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Raising a Child Without Investing - Possible or a Gamble?

29 Sep 2022

Raising a Child | VI College

If you're raising a child or planning to raise one, I want you to choose between these two scenarios.

Scenario 1: You and your partner are constantly worrying about increasing prices every year, yet your salaries are not increasing. You live paycheck to paycheck, yet if you work more hours than you do now, you won't have time to sleep. One day, your partner is suddenly rendered unable to work due to an illness, and you are now the only source of income for the family.

Scenario 2: You and your partner see prices increasing every year but you don't worry about them because you're able to keep up financially. You always have some savings set aside each month after spending on everything and when your partner is suddenly unable to work, his/her side of household income continues coming in. 

I'm sure for most, you would choose to be in scenario 2. Stable, and unfazed by any financial circumstances -- it is what all of us dream our lives could be.

But sadly, this is mostly unattainable in the present day, especially if you're raising a child, and when everything is rapidly increasing in price, too. Even if there's an increase in your salary, it will most likely catch up only to a fraction of the inflation.

On the upside, I've also seen more and more young parents, mostly millennials, picking up investing in recent years -- simply because they're starting to realise they can no longer depend on a single source of income. 

Here are 6 reasons why:

1. Beating inflation

Raising a Child | VI College

The world’s most successful investor, Warren Buffett, said, “The primary reason why we need to invest our money is to beat INFLATION.”

Inflation erodes the value of your money. If you earn $100 today, you probably need to earn $103 next year just to have the same amount due to inflation. This also means that you lose your purchasing power over time as prices for essential things like clothes, food and household products are ever increasing over the years.

And if you're a parent raising a child, you feel this even more because you will need things like milk powder, diapers, and stationery on top of your daily essentials, which adds up to even more expenses.

2. It's all about the money

You know how people always say "money is not everything"? While that's true to some extent, you DO need money for almost EVERYTHING.

Literally, we're even paying for water, one of the things we need to stay alive.

In parenthood, it's more of the same. We need money to pay the utility bill, childcare, new clothes, shoes and pretty much EVERYTHING your child needs. And this expenditure will not cease until your child is old enough to support him/herself, say when they're 20 to 25 years old.

And when it's time for them to go off to college or university, guess what? You'll need MORE money!

3. Active income vs passive income

The average Singaporean aged 40 and below would know that we need at least 1 MILLION Singapore dollars in savings in order to retire safely albeit not comfortably.

But how much time and energy can your put into your work and bringing in active income so you can have at least $1 MILLION in the bank? And by putting in more hours as well as energy, you're not just sacrificing your time but also your health.

That’s why working and savings alone are not going to help us, the only way to ensure that we have sufficient money to retire is to have a constant stream of passive income i.e., to invest.

4. Be a good role model for our children

Raising a Child | VI College

Do you want your child to become a millionaire?

Most parents would just say, "they don't have to be one, as long as they're happy, it's enough". But how can they be happy if they're not even earning enough to support themselves or even retire properly in the future when they get older?

At this point, being a millionaire is no longer an ambition, dream or "nice-to-have", it is a necessity.

As parents, it’s our responsibility to teach our children about financial literacy so they have good money habits growing up. And the best way to do that is to build this discipline into our everyday life, including learning how to invest yourself.

5. Relieve financial burden for next generation

As a parent who is currently financially free, I am proud to say that I have built sufficient passive income for retirement. In fact, our passive income is even enough for us to take care of OUR elderly parents as well. This means that my children will not have the financial burden of supporting us.

So if you're a parent reading this, I challenge you to do the same. Don't subscribe to the traditional belief that our children are supposed to take care of us wholeheartedly when we're old, just because we raised them.

If you genuinely want what's best for them instead of burdening them, I'd suggest you invest now.

6. If you fail to plan, you plan to fail

Raising a Child | VI College

Financial freedom or building passive income is not something we can achieve overnight. It takes time to create a sound investment portfolio and build it up. So it literally pays to start sooner than later.

Too many people have failed to plan and waited until the last minute to start investing. By then, there isn't enough money for them to retire or to send their children for tertiary education.

Many people I've met do not find value in investing because they feel like they're putting money in something that's not going to give them "guaranteed returns", so they don't start at all. But these same people also struggle financially later in their lives because of that. 

Raising a child in the late 1900s is quite different from raising one today. Not only is everything more expensive, but you also need to be paying for more things our parents didn't need to pay for when they were raising us.

Times are definitely not as simple anymore, so in order to properly live or even survive in today's society as parents, we also need to rise to the occasion and do the right things financially for the benefit of our children.

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