Everyone knows being a parent is a life-changing and enriching experience, but it can also be daunting in the terms of what to provide for the child beyond basic needs, education and life skills for the future. We know that in a cosmopolitan country like ours, the cost of raising a child in Singapore has been trending up and makes up a significant portion of a family’s spend. But through sound financial planning, parents can be empowered on how best to garner future returns through insurance, savings and investments. Learning to talk about this topic with your children from a young age is part of the process. In the first of our series of financial advice for families, Prudential’s Chief Investment Officer Lena Teoh shares practical solutions to consider as you work towards your family savings and goals for your children – and yourself.

First, get control of your budget and debt

It is critical to gain a clear understanding of your monthly spending, cash flow and commitments such as loans and mortgages: it’s remarkable how many people aren’t aware of what they are really spending on. Getting your budget under control enables you to prioritise, eliminate, or reduce unnecessary expenses and focus on what is important.

Banishing debt is a very important step towards securing a better financial position. Debt isn’t necessarily bad: you can leverage your funds well to fund long-term needs such as housing, or opt for a car hire purchase option to spread the cost. But overspending through personal loans and credit cards that charge exhorbitant interest rates should be brought to a minimum. Every ongoing obligation that you can eliminate will help free up more money each month to do what you need for yourself and your family. No matter how small (or large) the debt is, make it a commitment to knock it off to a low, reduce the borrowing period to speed up repayments, and throw out balloon financing car schemes that involve higher interest and a hefty final lump sum .Spending within your means is the first step to gaining back control of one’s finances. If you’re unsure what to do, getting in touch with a professional and trusted financial consultant is a good way forward.

Save early while you can

Your costs and income level are likely to vary a lot over the first few years of your children’s lives and if you’ve both been comfortably managing on your joint income in the years before children, suddenly struggling to manage can come as a shock, creating stresses and tensions between couples.

Saving as much as you can before the compounding effects of higher costs and lower income kicks in will give you breathing space later on. If you like the “jar” method of saving, where you save for different purposes in different jars, such as Chinese New Year, Christmas, holiday, house etc, start a “family” savings fund, which is specifically for this purpose. Try getting the whole family involved in the program.

Or, consider setting aside fixed amounts at regular intervals. This could then be put into a savings plan, investments or children/education oriented endowments or even Investment Linked Plans (ILPs) to grow your wealth.

Focus on yourself

Different backgrounds, upbringings and life values equip us with different levels of income, expenses, and ideas about saving and investing. While some can afford to purchase a home or car early in their lives, there are others who can’t, for example. It is not fair to use another person’s life benchmarks as your own, as you might find yourself taking on higher risk unnecessarily.

Practise discipline, be frugal, and don't try to keep up with what you see your friends and neighbours doing. It will be frustrating and ultimately self-defeating. And it’s not where true happiness or financial security lies. Gratitude about children, health, and having a roof over your head can go a long way towards realising you don't need everything you want. At the end of the day, you will be proud of many things – such as having raised your child and bettered yourself – and those things will be more important than whether you could buy something or go on vacation.

Start the money talk with your kids today

Talking about money with a stranger, let alone with your own children, can be awkward. But don’t be afraid to talk to children about money and be open about the reality of your financial situation. If not now, then when and how else are they supposed to learn about earning, and saving?

Engage them in discussions about living within a budget, which helps establish expectations. Take the time to explain to your kids why they may not go on as many vacations as their friends but instead only one vacation per year, for example. In fact, sometimes less is beautiful and focusing on simpler things, like one-on-one time, can mean the world.

Develop a financial plan that is workable

Yes, you should have a plan. And don’t worry if you think it’s incomplete. Life itself is full of competing priorities – some you can plan for and some you just don’t, or can’t, plan for.

You probably have exciting plans for each stage of your life coupled with an idea of the things you want to do that will require money, such as buying a house, paying for your children’s education and weddings, and having enough money for a comfortable retirement. But unexpected expenses like a broken-down car or medical bill can strain anyone’s finances. A financial plan can put you in control regardless of what life throws at you – saving and investing in the types of financial vehicles that are specially designed for your objectives. Having flexibility in your commitments, in terms of premiums and maturities, could coincide well with different life stage events.

Working with a financial consultant can help you build a foundation so that life doesn’t take you, or at least your finances, by surprise. A financial consultant can advise you when there are changes in the markets, tax legislation or the economy, and can help you adjust accordingly – guiding you through the ups and downs to stay on track towards your goals.

Invest according to what’s right for you

Investing can be daunting for beginners, with an enormous variety of possible assets to add to a portfolio. My advice is to invest sensibly, suitably, and simply.

Starting today not only gives your money the opportunity to compound (or grow in value) over time, but it also gets parents thinking about the topic more seriously. It is still possible to undertake some basic financial planning of your own, but there are significant benefits in receiving advice from a qualified and trusted financial. You can be confident that a personalised plan will be developed to cater for your circumstances, for example.

This tailored approach should be flexible and adaptable, and a result of a detailed analysis by a professional consultant, drawing on their knowledge and experience. This will help cut through jargon and marketing speak and tell you what is right (or not) for you. As circumstances change, the pieces in the jigsaw can be changed to ensure you remain on track. This is where the concepts of dollar cost averaging – investing through ups and downs – and diversification, so that you don’t put all your eggs in one basket, are key tenets to successful investing.

Your retirement, your priority

We all want to do as much as possible for our children, but at the end of the day, establishing your family’s financial security also means taking care of yourself. How you plan for your retirement today determines how you can retire comfortably. It is the responsibility of the modern parent to ensure that they will not become a financial burden to their children; just as children should be financially independent when they become adults, parents should also not assume that their children’s responsibility to support them financially in the silver years.

As you move closer to retirement, your priorities will shift and new concerns may arise. Take the time to lay out a realistic retirement plan. You will find that in order to achieve goals and conserve your existing resources, you will have to manage both your spending and the preservation of the assets you have accumulated so far. It is important to identify and plan for key unknowns, such as the potential need for long-term care.

Retirement is also the time to shift your portfolio strategy from one focused on generating returns to one designed to provide consistent income and preserve wealth while keeping pace with inflation.

Remember life is a journey, not a destination

Think of financial planning as the map that guides you through your life’s journey. Your financial plan helps you identify your savings and investment goals, along with insurance needs, and how to get there.

You could wing it, of course, but setting off aimlessly without any pointers will likely add extra time to your journey. In financial terms, that might translate into investing too late and losing out on the benefits of potential investment returns. The result? Making it to your destination late, or falling short on your insurance protection needs or retirement savings and being stretched thin in later stages.

Wrong turns and detours are likely to happen on a journey. Sometimes, life’s circumstances are within our control; sometimes they are not. Your financial and insurance plans should be flexible enough so that you can recalibrate seamlessly when you need to. That might mean cutting back on expenses or adjusting your goals to account for any setbacks.

The key takeaway is this: your financial and insurance plans should be personalised and customisable based on your unique starting point. That means they are tailored to your income, expenses, savings, and goals. Your plans should not be static, but rather dynamic as you go through the different stages in life. Finding a trusted financial consultant who understands the importance of this journey, someone who supports you in finding ways to live a meaningful life, makes a difference.

But, while having a plan is important, let’s not also forget to enjoy the blessings of parenthood.