment decisions.”
And while renovating can be a cheaper alternative to moving to a bigger house entirely, Meindertsma says you also need to be realistic about the costs of home improvements.
“Upgrading to a new home is not a one-size-fits-all; neither is uprooting your family to a new house. It’s all about doing your research and weighing your options.”
The beauty of upsizing is you can use the equity you’ve already accumulated to your advantage. Equity allows you to reach higher than you would otherwise be able. It’s the difference between the value of your home and the amount left on your mortgage.
Remember, too, that upgrading to a larger home incurs more costs than just the price of the property itself.
You also need to consider factors such as stamp duty; refinance costs such as discharge fees, mortgage registration and deregistration fees, application fees, settlement fees, bank valuation fees, title search fees and the preparation of mortgage documents; agent fees and legal fees; moving costs, which many people often forget about; and building management fees, which can be particularly high for private residential condominium estates.
“There are also maintenance costs of your house or condo,” Freddy adds. “Bear in mind that the costs of upgrading continue well past the purchase date. And more rooms and space generally mean higher utility bills.”
You should also consider the monthly mortgage finance costs, if a property loan has been secured with the bank of your choice.
Freddy says that banks will not finance above a certain debt-servicing ratio, looking at how your monthly income is sufficient to cover your monthly mortgage instalment (which comprises interest and down payments).
If you do decide to move, you may have to cut back on other family expenses, Chee Kian says.
“Think about the costs of your kids’ enrichment classes, their tertiary education and your own retirement. If you decide to spend more on a new house, would you still be able to afford the lifestyle that your family enjoys now? These things are all interconnected so you want to be conservative.”
Finally, if you want to move to a bigger home in an area that’s some distance from your office and the kids’ schools, you should consider if your family would be able to afford the extra travel time, says Simran Dadlani, a real estate broker at Powerful Negotiators @ PropNex.
It might be worth staying put if moving means you’d have to spend an extra 30 or 40 minutes just to get from place to place.
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