‘Life affords no greater responsibility, no greater privilege, than the raising of the next generation’ –
C. Everett Koop
The travails of being a parent present great opportunities for learning and praxis. As a registered financial planner, I have been exposed to the details of sound financial planning for persons and families — managing cash and debt, planning investments, insurance, preparing for retirement, preparing for children’s education.
Knowing one thing, however, is entirely different from experiencing it. As soon as my wife gave birth, the reality of preparing for our family’s future became all the more imperative. I had term insurance worth P1 million at that time but with the change of my marital status and the arrival of our newborn, it suddenly was insufficient. I sought out to increase my coverage by as much as our budget could afford and with as much protection as I could get.
Back then, I computed that a tuition fee in a good school would cost around P150,000 per semester by the time our child would be in college, not including include other expenses such as miscellaneous fees, books, allowances, rent, etc.
My wife is a physician and I also wanted to leave some amount of money to keep her career going should something happen to me. I wanted her to be able to buy hospital stocks and the rights to practice, which in the hospital she was eyeing cost a good P350,000. A major hospital can command at least P1 million.
After much study and looking around, it was providential that my former boss — a bank manager — offered me a product that fit perfectly: maximum insurance protection relative to its cost and I availed of it right away. With the additional coverage, I was more confident that my family would be able to better get in case of my death.
Insuring oneself, however, is just one part of being financially responsible for the family. Storing enough savings for the rainy days is a must. Financial planning wisdom recommends three to six months’s worth of expenses stored up as an emergency fund. But like the majority of starting couples, this level remained a target for us and not a reality. We aimed to achieve this so our belts were very tightened.
Building-up the appropriate level of emergency funds remained both a challenge and a target, especially when our incomes and expenses were almost at the same level. It was not easy and our agreement right before marriage helped a lot: we already talked how we would handle our family’s finances. My wife has an eye on details and she has a knack for budgeting and bargaining. We thus agreed that she would be handling our family’s money while I handled the excess funds: she is the chief finance officer and treasurer while I am the chief investment officer.
After much sacrifice, toil and arguments, we were finally able to achieve our desired level of emergency fund. But because the amount was quite substantial, placing all of it in just a savings account bearing 1.0 percent interest would be such a waste. We thus spread our emergency funds into a passbook savings account, a time deposit and a money market fund. This approach let us maximize the earnings potential of our idle funds as the returns of the last two were almost double that of an ordinary savings account.
Insurance coverage: check. Emergency fund: check. The bedrock of our finances has been established and as such, we are able to plan for other goals in life: saving up for her clinic, building up and allocating for a land purchase, and saving up for our children’s education.
The list is just the start of a very extensive one. But whatever the goals or circumstances in life, having been entrusted with a little angel and my own family means being financially responsible for now and the long years to come.
Rienzie P. Biolena is a registered financial planner of RFP Philippines. To learn more about financial planning and how to become an RFP, attend the 68th RFP program this March.For more info about the Registered Financial Planner program, send an e-mail to email@example.com or text <name><e-mail><RFP> to 0917-9689774.