Managing Your Finances As A Couple [Chills 19 Sponsored by Providend]
Finding your better half and planning for your big day with your partner… these are indeed some of the most wonderful moments in life. When a couple decides to spend the rest of their lives together, what are some factors to consider when it comes to managing their finances? Chin Yu & Yong Cheng share more in this episode from a special TFC Chills series brought to you by Providend, Singapore’s first fee-only wealth advisory firm.
Reggie, together with Chin Yu and Yong Cheng from Providend, dissects the major milestones that couples may encounter in life: buying a house, starting a family, planning for retirement. They share the pros and cons of combining finances; is it always beneficial? What can a couple do to balance each other’s property aspirations? Much of the discussion is also spent on the topic of having children and some perspectives to consider when planning for your child’s birth and education. On the other hand, what if a couple cannot decide if they want children? On top of everything, retirement should also be part of the financial plan as the couple grows old together.
Whether you are planning to start a family or deciding which property to get, Chin Yu and Yong Cheng emphasize on the importance of having an open conversation to understand each other’s needs and wants. When you are bonded with your partner for life, it is no longer about you versus others. It’s us versus the world.
To get an honest second opinion about your finances from Providend, go to https://thefinancialcoconut.com/work-with-providend/
Reggie: So transitioning from being a solo bachelor to settling down to an official marriage is definitely quite a thing. Apart from all the emotional, psychological, lifestyle changes that you have to go through where two assimilates into one, now you really have to sit down and have serious conversations about money. So no more “where to go for cafes?”, “what to do in the future?”, “where to travel?”… now you really got to sit down and plan your finances. So how should you as a couple, plan your finances for young family? What are some best practices, real concerns, trade-offs that we all have to grapple with to create that magical family experience that many may crave deep down? So welcome home as we discuss all of these and more.
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Welcome to a special mini series of Providend Chills with TFC. In this series, we will be bringing on a team of wealth managers and financial professionals with varied life experiences to share about topics we believe you will be interested in. Definitely this series is sponsored by Providend, if you cannot yet tell, Singapore’s first fee-only wealth advisory firm, meaning all their clients pay them a fixed fee for planning their finances. They do not accept any fees or compensation from product providers at all and with this model, they believe there will be no conflict of interest.
In today’s episode, since everybody sees family differently I think we have a great time discussing this. So joining me on this banter of best practices and practical trade-offs, we have a duo that did not start their careers out in the financial world. In Mandarin, we term this “halfway monks”, 半路出家 (switch to a job one was not trained for), leaving their highly- paid careers in audit and aviation to join this space on wealth management and financial planning. So let’s welcome Chin Yu and Yong Cheng: young dads, personal finance enthusiasts, wealth management professionals from Providend.
When you’re young, you want to do all these things, you are alone, and then you have a certain way, certain outlook of life, certain way to manage your money. But then when you transit it to the reality of a family.
Yong Cheng: Yeah.
Reggie: So now that you have decided to set up a family, two of you come together. Whether you have kids or not, that’s another big question mark.
Yong Cheng: Yes.
Reggie: How does this whole personal finance strategy then change? Because you’re no longer just you, right?
Yong Cheng: Yes. Yeah, exactly. You transit, but you cannot fully transit into somebody new. What I meant is that, for example, you might want to be a bit more prudent in your investment philosophy, but maybe some part of you still want to trade stocks. It’s fine. I guess it’s about striking a balance to think about it as what is material for my financial life or my financial life, my family financial life in the next five to 10 years, and then choose something that is a reliable way to get returns, but you can still continue to use what we call “play money” In Providend, we say “play money” for you to still enjoy that as a hobby, as an interest.
Yeah, but a lot of things actually started with conversation. Having, I would say… one party would need to initiate that conversation to spark off, to start thinking about setting goals. The thing about how do we structure both your finance together, even think about family goals, whether you want a child or not? Do you all… planning to have children, where do you stay? Questions like this have to pop up, but I will always start off by giving credit to the person who wants to initiate that, the partner, because it’s not easy.
It’s not easy to have to talk about money because you know, getting together, going to a marriage, I think the first conversation that they will have to talk about money is about wedding budget. Right? And that’s only I would say a small part of it but… we have gone through that phase where even if it’s a small part, it can create some drama. Yeah. So then if we…
Reggie: [chuckles] Some only ah?
Yong Cheng: Yah some drama.
Yong Cheng: Because their drama is not just you and… me and my wife. It also involves two other families, right? So who to contribute how much angpao (red packets) and then you also have who to invite and all this. So some drama.
Yong Cheng: I mean the drama will stop after the wedding is over.
Reggie: That is drama part one, right?
Yong Cheng: Yah, drama part one.
Reggie: And then all these other things then come in.
Yong Cheng: Yes, yes. So it’s hard because… imagine we need to magnify this topic from wedding, which is a one day event, to a lifelong conversation about having to set goals for the families. How do we manage the common expenses that’s coming in? I think if we even deep dive into insurance… into how do we combine our wealth to invest. These are tough topics. Very tough.
Reggie: So you think couples should combine their wealth? Is that what I’m hearing?
Yong Cheng: I don’t think it is a must. In my opinion, I think there are two perspectives that could give benefit to combining wealth. Number one of course from a financial perspective… is a bigger asset base You can do more compounds faster, rather than one doing something, the other one doing… you don’t have really a good idea of what each other are doing from a relationship point of view. If you combine wealth, more likely you will talk about what do you want the wealth to be. I will say about… for example setting goals. I think in a marriage, it’s good to have a common goal that the couple can work towards to and it strengthens the marriage because you have accountability. You have an accountability partner to say that if I were to spend $500 on… we were talking about iPad on our way here. I think [indiscernible] new iPad…
Reggie: New launch. Purple colour one.
