HfW: Having kids is a financial strain

Source here. Recently, in fact yesterday there was an article on this. Read on.

THE price of an S-Class Mercedes-Benz and a semi-detached house. That’s what urban parents can expect to pay to raise a child from primary school to university, say financial planners.

The high cost would just cover sending a child through school and university.

Personal financial management coach Yap Ming Hui estimated the cost of upbringing to be as much as the combined price of a luxury car and landed property in the Klang Valley.

“Easily, RM1.5mil,” he said, adding that tertiary education in a local university cost between RM30,000 and RM150,000, depending on whether it was a private or a public university.

Noting a growing demand for private and international schools in urban areas, he said education, especially for a degree abroad, would make the biggest dent in a family’s finances.

He said in urban areas, it would cost parents of a child in primary or secondary school about RM1,000 monthly, excluding extras like smartphones, data package charges, activities like music lessons, transportation and tuition fees.

“Previously, one tuition teacher would cover all subjects but today, teachers specialise and parents pay more.

“So, if you are planning to have three or four kids, you better think twice,” he said, adding that with higher living costs, it would cost much more than RM100,000 to raise a child from birth to the age of 18 today.

Financial coach Carol Yip cautioned parents against treating their kids as “insurance” for their old age.

“The more children you have, the less savings you will have left for your old age,” she said, advising parents to learn more about their children before investing.

“Before you spend all your money on their education in an international school or overseas, understand the child’s characteristic and needs first.

“A smart child will shine even in a normal school.”

Marziana Mohamed Alias, 33, a mother-of-two, spends close to RM1,500 monthly on her children, both of whom have health and education insurance.

“These are necessities. It’s so expensive when children get sick, even if it’s just a fever.”

The working mother still breastfeeds but also gives her daughter milk formula.

“Imagine how much more I would have to spend if I relied entirely on formula,” she said, adding that daycare took the biggest chunk out of her expenditure.

*Estimates based on how much middle-income families spend on necessities and perks. Expenditure includes the cost of food, tuition, transportation, clothing, extra-curricular activities, pocket money, health, insurance and education.

Things were much cheaper five years ago when her son was born.

She then paid RM290 in nursery fees but now the same nursery wants RM400 for her two-year-old daughter.

“It’s too much. I’m paying RM300 to a baby sitter instead.”

Her son’s pre-school fees cost RM500, and it is not even one of the branded chains.

She said she also had to set aside RM400 to buy new clothes every six months.

K. Anbalagan, 52, said the financial strain was even greater if the child had special needs.

His six-year-old autistic son needs RM1,800 monthly for his milk, vitamins and classes.

“He still wears diapers and will soon need speech therapy as well,” he said.

Rumah KIDS assistant coordinator P. Salvee said the “barest monthly minimum” to raise a child was RM500.

The home which houses 40 abused, orphaned and neglected children aged between six and 18 in the Klang Valley, spends an average of RM800 on each child.

Most of the home’s residents are children of single mothers who are too poor to raise them, she said.

The mothers are allowed to visit and even take their kids back when they are financially stable.

“Parents who leave their kids here have the love but not the means to care for their children. It’s heartbreaking.

“Food, schoolbus fees and tuition are not cheap. And, tuition is a necessity nowadays,” she said, adding that the home even paid for the children’s tuition.

Salvee said the Government should provide financial assistance beyond one-off yearly handouts if it wanted to encourage parents to have more children.

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HfW: 19 Secrets Your Millionaire Neighbor Won’t Tell You

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The secret to financial freedom.

From time to time we bring you posts from our partners that may not be new but contain advice that bears repeating. Look for these classics on the weekends.

That’s right. Although having a million bucks isn’t as impressive as it once was, it’s still nothing to sneeze at.

In fact, CNBC reports that in 2013 there were 13.2 million millionaires in the United States alone.

That’s a lot of people, people. And the odds are one or two of them are living near you.

Heck, one of them might even be your neighbor. In fact, the odds are very good that it is your neighbor.

But, Len, you don’t know my neighbor. That guy doesn’t look anything like a millionaire.

Well, guess what? Your suburban millionaire neighbor called (oh yeah, we go way back) and the two of us had a nice little chat.

Here’s a few things he shared with me but apparently doesn’t want to tell you. (No offense, I’m sure.)

1. He always spends less than he earns. In fact his mantra is, over the long run, you’re better off if you strive to be anonymously rich rather than deceptively poor.

2. He knows that patience is a virtue. The odds are you won’t become a millionaire overnight. If you’re like him, your wealth will be accumulated gradually by diligently saving your money over multiple decades.

