I spent $500,000 on my child after calculation – Taxi Uncle

This post was inspired by my wife conversation with a Taxi driver.

Taxi Uncle was good in financial planning, and he reckons that he spent about $500,000 per child, and he has two children, he solemnly declared himself a millionaire, by total income earned in his lifetime.

A 6 digit sum expenses per child, is the magic number that most parents will come out with.

First & Foremost: Education.

Many parents feel that this is the number one biggest expenses that they will be spending on their child/children, and it is often their greatest worry.

But i beg to differ.

I am a strong advocate of ending the sandwich generation in our generation.

Just a quick calculation of education cost from my point of view. Purely education cost without allowance money, money given to grandparents, etc.

Childcare consists of 2 aspects, and should not be calculated as solely education cost alone.
1. The school taking care of the child, while the parents are not by their side. (Afternoon nap, showering, etc)
2. Education aspect.

This post’s point of view is more from the lower/middle low income family’s pov.

With enchanced kifas kicking in, and a cash gift of $3000 in CDA account, the first 4 years of pre-schooling(not childcare) is almost 100% covered for basic pre school without any childcare. And any expenses after the first $3000 is automatically discounted by 50% with the 1 for 1 government matching.

Scenario (Not childcare): At $6000 below for total household income, you will be paying a max of $60 per month for sparkletots Nursey to Kindergarten. (Without enhanced kifas, it used to be about $170 per month)

There are annual registration fees, annual material cost & uniform cost ($20 per set).

The cost would be about $3500 in total for the first 4 years of schooling for your child.

Pre school 4 years $60 x 48 months= $2880. (free for first $3000, CDA cash gift if not used for other purposes. )
Primary school 6 years $6.5 x 72 months = $468
Secondary school 4/5 years $15 x 48/60 months = $720/ $900
JC 2 years $19.50 x 24 months = $468
Poly 3 years $1000 x 6 terms = $6000-$7000 est. (excluding some higher paying courses)
Nitec 2 years $500 x 4 terms = $2000
Higher Nitec 3 years $650 x 6 terms = $3900
University 3 to 4 years average = $40,000 (excluding higher paying courses)

Allowance money should not be included in education costs, as irregardless of education or not, we need money everyday for daily expenses.

As you can see, if you decided to go for the bare minimum road for your children’s education, you would be spending a low 4 digit figures for your children’s education right up to their N, O levels.

As they go into higher education, learning a skill that will make them more attractive for general employment, it will start to rocket into the 5 digit figures, other than university, you would be looking at $1x,xxx max, that is for basic Singapore education.

My first choice for my children, is for them to pay for their own higher education. I believe it gives them a good investment perspective. Although alternative arrangements can be worked out, if their life went the unexpected way. Always ready for financial haywire.

As responsible parents, i do not wish for my children to give up on their education due to financial issues, i will set aside the money and let them decide if they would want to go into their first investment jouney with me. I will explain to them, on why i would prefer them to pay with the help of a tuition loan, and setting aside roughly 1/3 of their monthly salary to repay the loan. For $30,000 loan at about 5%, he/she will be paying about $900 per month for 3 years, roughly $3000 interest fees and processing fees paid.

I will teach them investing for a lump sum of $30,000 with the same timeframe of 3 years, the time needed for them to complete their university degree. And compare their total returns vs the $3000 interest to be paid to bank. This is their lightbulb moment, whatever they can comprehend from this comparison.

A lot of parents dread tuition loan due to the interest , and over commit to education insurance/investment scheme, with heavy lock in period and low returns, only canceling after years later and making a lost, my parents included. But i see it as an investment opportunity if you have that $30k ready and taking up the tuition loan instead, the first pot of gold.

After you have worked out the numbers, education costs and fees does not seems so far fetched anymore, it is not daunting when you face the numbers head to head.

My other thoughts on why i prefer them to pay for their own higher education fees, is also due to the question on whether higher education is worth it or not?

If they go out to work after their N/O levels, they will be getting a pay of $1,xxx, with chances of hitting $2,xxx, if they put in some OT, their choices of work would be lesser, as compared to one who possessed a cert of higher education and worked in relavant field.