Yong Cheng: Yes.
Yong Cheng: [indiscernible] If you were managing your own finances, I think the thing is I just spend because it’s money that I earned. But if we were to combine together, then you will have… maybe the couple will have a portion and say that “okay, you know this X dollar is savings towards our common goal. If I were to buy the iPad, then I will need to find my money somewhere”. Then you are accountable to your partner and along the way, as both are accountable to each other, I think the relationship gets stronger.
But in our experience, as we are working with clients, we also have couples who choose not to plan together. And it’s nothing wrong with it because number one, they could just be very used to doing it. Yeah, for the last 10 years, last 15 years, we are used to it. They might have also some form of planning together, finance… a joint account is one. That’s quite simple.
They might also come to a conclusion that maybe my investment philosophy is different from my husband. For example, husband maybe [indiscernible] likes to trade stocks. The other one feel that… I prefer a more safe instrument. That could also be different levels of interests. One is more into finance, the other one is not. Yeah, so various reasons.
Reggie: Of course, of course.
Yong Cheng: At the end of the day…
Reggie: But the reality is when you decide to go into a union… two of you come together to decide to go into a union, finance is just an extension of the union essentially. Because what I’m hearing is oh yeah, you can manage together, you can also manage separately. Duh, that’s the reality. But when you decide to come together, there is some sort of commitment to each other as a union entity.
Yong Cheng: Yeah
Reggie: But at the same time, how do you retain your individualism? To me, that is always that balance, right? How do you go about doing it? I want to hear what you guys think about it. Because if you manage everything together, then it becomes… you are just committed to this thing already. This is a union and there’s no more individuality. Even buy iPad $500 also need to think [indiscernible] sounds super painful… I feel so painful. But then if you manage separately, it does not really feel like this is an extension of this like marriage and family and whatnot. So what do you think?
Chin Yu: So personally, I don’t think that you really need to combine. And it doesn’t mean that by not combining, it’s not an extension. So this not only applies to finance but it also applies to anything. Your wife likes to exercise, you like to sleep at home. Your wife likes to eat a certain diet… but at the end of the day, you want to have this common understanding on where are we heading. So I would say firstly, when you’re transitioning from an individual to a couple is that want to have this change in mindset. You’re moving from a single unit to a family unit and you got to recognize that your decisions actually impact another party and even more so if you have kids.
So it’s always a question of if you’re going to plan together, how is this going to impact us as a family? If you want to plan separately and if you want to… one party wants to work until 65, he wants to spend more now on gadgets, whereas the other party wants to retire as soon as possible. As long as I feel you have this open conversation, I feel that you want to still plan. At the end of the day, the plan can be separate. When it comes to execution, it can be together. It can be separate, I think that’s fine but the main thing is you want to be open. You want to be honest with one another and you want to define goals because you still want to respect this individuality. It doesn’t mean that marriage means that you follow my style or I follow your style. Yeah, but I always feel the communication and honesty with one another and sitting down to plan together… it’s very important.
Yong Cheng: Yeah, I agree with Chin Yu. I think a union is in substance. That’s most important rather than forcing a union in the form. If both parties are not happy, not comfortable putting wealth together then in a sense this is a form, right? Putting money together is a form. But like Chin Yu mentioned, if there’s no communication, no understanding about where this is going, it’s not going to work. It’s not going to work. So it’s important to have union in substance more than form.
Chin Yu: Yeah. Although I wouldn’t say there are certain aspects that you can’t run away from planning.
Reggie: Like what?
Chin Yu: Children. You cannot… okay. So for example, if you say one party wants to go spend a lot of money on iPads and the other wants to save more money so that this person can enjoy more and spend more in the future, I think that’s possible. But it’s not possible to say “okay, I want my daughter or my son to go a certain direction” whereas the other party has other plans for him. So I think children is one example.
How much you want to spend on education? This can vary quite a bit. Preschool itself can range from a few hundred dollars a month to a few thousand dollars all the way to tertiary education. These are the ones that usually we would recommend to really sit down and figure out how do we… okay, firstly what do you want to achieve? And then how do you want to get there?
Reggie: Because essentially if you think about it, there’s a mirage of goals out there. You can achieve all these different things that you want to achieve. Choices is the thing these days. There’s a lot of possibilities out there and we cannot discount them when you’re talking about it. I just want to be clear that there are a lot of perspectives in this way of planning family finances. Again everything be together, separate, half-half, 30-50… whatever.
So there are a lot of ideas here and we can talk about perspectives and best practices and not so much about “oh you should just do this or no this is wrong” and all those kinds of things. But on that basis of wanting to plan, anything that is a plan has a goal. There must be a goal that we’re trying to head towards. So when we come together in this marriage, what are some common goals that people plan for?
Chin Yu: I think the very common goals…
Reggie: Kids, like you pointed out.
Chin Yu: Yeah. Correct. So kids is one… we are talking about major goals. So kids’ expenses, that’s one. Of course, everybody needs to retire one day. It’s not possible for you to keep working. So I think that’s the other…
Reggie: I challenge that notion [laughter] but that’s a long long story for another day. Can you keep working forever?
Chin Yu: Sometimes it’s involuntary. Sometimes you want to keep working forever but…
Reggie: Then you don’t call that retirement. You call that retrenchment [laughter]
Chin Yu: Financially independent.
