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Raising a child and buying a property in Singapore cost saving tips

How much does it cost to raise a child and buy a property in Singapore?

We show you not just how much you need, but what it takes to get there.

The Truth About Raising a Child and Buying a Property in Singapore

At some point, most Singaporeans will aspire to raise a child (or children) in a home they can proudly call their own. These are worthy goals, but the fact is they can cost quite a bit of money, especially in a developed country like Singapore.

That’s why in this article, we will be looking at three questions:

● How can you mitigate some of the expenses of raising a child in Singapore;
● What does it cost to buy a property in Singapore (including hidden costs); and
● What might it take to achieve the previous two? (the most important question)

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2 Easy Tactics for Mitigating the Expenses of Raising a Child in Singapore

Estimates for how much it costs to raise a child in Singapore will, understandably, vary. No two children are raised the exact same way, nor is there a ‘market price’ for the total cost of child-rearing—unlike buying property. A quick search on the Internet will turn up average costs estimates from as low as SGD200,000 to as high as SGD900,000.

With such a wide range, getting an accurate consensus that most people will agree on is almost impossible. But there’s one thing everybody can agree on—it will come up to at least a significant six-figure sum. As such, everybody can benefit from learning how to mitigate some of the major expenses. Here are two easy tactics to use that every Singaporean can take advantage of.

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  • Tactic 1: Offset the early years’ costs with government grants

The Singapore government is highly supportive of parents and provides various subsidies and grants that new parents will find helpful—particularly in the early years. The costs of things like prenatal medical visits, the delivery itself, not to mention childcare costs, can quickly add up. Here are a few government subsidies¹,² and budget-friendly alternatives.
Baby Bonus Cash Gift: Up to SGD8,000 for the first and second child, and up to SGD10,000 for the third child and above.
Baby Bonus Child Development Account (CDA): A co-savings account opened in your child’s name. It is immediately funded with SGD3,000 and the government will match deposits on a one-to-one basis for up to SGD3,000 for the first two children and up to SGD9,000 for the third child and up.
MediSave Newborns Grant: Each Singaporean is automatically granted a MediSave account with a grant of SGD4,000 upon registration of birth.
Parenthood Tax Rebate (PTR): Parents are entitled to a tax rebate starting from SGD5,000 for the first child to up to SGD20,000 for the third child onwards³.
MediSave Maternity Package: Allows you to withdraw up to SGD900 for pre-delivery medical expenses, SGD2,150 for delivery, and SGD450 for each day in the hospital.
Preschool Subsidies⁴: A basic monthly subsidy of SGD600 for infant care and SGD300 for childcare for working applicants with a maximum additional subsidy of SGD467. Preschool, infant care and childcare centres must be registered as Anchor Operators under the ECDA to receive the subsidies. These subsidies can reduce the cost of childcare for some to SGD3 per month!

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  • Tactic 2: Make use of Singapore’s top-rated public education system

Sure, giving your children a prestigious international education and private schooling is a great option for those who can afford it. But it is largely unnecessary—Singapore’s public education system is just as good, if not better, and can be attained for a far lower cost.

The latest PISA test, which measures the reading, mathematics, and science skills of 15-year old students, places Singapore right at the top of the country list⁵. The country has been touted as having the world’s best educational system, and the best part is that for citizens, primary schooling is provided with a nominal miscellaneous fee of not more than SGD20.

Higher education is where the bulk of the educational expenses lie, but even here Singapore’s public universities stack up favourably. The National University of Singapore is the top-ranked university in the country (and ranked right at the top in Asia and top 25 in the world⁶) costs far less than most international educations⁷. Costs can be further reduced by applying for the MOE’s Tuition Grant Scheme⁸.

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Buying a Property in Singapore – The Potential Costs (Including Hidden Costs)

If raising a child is one major milestone, owning your own property is another. Fortunately, unlike the cost of raising a child, the cost of buying a property in Singapore is far more transparent, meaning it is easier to plan for.

According to the government’s Private Property Residential Price Index⁹, property prices have increased 60 per cent from the beginning of 2000 up to the fourth quarter of 2019. As for HDBs, the HDB Resale Price Index¹⁰ shows a 64 per cent increase from 2000 up till end-Sep 2019. Global real estate firm CBRE estimates the average price of a private property in Singapore at SGD1.18 million, with average price per square foot of SGD1,430¹¹. It is the second-most expensive in the world, only behind Hong Kong. For HDBs, resale prices as at 2019 range from about SGD250,000 to SGD800,000, depending on size and location¹².