After paying few thousand dollars of school fees and graduating with a poly/Nitec certificate, they would be looking at a range of $2000-$3000, slightly lower for Nitec, with the certificate paying for itself after a year of working.

And for university loan of $30,000 and a repayment duration of 3 years for 1/3 of their salary, the university cert would have paid for itself by 3 years time, with the knowledge and expertise sticking with you for the rest of your life. not to mention the higher starting pay of $3,000 to $4,000, as compared to diploma, nitec or N/O levels.

Different parents have different aspirations for their child/children. For me, i would like them to have more options for choosing but respect their decision, and to have the financial ability to send them for classes that interest them. Tuition are out for me at the moment, and i highly doubt that i will wish to send them for tuition in the future, unless they requested for it themselves.

The biggest expenses should be the daily F&B expenses and their allowance money. This is definetely a 6 digit figure sum, however it is still within the range of $100,000 to $200,000.

On average, 3 meals a day per child is about $10, excluding recess, which belong to the allowance category. At $300 per month multiply by 25 years, that would bring us to $90,000. During the infant years, $300 is also around there, when you include this and that.

Allowance is

Primary school $2 x 10 months x 6 years = $5,400 (Not given on holiday yet, as they are mostly at home.)
Secondary school $7 x 12 months x 4/5 years = $10,080-$12600 (Allowance given on holiday period for them to go out.)
Nitec/Poly/Jc $10 x 12 months x 2/3 years = $7,200 – $10,800

University $15 x 12 months x 3/4 years = $16,200 – $21,600

Total range for allowance money = $22,680 – $50,400

The allowance money doubled, when the education years are maxed out.

If I add all the expenses up, I am looking at about $150,000 per child, excluding university fees. For allowance money, I am giving slightly higher than what is necessary, I would like to observe how they are managing their money and their expenses/ savings rates.

If I aggressively reduce, I might be looking at about $100,000 per child, or if i add up all the miscellaneous, it will be about $200,000 per child until they start working. At $20k seed capital, at an investment rate of 10%, the money would double every 7 years, at the age of 21, I am looking at a good portfolio value of $160,000, with draw out every now and then to cover all the annual expenses, we would still be looking at a high 5 digit figures, which can be further deployed for their future life expedition, or added into the family portfolio for daily expenses or retirement.

Having children is our decision, and we do not expect them to pay back in any way. Realising their fullest potential for their first 10 to 20 years is our mission, and this no doubt require a good amount of money.

While we would have save a lot more without having children, and save all the headache, stress, tantrums, frustration & compromising. The joy of having children when you look back, is priceless.

At just $20,000 and a good, logical & sensible long term investing approach, the family finance is in good hands.

So have you set aside some money for your child?

Blogging

As my blog becomes a deserted island, I wonder why did I, again and again want to blog.

It always start with an urge to communicate my thoughts through words on any topic that interested me. Most topics are linked to finance anyway, from the money that flows through each and every one of us, investing that allows many people an alternative to life other than working till death do us apart. To the working culture, the politics around the world, to our everyday purchases, the house that we live in, the future of our ourselves, our children, our family, its linked to finance, it always has.

I take a long time for one post, often deleting and typing, deleting and typing, doing some research online for figures and references. And time is something that i can never have enough of, with 3 kids in the family. I have cut back on my career and income, to manage the kids schedule, and i prefer not to have a helper, i have always been a diy person, but big thanks to my in law, the children’s grandma, who played a big part in helping us to mange during the weekdays. It is what i called the divisive tactics, so there wont be middle child syndrome, or any other bad childhood upbringing associated with big family, but as the years passed, the health and energy level takes a big drain, often hitting new lows, and never recovering to the previous highs.

As a self-employed, i am blessed with the flexibility to cut down on work, while for employees, it is not as simple as changing from full time to part time, all I have to accept is the lower income range, i mean really low, lower than what I am earning from investments.

So i am extremely thankful to the younger me, for having a passion in investing, for willing to read a lot of books, for my career i self learned after NS, for investing i self learned from the library. Post tertiary education has not really played a big part in my career or in my life, late bloomer it must be.

I am more of a logical person, that’s why i chose value investing, there must be a value that i can count on, be it NCAV, NAV or PE, PSR.

To a logical person, it’s hard to see directly at the current state of world with eyes wide open.