Reggie: Situational, situational.
Chin Yu: Sometimes it’s sickness, sometimes it’s old age. I know people who are working at the age of 80 over years old and they enjoy it, but that’s also provided that they have the physical capacity to actually continue on. Yeah. So sometimes things happen, at least you want to have a certain plan. But even then, these days there can be quite a range of different perspectives.
Chin Yu: Gone are the days where people just accept that you are just going to work until the government’s retirement age and then enjoy. Some people want to retire early but that requires trade-offs. If there are any, I suppose, very significant perspective, you probably want your other half to know about it as well. I think the main thing is that you don’t want surprises to come along the way..
Reggie: But you think surprises will come along? My view is during your dating period, you guys probably should already talk about it already. So at some point in time…
Yong Cheng: [softly] You will be surprised.
Reggie: You have clarity… really? Tell me more, give me some examples. Personal experience, friends, clients, whatever. What surprised some of these people after they come together? “Eh I didn’t know my partner actually want this”.
Yong Cheng: I guess dating… of course when we were in the dating phase, there is the honeymoon phase. The first three months, first three years…
Reggie: Where you want to eat? Which cafe you want to go? That kind is it?
Yong Cheng: Correct correct [indiscernible] One partner could say “okay, I’ll just let it be. I just make my girlfriend or my boyfriend happy, and then I just do it” because it’s not that serious per se, because it’s purely dating. But just now like how we started this conversation, once you transit into and what Chin Yu mentioned, transit into twos, individual units into one union, two people make decision and it will impact the other one then different things start coming up.
Things like money values because in the past, I could be spending my own money. I want to buy this bag, maybe buy gadget. I think it’s fine. But if once you get together in a union, then money values… whether is it too far apart, or whether if it’s too far apart, can you all come to a common understanding of how you want money to be working out in your family life? I think that could have some surprises because of course we have people who say “this is my money. I worked so hard for it. I spend”.
Reggie: I think that’s quite a narrative.
Yong Cheng: Correct. Yeah, so I worked so hard for it. I spend… I think it’s fine. As long as I am putting aside X dollar to joint fund, I think it’s fine. I’m doing my part. Then the other partner could be the more prudent one. Maybe he put X dollar, similar amount, but he’s probably doing more savings on the side. And then you come to a stage where when we want to talk about having the option to stop working or having the option to say, stop work so that I can have one parent to be at home for the kids. Then the money thing start floating up, because one would may be say that “hey, I’m putting a lot Into this thing” and maybe the other have not saved much.
So sometimes it can be difficult because when we handle couple clients, sometimes we do see quite different thing, a different level of savings. And then when we go deeper into understanding their money values, then you see all these things start floating up. This could be a surprise to either party when they come together. But sometimes maybe they just learn to accept it and then they do more on their part.
If they are having a good career, I think if they are… everything is smoothly going along the way then I think it’s fine. Of course the pandemic taught us that things may not go our way. So then some of this money issues might start floating up, if my job is unstable then somebody got to… one of the partner might have to pick the rest. These are like what Chin Yu mentioned. (If) these are not talked about earlier on, then it becomes difficult when when things that you have not planned for happen.
Chin Yu: I think maybe, I can share a personal story. Growing up, initially both my parents have been working. Along the way, because my mom wanted to help me in my studies, she left her career to support me. My dad was the sole breadwinner, so of course he continue working. And then, I remember one day when he came back and he said that he has had enough of his job. That came as quite a big surprise to my mum. Yeah. I don’t know whether they are going to hear this, but [laughter]
Reggie: I’m sure they’re going to hear this.
Chin Yu: Yeah. But I remember it quite clearly, there was quite a bit of stress, especially on my mom’s side. I suppose… I sense that in a way… questions like okay, if you’re going to leave the career, what’s going to happen to all the bills? Do we have enough for retirement? And I remember in the end she broke down crying. But of course, we sat down together to try to… I mean they sat down together. I was still… I cannot remember how old was I. They worked out a plan for it. But when it… really comes as a surprise. Those are big decisions, to suddenly say that I’m going to stop working just like that.
Reggie: That’s quite a typical story out there, when people go through this process of discovering what they actually like. They go through their career switches, mid-career change. It’s a very real thing, and today of course, a lot of families are dual income, and sometimes with kids, one parent want to take a back seat, whichever side and all that.
So those are some realities that people struggle with, and we’re not trying to oversell certain sob stories in a sense that, we don’t to over… oh yeah, this is… Everything is a possibility, because your lifestyle… things will change and many, many things you cannot control, right? Like pandemic, like retrenchment, company seismic shift, whatnot. But at least based on our preliminary talk, I think there are a few things that people are concerned about, like kids, retirement, maybe housing.
Chin Yu: Housing. Yes.
Reggie: So these are probably the three things that Singapore always talk about. Every time I post these three content, sure a lot of people listen one [laughter] These are the things that people care about locally, so we cannot lie to ourselves. What are some things that you guys think is a good practice? Let’s say we start with housing. Because I feel right, the process is housing, kids, retirement in Singapore. At least it sounds like this, it’s how it is in a modern…
Yong Cheng: I would say it’s housing, marriage…
Reggie: Housing, marriage…
Yong Cheng: Then kids.
Yong Cheng: BTO first right?
Reggie: Okay okay.
Yong Cheng: BTO, then talk about…
Reggie: Wait, was that how you proposed?
Yong Cheng: No, no, no. I’m.. very traditional guy.
