Making Cent $ Meet

Helping my sons fulfil their dreams now, not later

Sell my house, downgrade, use the money to give my sons a headstart - that's worthwhile

At my older age, I have been thinking about investing - in the welfare of my two sons even though they are independent and in their 20s.

I want to give them the financial freedom to chase their dream - be it a passion to nurture an artistic or social service ambition or take on a job which is rich in terms of personal satisfaction but which may not be very rewarding in monetary terms.

In other words, I want to open for them a path to avoid the rat race and not be bogged down by the fear of not earning enough to fulfil monthly commitments, say, a housing loan, which is the greatest financial obligation for most people throughout a considerable portion of their lives.

You hear of many folks who take out loans that stretch to 30 or even 35 years to pay for a home at prices that are still considerable even if the property market is not so hot these days.

But with today's economy going through more unpredictable ups and downs because of changes in technology, consumer trends, slowdowns in major markets and company restructuring, right-sizing or whatever the latest catchphrase is, one can never be sure one's job is secure or that one is spared from a pay cut.

But even if job security is not at stake, paying off a mortgage on top of meeting the expenses of raising a family and taking care of parents - Singapore is rapidly ageing - today's younger generation have their work cut out for them.

It is something, of course, that I have lived through too, accepting compromises and trade-offs along the way.

I think many of us older adults must have at one point or another wondered if we could have done something different if we had the freedom to do so early in life before we became set in our ways or had too much at stake not to rock the boat and make a U-turn.

I have been thinking about how I can help my two sons achieve that freedom to have options right from the start. I want to invest in their future so I get the dividend of seeing them fulfil their dreams.

As with most people, the biggest asset my wife and I have is our house, which has risen a fair bit in value over the years.

We have always thought of leaving that property to our children in our wills but the transfer may come in 30 years or so, going by the longer lifespans that Singaporeans enjoy.

So while the house will appreciate more in value by then, our sons would also be much older and, while they will enjoy a windfall, the money may come too late to allow them to make much of a life-changing, or career-changing, difference.

So my wife and I have been mulling over this option - why not unlock the value of the house much earlier and use the proceeds to give them that dream start, a chance to live life pretty much on their own terms?

We could do this before our sons get married - and will have to take on mortgages.

They may settle for an executive condo, with the recent liberalisation of the monthly income ceiling to $14,000.

But a decent-sized EC unit still costs up to $1 million, even if the calculations thrown up by the developers show the monthly obligations can be mostly met by contributions from the CPF Ordinary Account. But they will not highlight one important point - that you may have to sign up for a 30-year loan to be able to depend entirely on CPF outlays.

That is 30 years of a chain around one's neck, and who knows what will happen along the way, say, if interest rates go up or if a dreaded recession pops up every now and then.

Besides, one forgets that the money in the CPF Ordinary Account pays a decent 2.5 per cent annual interest.

But if we help pay the better part of our son's homes, they can then channel more of their own money into other assets or financial products that will give them a valuable headstart towards a stress-free retirement.

Who knows, with less need to watch over every cent earned, they may start family life earlier and help boost the country's low birth rate.

With a secure roof over their heads, my sons and their wives can truly focus on what they want to do in life, and act accordingly, even if the calling may come from abroad to volunteer their time and skills in a lesser-developed country like Cambodia or Vietnam.

Selling the house earlier will also free my wife and me from the work and expenses needed to maintain an underutilised home. With the proceeds left over from helping our sons buy their homes, we could move to a smaller flat, rent, maybe even relocate to Johor. Or even tap on this popular dual-key concept where one property has separate spaces - and entrances - for two sets of residents.

If you see merit in this strategy but feel you are setting up your children for the easy life, you can always use the proceeds to extend a loan to them, with an agreed-upon amount to be paid to you every month. And if you feel you should levy a small interest rate, that is your choice too.

The upshot of it all is that it will be tremendously satisfying to see how our children's lives will pan out - without too much financial stress - while we are still around.

And I await an earlier chance to be a doting grandfather too.

Even if job security is not at stake, paying off a mortgage on top of meeting the expenses of raising a family and taking care of parents - Singapore is rapidly ageing - today's younger generation have their work cut out for them.

A version of this article appeared in the print edition of The Sunday Times on December 06, 2015, with the headline 'Helping my sons fulfil their dreams now, not later'. Print Edition | Subscribe