Planning for a Baby? Here is how much you roughly need

Winston Koo, Group Director of Trinity Advisory Organization, delivers his thoughts as a financial consultant and father of two.

When our firstborn son was just shy of two years old, he was struck with a high fever in the middle of the night.

Even as inexperienced young parents, my wife and I knew he needed immediate medical care. As we scrambled to prepare to bring him to A&E, I remember my wife asking me which hospital we should take our son to. She was mindful of the high cost of hospitalisation.

As it turned out, he had to be warded for two days and the medical bill came up to a whopping S$5,000! Thankfully, everything was covered by the insurance company as we had bought hospitalisation insurance for the whole family. It certainly was one worry less for this pair of jittery young parents at the time.

Financial planning for parenthood isn’t just about budgeting for the big and obvious things like pregnancy cost, medical care, education and enrichment classes. It is also about being ready for the little things that crop up along the way. It’s about being financially resilient as a family unit.

There are obvious costs involved in raising a child and taking care of its needs. Thankfully, in Singapore, the government offers support and rebates to assist young parents in their new journey of raising a child.

Based on an article by Smart Parents1, raising a child in Singapore adds up to approximately S$670,000!

While the numbers can be daunting, starting a family is one of those things you ease into, if it’s for you. And everyone finds a way. My objective here is to help you get some gauge of your financial readiness.

In light of this, here are a few questions to ponder over:

Do you have S$10,000 to S$15,000 in savings?

This is an approximate count, aka ‘good-to-have’, and not an eliminating requirement. An initial savings will help you meet expenses with a piece of mind.

Is your debt situation under control?

Debt can literally be a heavy price to pay – to start planning a baby. It’s good to ensure you have a plan to reduce your credit card balances and consolidate your smaller liabilities as you plan to add on this big ‘little’ investment to your family.

Do you have a habit of saving?

Typically, I would advise setting aside at least 10% of your nett take home pay for your baby. It’s also a good time to do a fitness check on your other savings such as insurance, investments, retirement planning etc.

Are you eligible for grants?

There are various grants and tax benefits2 associated with raising a baby in Singapore for 2021. Check out what you might be eligible for in my summary below:

Grant / Benefit Features Timeline
Baby Bonus Cash Gift
  • To parents of newborns, as per the order of the child.
  • S$8,000 for the 1st & 2nd child & S$10,000 for the 3rd and subsequent.
Distributed over 18 months from the birth of a baby.
Child Development Account Allocation of specific funds to pay for a child’s healthcare & education expenses. S$3,000 directly allotted to every child’s CDA, to match savings in the account, subject to caps.
  • Newborns eligible for S$4,000.
  • For payment of insurance premiums & hospitalisation costs.
Automatically deposited on birth and registration.
Qualifying Child Relief / Handicapped Child Relief Tax rebate ranging from S$4,000 to S$7,500 available to eligible parents. Tax filing
Working Mother’s Child Relief In proportion to specific percentages of the working mother’s earned income, depending on the order of the child. Tax filing
Parenthood Tax Rebate
  • Shared by spouses that are assessed for income tax.
  • Rebate amount depends on the order of their child.
Tax filing

Beyond Expenses: The Tougher Questions.

Getting a head start in financial planning lies at the heart of raising a child. From pregnancy to raising a child comfortably, there are considerable expenses that need to be accounted for. Even after factoring expenses, there are still unaccounted questions:

• What happens to the child if both parents are no longer around?
• What kind of life insurance coverage do the parents have, for which the child is covered in an unlikely event?
• What kind of life upgrades do you want for yourself as your child grows? Perhaps a bigger home, investments, vacations etc.
• What about your retirement plans?

Parenting is a challenge, both emotionally and financially. Having a comprehensive perspective of your financial situation can make the experience even more rewarding, giving you peace of mind to experience the fullest joy at every stage of your parenting journey.

If you need a non-obligatory hand to get you ready for this important milestone in your life, drop me a line and I’ll be happy to work with you in your parenting journey.

1Smart Parents

SG Alliance © Pte Ltd All Rights Reserved  |  Co. Reg. No.: 202036335W