Reggie: Traditional means what? Kneel down, with ring, everything…
Yong Cheng: Got picture.
Reggie: Ah okay okay. Can ah, give you off [laughter]
Yong Cheng: Yeah, I think when we talk about housing… I think again, conversation. I think having an understanding. While I think it’s prudent to start off with public housing, BTO or resale, I guess it’s also good to understand from each other what is their property aspirations? Because… for example, one of the partner might grow up in a landed property. I do have clients who say they grow in landed property. It’s where they have their childhood. They have a big garden to run, and one day I will envision my children to be like me in the past: a big garden, I grow up. And then when everybody comes back, you have a good space. So they might start out with some public housing and then slowly they envision themselves having estate or landed property. Maybe the other partner grew up in public housing all the way.
So again, like we talked about, is good to have a conversation, to try to understand each other’s property aspirations. Ultimately, at the end of the day, property is one huge asset. Yes, you can never escape it. It’s going to be a big chunk on your balance sheet and it’s usually commonly funded together, both parties having to pay it together.
So I think it’s important to have that conversation about both… property aspirations. Of course you can get a sense of how it is through their childhood.
Chin Yu: I think property… yeah, aspirations is one thing, but at the end of the day, it’s about being realistic, what you can afford. I mean, these days, I actually have quite a lot of conversations with clients about property for some reason. Property, two main things that we look at. One is the upfront cost. So you’ve got your lump sum down payments or stamp duties. Your renovation costs, if you need. That can be quite substantial, depending again on your property aspirations. And the other one is your cashflow. So you want to be realistic about your cashflow. Typically, we always recommend try to keep it within 30% of your monthly income.
Chin Yu: 30%.
Chin Yu: Yeah, of course if you want, you can stretch it further. Of course you do have your other expenses. It’s quite dangerous if you overstretch yourself because you never know where, for example, a pandemic hits. What happens if your income…
Reggie: Everything is pandemic these days. It never was a thing.
Reggie, Yong Cheng & Chin Yu: [indiscernible]
Reggie: Nobody cared about pandemics in the past.
Yong Cheng: Yeah, before pandemic was global financial crisis.
Chin Yu: Whatever the crisis might be.
Reggie: Yes, yes. I get your point.
Reggie, Yong Cheng & Chin Yu:[laughter]
Chin Yu: Yeah, so I think you always want to be realistic. You want to be prepared that if something happens, even if the income stops, would you have a buffer to sustain these mortgage repayments as and when they come along, even if for a short time, you don’t have an income or you don’t have a job.
Because once you start stretching yourself, once you start planning based on… okay, I’m going to have an increase in my salary. Then you start thinking about affordability from a future income point of view, which is not here yet.
Reggie: So there’s a lot of expectations, adjustments in that sense. You have all these aspirations. I first start at here, property aspirations… but okay. If you have aspirations of… you want to own a big property, but then there’s some realities that then you have to balance that off. So fundamentally comes back to the question of trade-offs. What are you willing to trade out of it? And maybe in a housing setting, people are more willing to trade, right? I mean here, there’s not a lot of choices, but what about kids?
Kids is that touchy, touchy thing, like… because we are talking about family planning today, right? So we definitely 跑不掉 (cannot run away from it), we definitely have to talk about this thing called kids. How many kids? What are the costs? What’s the reality? So for everyone that’s trying to look at having kids or entertaining this idea, what do they need to think of?
Chin Yu: So in terms of the expenses, same thing as suppose, what do you aspire your kids to have? Education is usually the big one.
Reggie: Give us some frameworks. How to aspire?
Chin Yu: Education, for example. What sort of preschooling would you expect to provide for your children? Because today it’s such a wide range. You can go from government type of preschool, childcare arrangement, a few hundred dollars. Or you can go to international schools. You can go to a much higher end private preschooling and the cost can go up to $2000-3000. And that’s not a small sum. One year you are talking about 24 to 36…
Reggie: Montessori, those kind of thing, right?
Chin Yu: Yeah. Correct.
Reggie: Wah Montessori, new name but yeah, $2000-3000 a month.
Chin Yu: Yeah, correct. So I think you really want to get on the same page as to firstly, can you afford? Secondly, I suppose, why do you want to spend this money? How important is this to you? Yeah, because we are talking about 30 over thousand a year. You then talk about, you’re actually trading off a lot of other things in your life.
Reggie: But that’s probably not the biggest ticket when it comes to education. The last one, which is the university is the thing that more people I think, they grapple with. Because everything in between is relatively public-funded like primary school, secondary schools, JC (Junior College)… if you get to poly(technic,) it’s a little bit more expensive, more private, but still not crazy. But hey, when you get to the uni(versity)… did you guys know the inflation rates for uni fees, and some thoughts there?
Yong Cheng: Internally we use 6% in terms of the inflation.
Reggie: Every year?
Yong Cheng: Yeah, internally in terms of data we track. We have been using 6% and yeah, you’re right. The tertiary education piece is a big one and it’s good to start talking about it as early as possible. While we know that for guys, it’s 21 years down the road. For ladies, if you have a daughter, 18 years down the road.
Reggie: Wait, so are you telling me that to plan for family, even all the way up to tertiary education, I should talk about it right from the get go with my partner?
Yong Cheng: think… is warming up. You have to warm up to that topic.
Reggie, Yong Cheng & Chin Yu: [laughter]
Yong Cheng: Right? Chin Yu talked about preschool and all. This is something very close to you, you can envision and can see. It’s also a phase.
Reggie: Cannot every day talk about cafe, movie, right?