You see leaders of the world that people used to look up to, bickering worse than children, bullying tactics, killing under the pretense for the greater good of mankind . If someone of the lowest integrity can become the great leaders of the world, it’s hard to teach your children to be kind, to be nice, to be good citizen and good people. When they are going to be working under the people whom you have worked hard your whole life to teach your children not to be. But yet we all persevere to teach our children to be kind, to do the right things, while it is always the innocent that get hurts, the world still need the majority to be kind, even if it is the silent majority.

No matter how many times i go round and round all these problems, the answer is always to be in charge of your life, to have enough money, so you can have more options in life, you can choose to walk away from deals that require you to kowtow, from jobs that go against what you stand for, and all the problems that can be solved by money.

As you can see from what I mentioned about my career and income, i am in the journey of “Coast FIRE”, with 3 young kids, it can be quite unimaginable for most of you. But i need very little, and i spend very little, and i always plan ahead.

Achieving FIRE too young, does not lead to happiness, it create a void in your life, then you start asking what is the meaning of life? Why am I still not happy despite living the dream life that most wanted? In life, you need to have a purpose, it can be love, it can be doing something for the greater good. It is ok if the purpose is temporary and you switch from one to the other, as one day you will realise that there is no purpose that is so strong that can last you a lifetime everyday 24/7, not even marriage or children. You can try to con yourself if it helps.

Right now the family portfolio is getting bigger, which is a good sign, we are able to draw out more to cover more of everyday expenditure if we want, but we are still quite young and able, so every year we take out money to cover the big items, while the bills, loan, etc are from our income, and if we have extra savings for the year, we will put it in too. We are on track for early retirement if possible, or FIRE, or (just do not want to work) whatever you call it. Positive cashflow, savings and investing has given us a good chance in life to pursue a different path from our parents and people who are in the rat race.

2020

It’s the start of the new year 2021, and most financial bloggers are putting up their report card for the year 2020, as the CFO of the family, it is my duty too, to consolidate and conclude for the year.

Let’s look at how the portfolio has grown over the years.

This year the portfolio grew by 9.53%, while STI ETF dropped 8.46% including dividends. The CAGR of the portfolio stands at 6.73% over 6 years.

2018 was a bad year for the portfolio, with a -14% performance, and the portfolio’s NAV has not recovered to End 2017 value of 1.59 yet. If i am a fund manger whose performance fees is based on a high water mark, i would have worked for free for 3 years by now, if i do not have new clients coming in, in the year of 2019 and 2020. Nevertheless, we inject new capital each year, so the portfolio absolute value is still growing steadily.

This year will be a milestone year, as the portfolio officially enters its 7th year, by the rule of 72, at 10% targeted returns, i will be doubling my starting capital at the end of 2021, or to be precise at 7.2 years. I will need to grow the portfolio at 30% this year to have an NAV of $2.00, however i won’t be doing anything different, value investing is still a very bottom up approach, on an individual company basic.

I am still invested in Singapore market only, while there are many opportunities outside Singapore, very exciting too, my target of 10% can be achieved in Singapore given the portfolio size. It’s me who is the problem, not the market.

A few thoughts i would like to share my views on:

  1. Conviction
  2. Stock Market
  3. Gold

Conviction

This year was a very important year for my investing conviction, a lot of the theories was put into use, and i have failed in one that i felt was very important.

” … to be fearful when others are greedy, and greedy when others are fearful.”

Warren Buffet

If the conviction was strong, and the discipline to follow your conviction was high, this year would be a good year to buy more and sell less, anyone who had done so, would be looking at sizeable gains this year. I did the opposite of selling more and only buying after i realised that it was not a good time to be selling, i also tried to time the market, as it swings steadily up and down in a tight range on a weekly basic, or so i thought, clocking in small gains and missing out on long term gains.

I was caught with my pants down, which reemphasize the important of cash level in the portfolio, i was a little lazy in the screening of stocks in the year of 2018 and 2019, so i told myself i wanted to work hard in 2020, i did much more screening, and was looking at financial reports of interested companies that fulfilled my criteria, so there were a few good companies that i wished to buy at the start of 2020, when the news of covid got serious, the cash portion of the portfolio was close to 0%, so while it was a good time to buy stocks from March onwards, i was selling stocks to raise cash, which was quite silly, if my conviction is strong, i would have injected more money into the portfolio. As a value investor, our cash holdings can be high at times, which will pull down the overall performance of the whole portfolio, sometimes this cash portion can also save the portfolio from dropping too much, if i was fully invested in 2018, it would not had been just -14%, it will be much worse.

