One good way to engage your kids in such unusual times now, is to educate them about personal finance. If you need to do so with your kids, this is the article for you, with tips grouped according to different ages.
4-6 years old: Introduce them to the concept of money and how money is utilised
Visual illustration – show them the various forms of money such as notes and coins.
Explain to them how they must pay to get the things they need/want.
7-10 years old: Educate them about earning and saving money in primary school
Teach them how earning money works.
Paying them when they complete a housework – they will learn that they have to work for money.
Or prepare a chart with the chores and the corresponding amounts they earn from doing the various chores.
This is the phase where they can understand the value of money and cultivate the skills to plan forward.
How to teach savings – encourage them to set aside some money until they have enough to get what they want, instead of spending it all at once.
11-14 years old: Open their bank account
Since they have acquired sufficient funds and knowledge on savings, it is time to set up an account for them.
Credit scores & how credit scores can affect their credibility and hence the amount of interest they are subjected to.
Warn them on the risks of carrying balance on a credit card – a possible way is to let them be the authorised user of your card so that they have a sense of its function.
Child in tertiary education
Ensure that they have already drafted out their budget and they have the capacity to pay off expenditures, whereby at most 50% of their budget will be set aside for expenses.
Ensure that they have an emergency fund – 3 to 6 months of expenses may not be saved yet, but they should have kept $500 to $1000 minimally for unforeseeable circumstances that require the extra money.
Child graduated and fresh in the workforce
Advise them of the following:
Get a credit card of their own to strengthen their credibility.
Retirement planning is one of the major components of any financial plan. It allows you to build for the future based on your current circumstances.
While we can’t see the future with a crystal ball, what we can do is to plan for it.
Some of the most common retirement expenses one should plan for are:
Housing is a big expense no matter what stage of life you’re in. While the majority of retirees own their own homes, some still have to factor in mortgage or rent payments.
While you’ll no longer use your car for commuting to work, transportation is still a large expense. Insurance, gas, and repairs should be part of your budget. If you live in a city with public transport, see what senior citizen discounts you qualify for.
According to a report by Asia-Pacific Risk Center, an average of US$37,427 will be spent on healthcare for each elderly person by 2030. It’s important to note that MediShield Life doesn’t cover some health care expenses like dental work, glasses, hearing aids and long-term care.
As long as you aren’t planning on dining out regularly, your budget for food shouldn’t increase significantly. At the same time, you’ll have more time to cook meals at home.
How would you like to spend your retirement? Think about expenses for travel or even local entertainment like movies, museums, or concerts.
The past couple of weeks have been the most insane period many investors have ever witnessed. The media has done a great job reporting it, there’s a lot of information out there. A lot of us are concerned and we should be concerned.
However, at times like these, we need to examine the facts. The fact is that COVID-19 is an event. It’s not structural, it’s not fundamental. And because it’s an event, we have to look back in history and we know how events like recessions eventually turn out. It’s not an “L” chart – markets don’t get knocked down and stay stagnant. But rather, it is a “U” or a “V”.
What you need, is to be very vigilant about your risk budget – making sure that you’re taking appropriate level of risk always make sense, especially in times of heightened volatility and the volatility we see now is probably going to continue. I believe we may possibly be down as much as 50% from the highs, similar to the financial crisis of 2007-08.
At this point you may question – why don’t I just get out and then get back in? Well, two reasons:
First of all, you can be wrong. (I’ve learnt this the hard way at the beginning of my career.)
Secondly, you would really have a hard time getting back in and the market does whatever it needs to do to prove people wrong.
Stock market volatility is akin to a roller coaster ride, it is dangerous for investors to unstrap themselves suddenly during the ride. Instead, during this period, it is advisable for investors to stay strapped in (invested) and average down the costs of investments in order to benefit when markets go up again.
To this day, I see people who got out in 2009 and never got back in – they missed a complete 10-year bull market. Warren Buffett has said, “The stock market is a device for transferring money from the impatient to the patient.”
And why will the markets go up again?
Historically whenever a recession happens, all of us – billions of human beings worldwide – always put in the collective effort needed to bring up our global economy again.
So, don’t get caught up in the short-term emotion and the noise. Take care of yourself. Take care your family. And if you have an investment portfolio with me, rest assured that I’m paying attention to your portfolio during this period. If it needs to be re-balanced (when your equity-to-bond ratio shifts 20% or more), I will contact you promptly for a discussion.