Yong Cheng: Or iPad.
Reggie, Yong Cheng & Chin Yu: [laughter]
Yong Cheng: Because you will have friends who have… went ahead of you.
Reggie, Yong Cheng & Chin Yu: [indiscernible]
Yong Cheng: Front runners, and then they go first. And then you look at… then this IG (Instagram) story you see. Oh move on already [indiscernible] These are avenues, opportunities to start talking about preschool. Of course, the uni part, the tertiary part. I think sometimes it’s useful to have a third party to come in. Because like you say, it’s not a topic that you… on the get go, you talk about it.
But sometimes if you talk to a financial advisor, then this kind of topic start coming to you because of course, sometimes it’s on sale, sometimes it’s more on the planning pot. But then the topics start coming in. If you say “let’s aspire our children to be locally educated”, I think it’s quite subsidized. Living expenses is also not very high in Singapore. Rather, if you manage your expectations, I think that is quite okay.
Of course we do have clients who are educated overseas and then they see the benefit of being exposed to multiculture, to being able to live independently away from our family and then they come back being a more resilient person. So they might say, let’s give our children the option to be able to study in Australia, UK, US.
Then again, we go back to trade-off. Because you want to be able to put aside that X dollar of money at a certain age and not forgetting that these are goals that you concurrently need to plan towards together with your retirement.
Reggie: Sounds like a lot of things.
Yong Cheng: So when you put all their money together, when you put the sums together and you put the calculation together and we chart it out, It becomes quite stressful.
Reggie: I mean just hearing, I already like wah.
Yong Cheng: Lao gua (breaks out in sweat)
Reggie: So many things to look forward to, right?
Yong Cheng: Yeah.
Reggie: Okay. So then there’s this part about choice essentially. Because like what you said, right? So overwhelming. There are so many things to think of: kids, education, retirement, housing, all these things. But for a lot of people, when they go into a union, these things are not… I don’t really care. Do I really want kids? I don’t know, question mark. Do I need a house? Yeah, I need a house. That’s something that I know I need. Do I really know when I’m going to retire? Nah, I don’t know. So for a lot of people, it’s not a thing. It’s not very high up their priority in terms of management. But possibility is oh, maybe five years down the road, I will entertain this kid idea. So how do I manage this from a financial standpoint?
Yong Cheng: Yeah, I think you’re right. I think for layman… is something that is not in your face yet. Sometimes as financial planner, we also ask ourselves are we the oddball who keep thinking about our future, having to chart out all these things to make sure that things are…
Reggie: Having to chart out, I think you’re the oddball.
Reggie, Yong Cheng & Chin Yu: [indiscernible] [laughter]
Yong Cheng: Yeah, so are we the only group of people who are in Providend talking about all these things and then the world there is actually just happy with things…
Reggie: Yeah just living your life… You just came out, you jump a few career and then jump a few jobs and then you settle down. Maybe this is my career, and then you get a partner and then you entertain this house. Nobody like… everything also chart, you know?
Chin Yu: That’s why at the start, I always say I think the partner who wants to start talking about all this has to deserve a big pat on your shoulder.
Yong Cheng: Respect. Because you know they have the… question. Am I the oddball who… things are okay, what if I ask this and start talking about all these things? And sometimes, during our sessions, our clients discovering about their life, their priorities and all this. We ask questions and they do share that these are things that we don’t talk about on a day-to-day basis, you know?
But it’s good to have somebody sit down and talk about it and verbalize it. I think that’s most important. Yeah, you’re right. The part about not thinking yet, I think is common. We often feel that we are odd [laughter] but we continue to be the oddball to advocate… people to start thinking about it because yeah, life throws us… will throw curve balls and we want… at least you don’t do anything, but at least you are mentally prepared to handle it if it happens. Yeah. Like you said, kids right? Suddenly come, what to do?
Reggie, Yong Cheng & Chin Yu:[laughter]
Yong Cheng: You start scrambling for what to do, what to buy…
Reggie: Yes yes.
Yong Cheng: So yeah.
Chin Yu: Yeah, I think it’s quite normal also. We always say planning is good because I mean… earlier we talked about tertiary education. You can see that it really ranges, very, very big. What, at the end of the day, you want to achieve? For example, some people say “I don’t even want to provide or support my children’s tertiary education.” You can take a loan. I have taken a loan, he can take a loan. I don’t need to build up, I focus on my retirement. There’s no wrong also.
On the other end, you have people who want to cater all the way to medicine, to the US. Of course, individually, you want to understand why that is so? Because I’ve seen before in certain cases, somebody who is educated in the US doesn’t want their children to go to the US to be educated. Yeah, so while we always advocate doing planning, again it’s very very normal to not have a clear idea exactly what sort of goals you’re trying to achieve.
So if that’s the case, we always would recommend… at least you still want to be prudent. If you say I’m not sure whether I would be having a kid, but in the future, maybe say three to five years time, we might start thinking of children. So you already think about kids. What sort of expenses would I start to incur? So even things like your… I mean, don’t even talk about upfront costs. Like delivery, your ongoing cash flow. You need to buy diapers, milk powder, and then after that tertiary education… not tertiary education, the preschool is already at least $500-$1000 more.
So at least you want to set yourself this buffer in your cashflow and at least you save it up for potential future goals. It could be like a backup or like a separate pot of money that you are building up.
Reggie: So that’s like a dumping fund. You just put the money there. Collectively, you know that you’re going to build a future but you don’t know what you’re going to do with it first. Maybe after you accumulate $50…$100000 and you had enough of this place and you want to buy some small little house in some part of Thailand and you live there. It’s also fine, you can get something like that, through that.