Stock Market

It has been said many times that the stock market is forward looking, and the price is very seldom a true representation of the current economy or company value, most often, the price of the stock market/ companies swing to and fro, briefly touching its intrinsic value every now and then. A trader trade short term based on the flow, the trend, the graph line, RSI, moving average etc. The quant invest based on it’s algorithm. The dividend investor relies heavily on the dividends yield, while the growth investor looks for how much the companies can grow than its current value, the macro investor more on the whole wide economy trends and what is the next new innovation and disruption, while the value investor more on the asset values of the company. These investors make up the stock market, along side many others type of investors and big fund management corporation. The stock market is often a tussle between many groups at one time, depending on the monetary powers on each side, and the liquidity present in the whole market & economy.

On hindsight, the US market new highs is pushed by the extremely low interest rates, and flush liquidity in the market right now. It is almost as if covid has not happened, and the world is in a very good shape, which i think even people on the main street can see that it is not so. The greed level seems to be high right now, with many earning good money from the stock market, and many others who have missed the rise, following right in the footsteps, so 2021 will continue to rise?

If everyone want to continue dancing, the music has to go on, but as people start getting tired, and wish to go home, there will be lesser people in the ballroom, and at a certain point, the music will stop.

There will be displeasure from people who want to dance a little more, but has a hunch that the music will soon stop.

There will be disbelief from the people who heard from all the fantastic reviews from people around them, that there is a 24/7 ballroom which plays good music, they sold some stuffs for money, they set aside budget to make this long trip, and truth beholds, the music was great, the people are great, but suddenly after 3 songs, the ballroom electricity was shut down, no music, no ventilation, no lights.

The people living around the ballroom, knows something was brewing, there were noise issues, traffics issues, legal issues, this situation can’t go on forever, but yet people are still flocking into town, creating good income for the people in town who offer services, food and accomodation for the visitors.

Soon, people start moving into this town, where job opportunities are abundant. A new eco system was created, with the ballroom in the center of the new economy.

What happened when the ballroom closed? What happened before the ballroom closed, with a few privileged people knowing the news before it closed? What happened to the people that came last?

I have no doubt, that there will always be another ballroom to replace the previous one, there are people whose livelihood depends on the existence of the ballroom, but if you do not, it is always prudent to wait. Opportunities lost do not results in losses.

Gold

I do not have much interest in investing gold, as much as i do not have much interest in investing properties. But i think they are one of the best way to fight inflation with very minimum effort needed in the research/ reading phase. Many older folks got their fingers burnt in the stock market, following the hot stocks, or that mentality that government linked stocks will never failed. But the gold jewelry they purchased many years back, even taking into account the jewelry design fees, they are still looking at a very good profit.

For properties, you get good returns, because of leverage, the value does not fluctuate as much as the stock market, and inflation include properties prices too.

Gold has been compared with bitcoins as alternative investment, however gold has practical usage in the world, but bitcoins does not have any practical usage yet, at best an ideology. You will find some gold in most families, but rarely bitcoins, so it is still a bit far fetched comparing bitcoins to gold. Long term wise, it can be very good at fighting against inflation, especially in country which is very unstable, whose fiat currency are at a big risk.

It is getting easier to invest in gold, whether it is physical gold, or gold etf etc. There are still some hurdles, and more expensive fees as compared to the stock market.

I think gold is more of an insurance rather than an investment, you do not need to claim from insurance most of the time, but just that few crucial claims can benefit you for life. I have strong faith in the SGD, much more than USD, although if USD fails, most currencies will go down with it. In my generation, it is quite hard to fathom SGD and the Singapore Govt failing in its monetary role.

