Invest In Your Child's Future

BY JO-ANN HUANG | Citibank Singapore's head of wealth management and segments Chan San-San highlights the importance of long-term investing and succession planning for your family in the last of a three-part series

When it comes to retirement, making sure that there are enough funds for the next generation is one of the biggest aspirations Singaporeans are working towards.

Amid longer lifespans, it is imperative that those in the workforce start their retirement savings and investment plans as soon as possible.

According to a recent survey on financial planning and money management commissioned by Citibank Singapore, financial independence and having sufficient funds to meet long-term healthcare needs and expenses are important financial goals of Singaporeans.

The survey, which concluded in August 2016, was conducted among 100 affluent respondents aged between 30 and 60.

"These individuals have expressed their desire to be able to retire comfortably and stay active after their retirement," says Ms. Chan San-San, Citibank Singapore’s head of wealth management and segments.

They also desire to pursue their passions and hobbies, such as travelling the world, as well as learning new skills and starting their own businesses. Basically, they want to stay relevant in the modern economy after retirement, she notes.

Singaporeans are also living longer, so having enough funds to meet daily living expenses and medical needs while retired has become a key priority. A longer life means having to save and invest more funds for a longer retirement.

On top of preparing for their golden years, Singaporeans want to make sure that their families are well looked after.

"We want to ensure that our loved ones are well protected. Our first priority is to ensure that they are in a position to maintain the same standard of living.

This is especially so in the event of a job loss or the death of a breadwinner in the family," says Ms. Chan.

"The time horizon for saving towards a child's education and age group of the parents will dictate the type of assets to be held. For example, if one has a shorter time horizon to save towards a child's education, then the savings or investment plan may include more low-risk assets to be held and vice versa."

Ms Chan San-San, Head of wealth management and segments Citibank Singapore.

Providing for their children's education is a major factor for Singaporeans when it comes to planning for their family's future.

Ms. Chan notes that tuition fees at Singapore's universities have risen since 2010. Undergraduate programme fees across all faculties have grown by about 1 to 1.5 per cent each year, while specialised programmes such as law and medicine have grown by about 5 to 8 per cent.

International undergraduates pay about £11,987 (S$21,140) a year on average for a university course in the United Kingdom, according to the Reddin Survey of University Tuition Fees (2016–2017) on www.thecompleteuniversityguide.co.uk

Tuition fees at American universities have risen about 2.3 per cent each year over the past 10 years. Fees reached an average of US$32,406 (S$44,040) for a four-year programme for the 2015 and 2016 intake, based on College Board's Trends in College Pricing 2015.

"If tuition fees continue to grow at the same rate, a local business degree would cost at least $13,000 a year in 20 years. Tuition fees in the US could reach US$51,000. UK fees could hit £20,800 a year," says Ms. Chan.

She highlights that the above figures are just tuition fees; living expenses and other miscellaneous costs have not been taken into consideration. As such, many families may not be saving enough for their children's education.

Families should also consider how global their banks really are, especially where overseas studies are involved.

Says Ms. Chan: "There's already a lot to think about when our children go overseas to study. New friends, a new culture, new food, perhaps even a new language.

"So partner with a bank that can ease the transition."

Citibank Global Transfer is an option that allows clients to make instant online global fund transfers to other Citi accounts overseas. It is complimentary for clients and backed by Citibank's network of branches and ATMs worldwide.

Ms. Chan believes that it is wise to start a savings plan early and, ideally, parents should do so as soon as their child is born. They can consider setting up a regular savings plan (RSP) or investing in an endowment or portfolio of safe assets when their child is young, she adds.

By building up one's savings through compounding interest, RSP is a disciplined way of setting aside money each month, which adds up to a tidy sum with time.

"Cash withdrawals from education savings plans can help with tuition fees and living expenses when the child begins his or her tertiary education," she says.

She also emphasises that parents need to remember to save for their retirement at the same time, as both goals are important and involve a fair sum of capital.

She says: "The time horizon for saving towards a child's education and age group of the parents will dictate the type of assets to be held.

"For example, if one has a shorter time horizon to save towards a child's education, then the savings or investment plan may include more low-risk assets to be held and vice versa."

Saving for retirement as well as for your child's education is no easy feat. But with the right knowledge, tools and some discipline, such an achievement is within reach.

It is no wonder many Singaporeans would like to pass on lessons in money management to their children, according to the Citibank survey.

Ms. Chan says 71 per cent of the participants believe that it is important to equip the next generation with financial management skills. That way, savers and investors can rest easy knowing that their children will be financially savvy when they reach adulthood.

The challenge for families lies in finding, and achieving, a balance between saving for retirement and children's education.

This is when professional advice from a competent and qualified financial advisor will make a difference, says Ms. Chan.

Citi's Total Wealth Advisor is a tool that provides users with an interactive experience on financial planning to customise inputs and risk profiles for various goals. Thereafter, investment portfolios can be tailored to these goals.

"Regular and in-depth portfolio reviews ensure that these goals are constantly monitored and on track," she adds.

Another tool that can help one save and invest for the long term is Citi's Model Portfolios, which was created to help clients achieve sufficient portfolio diversification and develop realistic investment situations. It also serves as an asset allocation reference tool for the long-term investor.

Asset allocation is critical to ensure that the investment portfolio is able to withstand the ups and downs of multiple market cycles. Central to it is an investment mix that strikes a good balance between risk and return. Investors should also review their investment mix regularly to keep it aligned with their long-term portfolio targets.

Through other proprietary advisory tools such as the Portfolio Risk Evaluator, investors are able to review their investment portfolios in simulated risk scenarios. This will help them avoid knee-jerk investment decisions due to market fluctuations and equip them with better decision-making skills.

While many desire for their future generations to be well protected, the survey reveals that four in 10 individuals have not really considered how this wealth can be transferred to their next generation.

To address that, look to legacy planning, of which writing a will is vital, as it facilitates the amicable transfer of wealth to the next generation.

As CPF monies are not covered by a will, it is prudent to make a CPF nomination, which will allow your savings to be distributed according to your wishes, notes Ms. Chan.

Citibank conducts seminars on the writing of wills and legacy planning for its clients from time to time.

Ms. Chan notes that parents have traditionally retired after their children have completed university.

"The time difference is, however, getting shorter as more parents have children at a later age. As such, it becomes more crucial to keep track of these two important goals," she explains.

Legacy planning through the use of insurance products will allow individuals to pass on their assets to their future generations.

Says Ms. Chan: "One consideration is to look at universal life insurance. It provides high death coverage and an estate is immediately created when the policy owner passes on.

"One should also take into consideration the performance of the yield return from the policy as well as the corporate credit rating of the insurer."

With the majority of parents surveyed hoping to teach their children financial management skills, they should lead by example and enable the children to develop good money habits from young, she adds.

Her advice to parents is to teach their children "how to budget and how 'small' spendings add up" by taking them along to meetings with their trusted advisors, as well as to events and seminars held by their banks.

Parents should also encourage their children to sign up for workshops on managing and growing their money.

"As the old proverb says, give a man a fish and you feed him for a day. Teach him to fish and you feed him for a lifetime," she says.

The opinions expressed in this 3-part advertorial should be regarded solely as general information, and does not constitute investment advice or a guarantee of returns. Neither the information nor any opinions expressed herein constitute or are intended to constitute an offer or invitation to any person (nor are they calculated to induce any offer or invitation from any person) to acquire, subscribe for or purchase any investment product. The views expressed herein do not necessarily reflect the views of Citibank Singapore Limited, Citibank N.A. nor any of its affiliates.

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