So you are trying to tell me to… as a union, you guys should put some money aside for these kinds of future things that you have not planned for it. Because the fundamentals of planning is you must have a goal.
Chin Yu: Yep.
Reggie: But because life is fluid, you don’t have a goal yet, but till then, you should still put some money aside in that sense.
Chin Yu: Yeah. I always feel that rather than when the time comes, then I need to cut down my expenses.
Reggie: Yes, it’s very painful because you got to make up for the time, right? Especially like what Yong Cheng said “huh got kid already?!” you know, that kind of… [laughter] you got to make up in a short time. It’s got to be very hard. Can you paint us some picture, what is the average cost if I’m trying to get a kid? [indiscernible] already got a kid… then you know we’re going to go through this whole process: maternity, delivery and the hospital… everything. What is the average cost? We are not talking about Gleneagles or what, we are just talking about average. So help me paint a little bit of picture there. What is the ‘colour’ there? How much does it cost to have a kid here? Just to get it out and make sure the mom has some confinement time, not the raising part yet.
Yong Cheng: I have two year old, going three. We went through the public hospital route, but it’s a hybrid. You can have the public hospital route whereby you go through say NUH, KK(H), and then you don’t get to choose your gynae which means you let the doctor schedule the schedule. That’s much cheaper, but I don’t know the cost, I haven’t really calculated.
But for myself, I went through the hybrid, which means I choose NUH as the hospital, you can also choose KK(H), but I choose the gynae. So my wife and I, we decided, I think we were comfortable with this gynae and then we become like a private patient in a public hospital setting. I think in total, if we add it all up, it’s about $3000-4000 plus.
The next level is where you… right on the onset, you go to the private gynae, private hospital. That will probably be $10(000) at least, good to put aside about $10(000). $10(000) is assuming you have a smooth, normal delivery. Of course, if it’s an emergency C-sect, you will have maybe of-course choy choy (shoo away bad luck), then no pregnancy complication, extra day of inpatient, staying in hospital… that could rank up the cost. Yeah, I would say that’s the ballpark. So that’s just delivery. If you talk about stroller, talk about other things, another episode already.
Reggie, Yong Cheng & Chin Yu: [laughter]
Chin Yu: I can share my experience because I’m on the other side. I’m all the way till private hospital, try to do a normal delivery, but ended up emergency C-section. So that’s the most expensive. Yeah. Okay, I tracked every single cent of my expenses and I know…
Reggie: [indiscernible] expect, you plan everything.
Chin Yu: Yeah. I’m not normal.
Reggie, Yong Cheng & Chin Yu: [laughter]
Chin Yu: But I spent about $20000, including your pre-delivery checkups, medicine and all that. $20000 is on the higher range, but of course, if everything is smooth… public hospital, normal delivery, probably $2000? A couple of thousand or even lesser.
Reggie: Okay, that’s cool.
Yong Cheng: It’s quite okay, it’s quite okay. It’s quite heavily subsidized if you go to…
Reggie: Of course, they want you to have more kids, right? [laughter]
Yong Cheng: Yeah.
Chin Yu: Yeah.
Reggie: So then the question will be about maternity insurance. Do I need to get maternity insurance?
Yong Cheng: Okay, so maternity insurance is essentially an insurance you buy, it’s kind of a one-off insurance that covers the wife and the child in the event of say, pregnancy complication. There are certain criteria… of course I’m not a doctor. There are certain criteria that you have to meet before they pay out the lump sum. Typically you can buy a maternity insurance that pay out a lump sum of $5000, $10000, usually not more than that. It’s a term plan because you pay and then you get cover and you can buy it as early as when your pregnant wife is 13 weeks… all the way and covers you beyond… after delivery. So it’s a term plan essentially.
Reggie: What’s the average cost?
Yong Cheng: Usually it’s broken down into different bands. So you have the pre-35 year and the post-35 year kind of premium, but the payout is the same: $5000 or $10000, depending on how you pay. For example, it can cost about $300 for $5000 lump sum payout. Then you can actually go some range towards $1000.
Yeah, but of course, the question that you asked is “need a not?” Again, we ask ourselves, if you were to pay a premium to get $5000 lump sum, can you self-insure? Always, we go back to the question of you buy insurance to insure. If there’s an option for you to self-insure and you can have the ability to do so, then do you need to get insurance to cover it?
So I think that’s the question. If one were to say that “I think I have emergency funds who can cater for this kind of scenario”, then I might not need the expenses… to fork out the expenses to buy the insurance.
Reggie: So what kind of scenario, in terms of complication?
Yong Cheng: I would say that maternity insurance, there are different ways you can get it. There are the standalone one, where you just purely buy…
Reggie: Yeah, that was actually my next question. Because there’s a lot of package deals these days, right? I’m generally very adverse to package deals. It’s like how Singtel sells you wifi, phone, SMS? Who the hell uses SMS, you know? So I think in the financial space, there’s a lot of structure products that go down this path and then they will tell you that “oh, this is more expensive because you cover maternity” cover blah, blah, blah, blah, blah, blah, everything else. Like really? Do I need all these things? I don’t even know what my life’s going to look like.
Yong Cheng: Yeah.
Reggie: So what is the stand? Should we buy insurance separately, even through this process of child-bearing and facilitating the kid and all that?