The Singapore government is like a value investor, very cautious and stingy at times. This is very important to a small country with no natural resources, the covid year was one of the rare times, that the government is giving a lot of money to the citizens, USA is like someone with high income power, top 1% income tier, with high spending habits with no savings, a spendthrift, spending all the income and getting into debt to fund that lavish lifestyle. We wouldn’t teach our children to spend all their monthly income, and wait for next month to come, so why should a country do so, unless it is to stay in power, and who benefit most from it?

I got a hole in my backyard, the hole gets bigger as the months passed by, i got some stuffs to fill up the hole, but the hole gets even bigger from all the weight of the stuff. Should i get the hole check, instead of dumping stuffs to cover the hole, if the hole requires extensive repair works and quite a long timeframe, which will affects me, my house and all my neigbours, are we willing to bear with it? Or we would just cover it as the experts has said, in my lifetime it shouldnt be a problem. You can move house if you want to, as the repair cost can be quite high. Luckily i still have a choice to move, but what if i do not have a choice?

2020 online expenses



I paid: $33.92, NTUC: $41.85, Shopee normal price: $41,50 , i saved $7.58.
I paid: $30.48 for 12 tubes, $2.54 per tube, NTUC at $8.50 per tube, Shopee Colgate at $18.50 for 3 tubes, i saved $43.52!
I paid: $54.10, NTUC per carton at $40.65, Shopee at $59 for 2 after discount, i saved $4.90
I paid $12.75, I saved $2.25
I paid: $33.21, NTUC: $41.85, Shopee $41.50, i saved $8.29.
I paid: $155.05, NTUC: $257.40, Shopee $177.50, i saved $22.45.
I saved about $20 due to free 1L.
I paid: $56.23, NTUC: $76, Shopee: $68.90, i saved $12.67.
I paid: $26.04, NTUC: $53.70, i saved about $27.66.
I paid $56.53, NTUC per carton at $40.65, Shopee at $59 for 2 after discount, i saved $2.47
I saved about $12.45 and more from the promo used and bundle deals.
I saved $13 from promo used.
I used voucher to sort of waived off the delivery, and $10 saved from flash deals.
I saved $14.53.

I saved a total of $201.77 as compared to normal shopee prices, the 12% cashback in shopee coins for selected listings will further reduce the savings gap.

However if we compared to NTUC prices, the savings are huge, at about $360, just for the above expenses.

The above expenses are just a part of the family online expenses on my side, there are more on my lazada account especially formula milk, and also on my spouse side. I reckon we saved at least $1 to $2k each year.

We can really feel the difference, when we switched from NTUC to online e-commerce, as during the time of our first born, there was no shopee/lazada. While we always wait for the promotions in NTUC, the savings cannot be compared to online shopping, where the brands sell direct on the platform without adhering to the retail price they set in the supermarts.

Points to note:
1. The 12% cashback in the form of shopee coins, is one of the biggest reasons behind most of the savings nowadays as credit card promos are notoriously finished up before the morning with people buying right after 12am. The in-store vouchers/promotions plus some flash deals are attractive from time to time.
The cashback will end one day, just like Grab crazy promotion, during their fight with Uber for market share. We could saved a lot of money back then for Grab, with some of the trips costing next to nothing. We moved on after the promo ended. Enjoy while it lasts.

2. Planning for your purchases and delaying them for further discounts will always help you to save money, your choice whether it is worth it.

3. While the savings seems minimal, over your lifetime if you applied it to most of your purchases, especially the big ones, you will save a lot, and always remember, money not spent is not money saved yet, only when you put it aside, save it, invest it and let it grow, then you will really feel the power of prudent purchases and compounding!


Hello World

The first post, the first step.

I am the CFO of my family, we are Singaporeans. And thus the domain name, cfosg.wordpress.com was chosen.

CFO can be Chief Finance Officer, it can also stands for Chief Family Officer or Chief Father Officer.

Join me as my family and i navigate through Singapore living standards, this blog will be more skewed towards the financial aspects of a typical Singaporean family.

It will be from my point of view, touching on some interesting purchases, some number crunching on the yearly expenses, my investing journey, and the decision i made over the years.

I am Y, 34 Male (Yr 2020), married with 3 kids, living in HDB with a housing loan, no car, self-employed with minimum CPF.

My current biggest financial goal is to invest wisely with a 20 years time frame, aiming for a 10% CAGR over the years, so that my children will not be the sandwich generation anymore.