How would you do financial planning for a baby?

Hi anon,

Here's what I would do:

• Without a doubt, the first insurance you need to get will be a hospitalization plan.

This covers any hospital bills and associated pre/post hospitalization costs. This would be from an integrated shield plan, with a rider to take care of the deductible/co-insurance. Depending on your budget, you can take a private hospital plan and downgrade later, or just go for Goverment A ward. The rider is important in order to cap your maximium out of pocket costs.

• You can consider an education plan if you wish to set aside some funds to deal with education costs in future.

Such plans will grow your money in a safe manner and it will mature around 18-25 years in future, so that funds can be made available for school fees (university fees will be huge in 20 years). If your child manages to get a scholarship in future, the money is still yours as you are the policyowner. You could invest as well as you probably have a 20 year horizon, but since funds are required at a specific point in time, I would still want a part of my child's university funds to be in something safe. Maybe a 70/30 split between saving and investing would work.

• If budget permits, a whole of life critical illness plan can also be considered. Due to the age of a child, the premiums will be extremely low. As a live data point, a recent client of mine purchased a lifetime of $200K CI/early CI cover for their son and it cost $197/mth for 10 years (they are done with the premium when he turns 11).

Some see this as a gift of love, but I personally think that the more important thing is insurability. I have come across a young student aged 21 who was diagnosed with lupus at the age of 18. She is completely unable to buy critical illness cover now, and can only rely on a $50K late CI plan her father bought for her when she was 1 year old. At least she still has some coverage even before she started working.

• An accident plan will be important once your child starts to learn to walk and run, as they are more inclined to get bumps and bruises, fall down, etc. They are also prone to things such as HFMD and some accident plans will cover such things.

If budget is tight, just focus on the hospitalization plan first. That's pretty much non-negotiable. The rest really depends on your cashflow, but will definitely be helpful.

As a side note, being a parent, I would make sure that I have enough coverage for CI and death/TPD. A hospitalization plan with a rider is also a must.

In terms of priority,

1) Hospitalization w/ rider - The reason why premiums for 0-2 years olds are higher than those in 3-10 is because of the frequency of claims.

2) Critical illness - Especially if you and your spouse are both working adults, you may need the CI/ ECI payout to supplment some months/ years of income in the event either parent wishes to stop working to care for the child. 1 less income source can have a major impact on your family's finances and cashflow.

3) Personal accident - Usually more commonly taken up when they are able to walk, attend childcare etc. (higher risk of accidents and illnesses like HFMD at childcare)

4) Children's education - The initial cost of raising a child may be quite substantial so you may need some time to adjust. Saving's for child's education is good when early but there are always products out there to help you get to your goal anyway. It's better to insure your child the moment while he still enjoys good health.

On a separate note,

Income replacement for family is often overlooked but equally if not more important that (1). As parents, your children are dependent on you for their livelihood. Should you not be around, they would not longer have financial support. (Consider how you not being around would financially impact your family vs. your child no longer being around affecting you financially)