Yong Cheng: Maternity insurance are usually sold, either stand alone, you buy and then you… once the period is over, your insurance coverage cease. You can also have the option to buy as a rider with whole life plans, investment-linked policy, sometimes maybe term plan. So typically if you buy it as a rider, your premiums would be lowered, cos bundle right? You say bundle, usually the package is better.
I think the question to ask ourselves is that if today… do I need the main plan? Whole life investment-linked policy, or a term plan for my child? Even though maternity insurance… if I deem it’s useful for me, is it worth paying? I think first thing first, whether you want the maternity insurance in the first space. If you want, then you think about whether buy it alone or you buy in bundle.
Of course, from Providend’s standpoint, we see insurance as a form of protection. For a child, I think the need to protect them for death is not that high because assuming if the child were to pass on, they don’t have a dependent now. In terms of critical illness as well, I think to us, when we look at critical illness, it’s really about a form of income replacement. If I can’t work, I need certain X dollar to help me tide over this period. Again, if you think about it from a child perspective, there’s really no need for it, unless you want to buy a whole life plan as a gift for them to ensure insurability for the rest of their life.
But that being said, you might not need to buy a very big plan. Maybe a small plan will do. Again, coming back, if you need a maternity insurance, in our opinion, I think for newborn, for a kid, I think the first thing that is very important to do is to quickly get them onto the Integrated Shield Plan. I always tell my clients, once it’s the 35th, 36th weeks, start filling out the form already because once the child is…
Reggie: Tell me more. Why?
Yong Cheng: I think because whenever we buy into hospitalization plan, the fear that we have is always… are we going to be excluded from certain coverage, from pre-existing illness? Sometimes after the child is born, things can be very fluid. So you want the child to be covered in full as soon as possible. You can always pre-populate the forms. Fill, sign, predetermine the name, your name. Then once the IC number is ready, send it to your agent to get this done as soon as possible so that the child can get covered, get insured as soon as possible.
Reggie: So Integrated Shield Plan is essentially a hospitalization plan?
Yong Cheng: Yes.
Reggie: For the kid?
Yong Cheng: Yes [indiscernible]
Reggie: Because a lot of names… I want to get some clarity.
Yong Cheng: 对, 对, 对 (correct).
Reggie: Okay, okay.
Chin Yu: Yeah. I can share my own journey. So I’ve got a six year old this year. When my wife was pregnant, we considering maternity insurance. So same thing, well, it’s going to cover $5000 – $10000. Is it going to cripple me? That’s the first question. But I think maternity insurance, more than the $5000 or $10000 it’s going to cover is this guaranteed insurability of this whole life plan. The next question, as what Yong Cheng said is “do you need this whole life plan?”
So typically, these are the questions you want to ask yourself. Do you really need this? In some cases, there’s no real right or wrong. For example, I’ve also met couples who say that although we say that the child is not an income earner, if the child passes on, we are not losing any form of income. But the couple say that if my child really passes on, I won’t be in the mental capacity to be working. So I wish to have, for example, this sum of money…
Reggie: That is a perspective. Yes.
Chin Yu: Correct. So I always thought that’s a good perspective. That’s one way to think about it. If that’s really something that you feel that… you want this lump sum to cover you for one year so that you have this option to stop working, then by all means, go for it.
But of course it’s never free. You have to pay for it. Yeah. So then coming on to the second part on the hospitalization plan. The thing is, I’ve also looked into it, does a maternity insurance plan… does it give you guaranteed insurability for a hospital plan? And the answer was no.
And personally I made the mistake of not getting the plan immediately for my daughter. My daughter has a slight heart murmur or small hole in heart. So after that, it was quite difficult to find an insurer that’s willing to accept her, number one. Finally we got one, but it was with exclusions embedded into the policy.
Reggie: Okay. So two things I want to ask. What is guaranteed insurability and how does the exclusions work?
Chin Yu: Exclusions mean that if you have pre-existing condition…
Reggie: Because of the heart, so they will exclude some of these things that they will protect.
Chin Yu: Correct. So they will say that if it’s a heart condition, we are not going to cover it. So that’s an exclusion. If they straight up reject your policy, that means that you can’t even buy this insurance. So if it’s a guaranteed insurability, it means that before your child is even born, they will say that we will definitely allow you to buy this policy without medical underwriting for this whole life policy. But… usually only applies to whole life. It can be part of this package that you’re pre-buying before your child comes out.
Reggie: So in that sense, guaranteed insurability means the insurer will definitely insure all the cases underneath without exclusions?
Chin Yu: Yep.
Reggie: Okay, okay. Just on the basis that… because the kid haven’t come out, so there’s no other kind of medical realities that they handle with, so they will insure you.
Chin Yu: Yep.
Reggie: Okay, okay. But then the whole Integrated Shield Plan, which is the hospital side of things… how does that work?
Yong Cheng: It covers you for hospitalization expenses.
Reggie: Okay. For the kid?
Yong Cheng: Yeah. Imagine a heart condition, right? If the kid has to go into hospital for treatment, then if he or she is not covered or being excluded from heart condition treatment, then the Integrated Shield Plan will not pay for the treatment. So there’s a lot of outpocket.
But of course, if the heart condition has not really accelerate into or deteriorate into a severe critical illness, then the whole life plan will also not pay out. So you’re stuck in nowhere. Of course then, a lot of out of pocket expenses.
Reggie: Okay. So clarity here, the Integrated Shield Plan is essentially a hospitalization plan for the kid. So if the kid goes in and out of hospital, based on whatever complications, the framework, then they get covered.
Yong Cheng: Correct.
