Starting a New Family: 4 changes to consider in your financial planning

I want to start a family. How do I plan my finances after having children? Here are four non-negotiable changes in you and your partner’s lives that you’ll need to consider.

Are you and your partner thinking of having children, but not entirely sure how would your financial plans change once you have an addition to the family?

You’re not alone.

Planning every detail of your life journey is challenging with a child involved because there are so many things to consider (like if you might want to give them the best shot at pursuing their passion in an extra-curricular activity).

That said, here are four non-negotiable changes in you and your partner’s lives that you’ll need to consider.

One thing is clear: having a child means supporting them till they are old enough to start working and earning their own keep. In the context of Singapore, that will be when they are about 25 years old. Knowing this, you’ll need to be realistic about the age you actually can stop working, which may be a little later than you initially planned.

For example, if you have a child when you’re 35, you’ll probably need to keep earning money till you’re 60).

However, if you start planning now, you can research on the financial and insurance instruments available that may help you build up your wealth. You have to be aware that there are risks involved, so speak to a financial consultant to learn more. With careful planning, you could possibly kick back and relax at a slightly earlier age, if you so choose.

You or your partner might plan to stop working and take care of your child after birth.

This would make a huge difference in your family income, savings and expenditure – less disposable income for spending! In any case, always build a contingency fund of about six to 12 months of your combined income. This would ensure sufficient buffer in case one of you decides to stop working for a period of time after your child is born.

I Remember - when you’re planning for your child’s education, you’ll need to carefully take into account prevailing inflation rates in Singapore.

This is because a large portion of your child’s education fund will be spent on his or her university studies (around 18 years away) so the amount of money you need might be significantly different from the figure you just Googled the other day.

If you’re looking to enroll your child in private institutions, you’ll incur higher expenditure.

If you’re thinking about it now, take this opportunity to plan the right steps on just how to build that education fund for your child.

The future might seem uncertain, but you would definitely want the best for your child. Getting the right insurance policies would protect your child financially.

For example, whole life insurance policies insure your children for their entire lives (once the required premiums are paid) and also some come with annual cash returns (until the policy is terminated). If you’re able to afford the premiums for such a policy, it can give your child yearly returns all the way through to their retirement.

However, as always, a conversation with a professional financial planner regarding this will definitely help shed some light on what is the ideal plan for you and your family.