3. When you go to his modest three-bed two-bath house, you’re going to be drinking Folgers instead of Starbucks. And if you need a lift, well, you’re going to get a ride in his ten-year-old economy sedan. And if you think that makes him cheap, ask him if he cares. (He doesn’t.)

4. He pays off his credit cards in full every month. He’s smart enough to understand that if he can’t afford to pay cash for something, then he can’t afford it.

5. He realized early on that money does not buy happiness. If you’re looking for nirvana, you need to focus on attaining financial freedom.

6. He never forgets that financial freedom is a state of mind that comes from being debt free. Best of all, it can be attained regardless of your income level.

7. He knows that getting a second job not only increases the size of your bank account quicker but it also keeps you busy — and being busy makes it difficult to spend what you already have.

8. He understands that money is like a toddler; it is incapable of managing itself. After all, you can’t expect your money to grow and mature as it should without some form of credible money management.


9. He’s a big believer in paying yourself first. Paying yourself first is an essential tenet of personal finance and a great way to build your savings and instill financial discipline.

10. Although it’s possible to get rich if you spend your life making a living doing something you don’t enjoy, he wonders why you do. Life is too short.

11. He knows that failing to plan is the same as planning to fail. He also knows that the few millionaires that reached that milestone without a plan got there only because of dumb luck. It’s not enough to simply declare that you want to be financially free.

12. When it came time to set his savings goals, he wasn’t afraid to think big. Financial success demands that you have a vision that is significantly larger than you can currently deliver upon.

13. Over time, he found out that hard work can often help make up for a lot of financial mistakes — and you will make financial mistakes.

14. He realizes that stuff happens, that’s why you’re a fool if you don’t insure yourself against risk. Remember that the potential for bankruptcy is always just around the corner and can be triggered from multiple sources: the death of the family’s key bread winner, divorce, or disability that leads to a loss of work.

15. He understands that time is an ally of the young. He was fortunate enough to begin saving in his twenties so he could take maximum advantage of the power of compounding growth on his nest egg.

16. He knows that you can’t spend what you don’t see. You should use automatic paycheck deductions to build up your retirement and other savings accounts. As your salary increases you can painlessly increase the size of those deductions.

17. Even though he has a job that he loves, he doesn’t have to work anymore because everything he owns is paid for — and has been for years.

18. He’s not impressed that you drive an over-priced luxury car and live in a McMansion that’s two sizes too big for your family of four.

19. After six months of asking, he finally quit waiting for you to return his pruning shears. He broke down and bought himself a new pair last month. There’s no hard feelings though; he can afford it.

So that’s it. Now you know what your millionaire neighbor won’t tell you.

Oh, and, um, would you be so kind to keep this just between you and me? I’d hate to ruffle anyone’s feathers or cause of any kind of neighborly spat.

Please?

Thanks. You’re a peach.

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How to Create Wealth You Can Pass Down to Your Kids

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Your money is the culmination of hard work, discipline and smart management skills. If you are finding financial success, there are some ways to better sustain that wealth not only for yourself, but for your children and their children after that. However, leaving a legacy of multi generational wealth is no easy feat. While wealth affords opportunities, it can also present unique and complex challenges. If you want to leave behind some money for generations of your relatives to use and pass on, follow these tips for transferring wealth through your family tree.

Educate Your Family on Financial Matters

Even if you pass on millions, your children may squander all you have worked for before it can become a legacy. It's important to have open and honest conversations with your children about how to make, spend and save money.

Make Sacrifices

No matter if you follow a familiar career path, build your own business or focus your energy on investments, everyone needs an income. To create generational wealth may mean forgoing luxuries and even opting to avoid early retirement in favor of filling the family vault.

Protect Assets

Life insurance can be a powerful tool for passing on wealth, especially because the beneficiaries of your policy will not have to pay taxes on this stimulus. If something happens to you or your spouse, this can provide your family the financial resources they need to cover the expenses of your death, but also income for education, investing and wealth building of their own.

Tax & Transfer Wisely

Taxes can have a significant impact on you wealth and generational legacy, so you may choose to work with advisers to reduce your tax liabilities. This may require special transfers like trusts, endowments and estate freezes. If you have a traditional IRA, you can convert it to a Roth so your heirs inherit an asset with continued growth potential.

Maximizing your wealth for a legacy is more than finding fiscal success. There are many aspects of a comprehensive wealth plan that will last for generations, but if this is a priority for you, it's important to plan wisely.

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