Reggie: My whole life essentially is how all life insurance works, right? You must extend to some critical illness or some disability, some very big case scenario, something happened, or some death scenario, then there’ll be a payout based on the premium insured.
Chin Yu: Yup, yup.
Reggie: That’s how it works.
Chin Yu: Based on the sum insured.
Reggie: Based on the sum insured. Okay, very good clarity [laughter] Good stuff! I think there is a recurring theme here, right? Choices… all these different things that people have to choose with because now you’re no longer alone. You guys keep talking about communication, communication, communication, right? So give us some tips and tricks, how to communicate with your partner, to come to common consensus?
Chin Yu: My sort of philosophy is again, this mindset shift. You want to tackle anything in your life from a perspective that it is us versus the problem. You don’t want to tackle it from the perspective that it is you versus me, it is your goals versus my goals. You want to think of it as… let’s say there’s a problem, and even if the problem is that I want something, you want something, but how can we work together as a couple to tackle this so that there’s family harmony? I think that is very important.
It’s always us versus the problem and once you have this mindset, I feel that things get better. You tackle the problem objectively.
Reggie: Nice, nice. Okay. So I think we’ve covered a lot, right? From coming together, setting expectations, understanding each other’s aspiration, some communication tips, even the whole transition with kids, maternity and all that.
I just want to thank you. Thanks for coming on. I think we’ve all learnt a lot of good stuff and anything else, they can contact you through the Providend website. Okay. Take care guys. See ya.
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Okay. So we ask everyone these questions, right? These last three questions. So keep it short, sweet, candid. One of the first question is what is a life principle that you hold close to?
Chin Yu: For me, very short and sweet. My core principle is that we all run our own race. The most important thing is that you want to be very clear on your purpose and priorities and you want to be very intentional in your decisions and choices that aligns well with this purpose that you have.
Reggie: Okay, so purpose-driven choices essentially.
Chin Yu: Yes.
Yong Cheng: For me, I think it’s about being able to make meaningful contribution to the society in any way that I can. Yeah.
Reggie: Okay. The next question is what is a personal finance advice that you view needs to be further propagated?
Chin Yu: For me, I’m not sure whether this counts as a personal finance related advice, but I always feel that critical thinking is very important, especially when it comes to evaluating financial or investment decisions. In general, I think that we can always apply a little bit more skepticism and a little bit more objectivity. So even… I like to talk about investments, let’s say we bought an investment, it has made money. Iis it due to skill or is it due to luck? We just want to be very critical and because there’s so much information and opinions out there, you want to be very critical in filtering out the noise from the truth.
One area that I think… like I said, people don’t really pay so much attention is this role of luck. What’s the track record? If you have done well picking stocks for three years, does that mean that you are a fantastic stock picker? And does that mean that going forward, your decisions will continue to yield good results. I think that’s something that most people should think more deeply in.
Reggie: I like, I like, I like the luck. Yes. Really, really. I think one episode about the three things you need to be a good stock picker. The first thing was luck and I got a one star review on Apple and… [laughter] Shoutout to the guy that gave me the one star review. I still remember you. Just saying, but anyway. Yes.
Reggie, Yong Cheng & Chin Yu: [laughter]
Yong Cheng: It’s just unlucky you got a listener like him… So for me, I think we are living in a world where there are a lot of information and there are a lot of information we self-select, especially in this social media age. So I think the idea that I want to really propagate from a personal finance point of view is intentionality and your needs versus desire and what other people are having. Like I said, I think in this social media age, we see a lot of people having things, doing things.
But then I think we need to sit back and ask ourselves whether are these things that we need, are these things that people are happy having, but maybe once I get it, I might not be happy. So intentionality towards how we look at our money, how we spend our money… I think that’s one thing I think can be better propagated in a very messy information age.
Reggie: Nice! Cool. Okay, last thing. What is something that you’re putting additional focus on your life now?
Chin Yu: I think I would say I’m putting a lot of focus on my work right now? Sometimes, maybe a bit too much.
Reggie, Yong Cheng & Chin Yu: [laughter]
Chin Yu: Yeah. So I’m…
Reggie: The healthy skeptic workaholic here, huh?
Yong Cheng: Boss not here.
Reggie, Yong Cheng & Chin Yu: [laughter]
Reggie: Boss not here, no need to wayang (drama) ok?
Yong Cheng: First he will hear you say he’s a salesman.
Reggie, Yong Cheng & Chin Yu: [laughter]
Chin Yu: Yeah, but I’ll say I’m trying to find that right balance, setting boundaries so I don’t neglect other areas in my life, like family, like parents and just enjoying the simple life in general.
Reggie: Nice, nice. I’m learning the boundary part also. Yes.
Chin Yu: I think especially Covid… the boundaries start to blur quite a lot.
Reggie: Yes, yes. In the past, you can just leave your work on the desk. But these days, you can’t. Where’s the desk? Yeah. You?
Yong Cheng: I think it goes back to being intentional. For me, I think the focus… I think it’s… yeah, I think I agree, it’s about setting boundaries. When I’m in the boundary, I think I want… also to be optimally in that boundary, meaning that I’m meaningfully engaged because there might be times I’m guilty. I may be playing with my daughter, somebody texts me. I might not be meaningfully engaged with her. So it’s something that I want to be intentional about, and it’s something that I think is never going to be a finished product. I think is something I need to continue to work hard to be in.
Reggie: Awesome! Awesome. Cool. Thanks guys. Appreciate all the time together.
Yong Cheng: Thanks.
Chin Yu: Thanks.
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