But beyond just the sticker price, you must also consider the not-so-visible costs of buying a property in Singapore. They include:

Option Fee: The fee to reserve a chosen property, payable upfront. Ranges from flat fees (HDBs) to percentages (private).
Fire and Home Insurance: In the case of buying HDBs, basic fire insurance is compulsory. However, most owners would prefer more comprehensive insurance coverage.
Stamp Duty: Mandatory for all property purchases in Singapore. Calculated as a percentage based on property value. Additional stamp duties also apply for the second property and above.
Legal Fees: To ensure the mortgage and purchase is processed properly.
Valuation Fees: To appraise the value of a property before obtaining a loan. The bank may decide to absorb the cost.

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What Will It Take to Afford to Raise a Child and Buy a Property in Singapore?

When you total the estimates of raising a child and buying a property in Singapore, it can easily add up to well over a million dollars. Fortunately, this is not a cost that has to be paid in one lump sum, but one that is spread out over many years. Even so, meeting such obligations can be a challenge. So, what does it take to be able to afford such amounts?

There answer is simple, but not easy. It is financial discipline, time, and the magic of compound interest. You should start saving and investing as early as possible, no matter how small the initial sums might be.

Here’s an illustrative example. Consider two people, one who starts diligently saving and investing from the age of 20, and another who only begins at 30. They both get a return of 5.5 per cent a year, based on the following two assumptions:

● Their savings accounts (or insurance savings plan) return 1.8 per cent per annum while their investment accounts return 9.2 per cent per annum (which is the annualised total return of the Straits Times Index from 2009 to the beginning of 2019 )
● They allocate half of their excess funds to savings and half to investments (e.g. mutual funds or liquid equity), for a total blended return of 5.5 per cent per year.

Now, let’s say they both save and invest SGD1,000 a month. How much would that turn to by the time they’re both 60?

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Monthly Amount
Number of Years
Total at Age 60
Person A (Started at 20) SGD1,000 40 SGD1,741,040
Person B (Started at 30) SGD1,000 30 SGD913,612

The difference is startling. Just 10 years of additional compounding resulted in a 90.6 per cent difference in their ending amounts! While you expect Person A to end with more, chances are you didn’t expect the difference to be that large. The reason is simple—we are just not intuitively built for thinking exponentially. But that’s what creates the magic of compound interest.

The table below shows that to break even, Person B would have to almost double their monthly contribution.

Monthly Amount
Number of Years
Total at Age 60
Person A (Started at 20) SGD1,000 40 SGD1,741,040
Person B (Started at 30) SGD1,900 30 SGD1,735,863

Let’s make things a bit more interesting and vary the monthly amount by decades. Person A now saves and invests SGD500/month in their 20s, SGD1,000/month in their 30s, SGD2,000/month in their 40s, and SGD3,000/month in their 50s. For Person B, we will define two scenarios:

  • Scenario 1: Person B starts at 30 and puts in the same amount of money as Person A by age.
  • Scenario 2: Person B starts at 30 and puts in 50 per cent more money as Person A by age.
Number of Years
Total at Age 60
Total Principal Deposited
Person A 40 SGD1,922,461 SGD780,000
Person B (Scenario 1) 30 SGD1,508,747 SGD720,000
Person B (Scenario 2) 30 SGD2,263,120.29 SGD1,080,000

In the first scenario, although Person A only saved and invested a small amount in their 20s, for a total principal of only SGD60,000, that still added up to over SGD400,000 in higher potential returns! And while in the second scenario, person B did end up getting about SGD350,000 more in potential returns, the principal deposited was also higher by SGD300,000, which almost cancels it out.

The numbers all lead to a clear conclusion—you should begin saving and investing now, no matter how little you think the amounts are. The power of compounding is such that smaller amounts invested earlier are worth just as much or more than much larger amounts invested later.

So, if you want to eventually raise a child and buy a property in Singapore, don’t wait. Lay out a savings and investment plan now, even if you think it might be over a decade away. Time waits for no man, and time is what truly allows you to benefit from the magic of compounding.

If you’re looking for more detailed advice on how to structure your finances to hit your goals, speak to one of our knowledgeable Relationship Managers today.

Disclaimer

This article is for general information only and it does not constitute an offer, recommendation or solicitation of an offer to enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments. This article has not been prepared for any particular person or class of persons and does not constitute and should not be construed as investment advice or an investment recommendation. It has been prepared without regard to the specific investment objectives, financial situation or particular needs of any person or class of persons. You should seek advice from a licensed or an exempt financial adviser on the suitability of a product for you, taking into account these factors before making a commitment to purchase any product or invest in an investment. In the event that you choose not to seek advice from a licensed or an exempt financial adviser, you should carefully consider whether the product or service described herein is suitable for you. You are fully responsible for your investment decision, including whether the investment is suitable for you. The products/services involved are not principal-protected and you may lose all or part of your original investment amount. Standard Chartered Bank (Singapore) Limited will not accept any responsibility or liability of any kind, with respect to the accuracy or completeness of information in this article.