What Motherhood Taught Me About Investing
Being financially prepared is one if the first and main commitments to make before having a baby.
Before even deciding to have kids, most people would already know just how expensive the cost of raising a child is in Malaysia.
Even during pregnancy, the costs can be pretty steep if you go down the private route. My first visit to a private hospital for my pregnancy, I had to stay overnight and my bill was a whopping RM3,500!
At 27 years old and only 6 months into my marriage, we were financially unprepared for something like that.
After that, for the rest of my pregnancy, I decided to try out the government option. My entire bill for the 9 month pregnancy, plus a hospital stay of 6 days in my second trimester, and the final cost of my c-section delivery, was sub RM2,000.
Talk about a world of difference.
Even before the baby was born, I knew I would have to start investing in his future if I wanted to stay ahead of the huge, looming financial costs I was about to face for the next 25 years of my life (most of us Asian kids stay with our parents till then, some even longer!).
Cost of raising a child: investing for your kids
So here’s what I considered as a young mother planning for her son’s future:
1. Insurance is the first step
I once heard a story about a woman who took her baby for a short holiday and while overseas, the baby passed away due to Sudden Infant Death Syndrome and she had no insurance to pay for her child’s remains to be repatriated. She ended up in a mountain of debt. This story stuck with me throughout my pregnancy and as soon as I could, I requested for insurance.
In Malaysia, you can buy insurance for your unborn child as early as in the second trimester. But if you are diagnosed with gestational diabetes, you might be rejected by the underwriters. If not, your loading premium might be higher.
If you successfully obtain insurance while pregnant, the plan will then be converted to your child’s insurance upon the child turning 2 weeks old.
I didn’t manage to get pregnancy insurance, so as soon as my son turned 2 weeks old, we were sure to sign the insurance papers for medical and hospitalisation.
Life insurance at this age is not completely necessary just yet as many view life insurance to be a financial cushion to leave to the next of kin.
2. Education is going to be even more expensive in the future
Considering the rate of inflation and the rising costs of education, many parents will want to ensure their child’s college fees are covered. Starting an education fund is one of the best ways to do so.
For those who have the option to invest in Amanah Saham Bumiputera under Amanah Saham Nasional Berhad, this is one of the safest and best bets. On average, the returns for the account one hovers around 8% annually, while account two is 6% on a decent year.
Each account can hold up to RM200,000. So if you’re able to dump in a lump sum from your child’s birth, you can be looking at a very healthy fund for your child’s future by the end of 18 years. Even if you’re not able to, every bit counts.
For those who don’t have this option, many insurance providers now offer investment plans that are tied to insurance that can also meet this need.
Compounding interest is one of the most powerful tools in financial planning, so make good use of that.
3. Investing in the present is just as important
One thing new parents will learn quickly is that having a child is unpredictable. This means the child is not going to wait until your rainy day savings are full before an unexpected trip to the paediatrician.
By the way, on average, a trip to the paediatrician will set you back RM200 at least.
Having an immediate emergency fund to access for moments like these will prove to be very useful so you don’t have to dip into savings or charge it to your credit card.
Besides setting aside their college fund and insurance premiums, parents should have a separate account to keep this emergency money in.
4. Buying in bulk… isn’t always cheaper with a baby
One thing you will see a lot of are baby fairs or expos. You will be tempted to go and check out the awesome deals that brands are offering during that period. This, in my opinion, is not necessary for two reasons.
One, babies grow quickly and you won’t know that what works for them now will work for them in a month’s time.
Two, with the bursting popularity of e-commerce sites and an unhealthy obsession with monthly sales (1.1, 2.2, 3.3, 4.4, so on), you can easily catch these deals all year round.
I had once spent RM400 buying diapers for my son at a baby expo thinking it would be a great deal of savings… only to have to donate the whole lot to an orphanage two months later when I found out he was allergic to that particular brand of diapers!
I had also used the opportunity of baby fairs to purchase many milk bottles on sale to find that my son only wanted to use another brand of milk bottles.
So when it comes to babies, buy as you go.
A little goes a long way
Ultimately, what motherhood really taught me about money and investing is this -- we will always want to give the best to our children, even though the cost of raising a child might equal a bit of financial sacrifices.
Sometimes, the best can be as simple as making sure you have enough to get them by every month with food and clothes. And when you have a little bit of spare cash, you tuck it away into a savings account for them.
No matter what the circumstances are, mums and dads, we know you’re trying your best for your little ones.