From The Invest Editor

Financial tips for dads: Sound planning makes for a Happy Father’s Day

While work is important, make family time a top priority too. It is worth building memories with children while they are still young and need your company.
While work is important, make family time a top priority too. It is worth building memories with children while they are still young and need your company.ST FILE PHOTO

Ensuring that your financial house is in order is as important as providing for your family's daily needs

It is Father's Day today so, dads, you should relax as the family shows their appreciation for how hard you have worked to provide them with comfort and financial security.

It is also an opportune time to reflect on your financial planning needs and take steps to implement solutions if they fall short.

With the right planning, you will be in better control and enjoy greater peace of mind.

Here are some ideas for you.

EDUCATION AND RETIREMENT PLANNING

  • Top up dad's CPF to ease his retirement

  • Adult children can also review their fathers' financial needs. One way to enhance your dad's retirement savings is to top up his CPF account.

    If your father has a low Central Provident Fund balance, you can top it up using your CPF or cash. That way you will have peace of mind knowing that he will have his own source of retirement payouts via the national annuity CPF Life scheme. And if he is 55 and above, he will enjoy the extra interest that will be paid into his CPF account.

    The number of top-ups from child to father grew from 8,600 ($30.2 million) in 2013 to 10,200 ($34.8 million) last year, a rise of nearly 19 per cent.

    In terms of absolute numbers, CPF top-ups are generally higher from child to mother. Last year, there were 21,400 ($86.8 million) top-ups from child to mother, up from 18,200 ($75.1 million) in 2013, according to the CPF Board.

    By topping up early every January instead of December, your dad's nest egg can grow faster. Assuming you top up $3,500 every January, at the end of 10 years, your dad's Retirement Account would have grown to $43,562.20. It would be $42,021.44 if your annual top-ups are in December.

    This translates to an additional $1,540 in his account, based on the current interest of 4 per cent a year.

Starting to save early for your children's tertiary education will help ensure that it does not eat into your retirement funds.

Planning early and reviewing your plans regularly mean you can avoid having to work longer than you envisaged in order to fund both your children's education as well as your golden years.

Time and compound interest are a powerful combination when it comes to financial planning.

Recent findings of an HSBC survey showed that Singaporeans are placing their children's education at the top of their financial pyramid, often at the expense of other commitments and ambitions, including saving for retirement.

This is contrary to what financial experts advise, which is to put retirement savings first.

The survey also found that Singapore parents spend an average of $21,000 a year on their child's university education, more than twice the global average, with over half of them willing to go into debt to pay for it.

LIFE INSURANCE

Getting married and starting a family are milestones usually accompanied by decisions about life insurance. That is only prudent as you would want to have your spouse and children's current and future financial needs adequately covered, especially if they are reliant on your income.

Consider your family's health insurance requirements as well as the more affordable term-life insurance as your basic building blocks when reviewing your insurance needs.

If you are working, you are likely to be covered by your company's group life policy, but do remember that this is not portable and the cover ceases when you leave your job. You should, therefore, supplement it with your own life and health insurance plans.

Finance experts will also encourage you to consider disability insurance if you are unable to work due to a disability.

LEGACY PLANNING

We like to believe that we will live a long time to protect our families, but there is nothing more certain in life than taxes and death.

A will is a helpful legacy planning tool that will take care of matters when you die.

Especially for fathers of young children, one of the most important decisions you and your other half have to make is to stipulate who would be your children's legal guardian in the event of your untimely demise.

Once the will is done, review it periodically and when circumstances change.

However, having a will alone may not be enough. Other complementary legacy planning tools include a Lasting Power of Attorney (LPA) and an Advance Medical Directive (AMD).

Some people might even want to set up a trust for their children or siblings, particularly if they are mentally or physically handicapped.

Each document fulfils a different estate planning objective.

A will takes effect upon death, an LPA is effective when you are still alive but have lost your mental faculties, while an AMD takes effect if terminal illness strikes. And if you have Central Provident Fund (CPF) assets, remember to make a nomination.

If your wife has a low CPF balance, you can consider topping up her account using your CPF or cash. Changes on Jan 1 mean a CPF member need only set aside the Basic Retirement Sum - currently $80,500 - in his own account before topping up his spouse's CPF account up to the Enhanced Retirement Sum ($241,500 or three times the Basic Retirement Sum).

By planning well, you would have covered yourself for most contingencies while saving much inconvenience, uncertainty and cost to your family and loved ones.

WORK-LIFE BALANCE

In a bid to be a good provider and bring home the bacon, some dads end up becoming workaholics, spending many hours at the office or travelling.

Hence, they may not give enough priority to spending quality time with their family.

While work is important, make family time a top priority too.

Time flies and, before you know it, your children would have grown up.

It is worth your while to build memories with them while they are still young and need your company. Material things cannot replace the time spent together.

A version of this article appeared in the print edition of The Sunday Times on June 19, 2016, with the headline 'Sound planning makes for a Happy Father's Day'. Print Edition | Subscribe