Articles

1 July 2012

The signs are out there. It would have been impossible to avoid them had one even wanted to.

Utility bills have crept up. Weekly groceries bills come up to twice as much as they used for roughly the same number of items. And if you happen to be paying the same price for an item as you used to, say a year ago, you discover you are not getting as much bang for your buck.

Like making do with smaller portions for the same price at your favourite food stall.

Faced with such day to day examples, many families in Singapore may not have batted an eyelid when the inflation rate came in at 5.40 percent for April 2012.

Primary Concerns of Parents

Like the various population segments, families in Singapore are most likely looking at ways to stretch their dollar.

An OCBC study done with 1000 parents in December 2011 indicates the financial responsibilities facing this group -- comprising parents of school-going children -- are onerous. Aside from putting money aside for day to day expenses like clothes, food, transport, pocket money, parents also have to think and plan for the future of their young children.

In an academic driven society, not surprisingly around 70 percent of the parents listed saving for their children’s education as their top financial concern. Jostling for a close second was worries about the increasing cost of living, which came in at 69 percent.

Faced with two pressing issues, saving for a rainy day was delegated a distant third with 44 percent listing as a top financial concern.

How to best address these three issues in a feasible way? Our suggestion is simple. Start early.

A “Bucket” System

Time is always a friend when it is on your side. Looking at today’s inflation rates and the looming global situation, it is very hard to feel optimistic about the future.

Concern over the rising cost of education is legitimate. A 4-year general degree course at a local university that costs $36,548 currently may cost $52,186 or higher in 18 years time.

To ensure parents don’t over look any important aspect of their financial responsibilities towards their children, parents can imagine putting aside cash mean for their children’s well-being into separately labelled buckets:

Bucket A: Label it “Everyday” for day to day expenses.

-         Put in place income replacement options to take care of your family’s living expenses in the event the main breadwinner is not able to provide for them.

Bucket B: Label it “Occasional” for emergencies, like hospitalisation.

-         Protect your little bundles of joy from high healthcare costs should they require specialised medical attention and be hospitalised.

Bucket C: Label it “Future” for higher education needs down the road.

-         Obtain a plan that helps to grow your child’s savings and reduce future expenses.

Finally, Bucket D: Label it “Precautionary” because life is uncertain and you can prepare for the unexpected.

-         A contingency plan to provide lump sum and cash for life. Parents can use it to fund the family’s necessary expenses should the unexpected happen.

Making the System Work

Having spent some time thinking about their expenses should have made it easier for parents to allocate their savings in order of priority. They can keep track of their savings with the Savings Goals tools with OCBC Online Banking.

To make it easier still to keep to their goals, parents should tap on suitable investments that are designed to meet parents’ needs in the respective areas identified by the buckets.

An example would be the School Protection Plan, which is a participating regular premium endowment insurance plan underwritten by The Overseas Assurance Corporation Limited. This plan makes it convenient for parents with children in primary school to set money aside regularly.

Under the School Protection Plan, the parent pays up to 6 years of premiums, and receives annual payouts that can be used for the child's education and development. The parent also has the option to reinvest annual cash payouts at attractive interest rates. Premiums start as low as S$7 per day.

More importantly, the funds are protected should anything unfortunate (like death or total and permanent disability) happen to the parent.

For expenses related to their grocery, utility, petrol, medical and insurance bills, they can make use of credit cards to enjoy rebates. The rebates may work out to be modest, but still preferred when you consider that Singapore’s Consumer Price Index is forecast to hit 3.5 per cent to 4.5 per cent for 2012.

With these financial planning building blocks in place, parents -- who want their children to achieve their fullest potential via a good education -- hopefully, may find it easier to do so.

Important Information

School Protection Plan is a regular premium participating endowment insurance plan underwritten by The Overseas Assurance Corporation Limited, a wholly-owned subsidiary of Great Eastern Holdings Limited and a member of the OCBC Group, and it is not a deposit or obligation of, or guaranteed by OCBC Bank. Please refer to http://www.ocbc.com/wealth-management/ for more details.

Buying a life insurance policy is a long-term commitment. An early termination of the policy usually involves high costs and the surrender value payable may be less than the total premiums paid.

The information provided herein is intended for general circulation only. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You may wish to seek advice from a financial adviser before making a commitment to purchase a life policy. In the event that you choose not to seek advice from a financial adviser, you should consider whether the life policy in question is suitable for you.

This is not a contract of insurance. It does not constitute an offer or solicitation to buy an insurance product or service. It is also not intended to provide any insurance or financial advice. The specific terms and conditions of the plan are set out in the policy documents. A person interested in the insurance policies should read the Product Summary and Benefit Illustration (obtainable from OCBC Bank) before deciding whether to buy this product.

No representation or warranty whatsoever (including without limitation any representation or warranty as to accuracy, usefulness, adequacy, timeliness or completeness) in respect of any information (including without limitation any statement, figures, opinion, view or estimate) provided herein is given by OCBC Bank and it should not be relied upon as such. OCBC Bank does not undertake an obligation to update the information or to correct any inaccuracy that may become apparent at a later time. All information presented is subject to change without notice. OCBC Bank shall not be responsible or liable for any loss or damage whatsoever arising directly or indirectly howsoever in connection with or as a result of any person acting on any information provided herein.

This publication may be translated into the Chinese language. In the event of any, discrepancy between the English and Chinese versions, the English version shall prevail.

Policy Owners’ Protection Scheme
This plan is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC).  Coverage for your policy is automatic and no further action is required from you.  For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the Life Insurance Association (LIA) or SDIC websites (www.lia.org.sg or www.sdic.org.sg).

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