from MoneySense Magazine April 2015 Issue
In my experience, having children changes your perspective in life. I have three young daughters, Catie, my 6-year old, Jianna, my 5-year old and Chloe, my 9 month old. I look at my 2 elder daughters and I realize that it was not so long ago that both of them were just like our baby Chloe, who is still in diapers.
I feel that what used to be a 5-year long wait has ended so quickly. In 4 more years, my eldest daughter will be in 6th grade, a couple more years, she will be in high school then suddenly off to college. If you are a parent, I’m sure you can relate as to how the perception of time becomes much faster as you watch your children grow.
I did not come from a well off family. Both my parents survived us through sales of property, insurance, encyclopedias and whatever have you to survive 4 children. Yes, while our family is Chinese, but we did not have the same privileges as other Chinese families, who had family businesses that were easily assumed by the next generation. From where I stood, I knew that if I wanted financial independence, I’d have to find employment or start a business and hope to God that one day I could become successful.
When it comes to securing your child’s future, your primary home is your first and best property investment. The security a primary home provides, even when you are gone, will enable your child to grow and learn in a safe and stable environment. I encourage you to buy your primary home first before looking into property to lease out. If you have not saved up the full amount to buy your primary home, do explore bank loan facilities. The opportunity to lock in the current price and enjoy building your family values and memories in your own home far outweigh the interest costs.
Coping with daily expenses, as well as saving for your child’s future is indeed challenging. Payments for your children’s education, household and personal expenses have to be hurdled before you even start thinking of investing, but once you feel ready to put some money aside for your child’s future, here are a few tips on how to use property to help you get started.
1. Have a clearly defined 40-year game plan.
I highly encourage all young parents to have a financial 40- year game plan. Do not mark your finish line after your kids graduate from College, instead factor in 20 more years, so you can retire comfortably. Securing your child’s future starts by securing ourselves during old age.
2. Increase your net monthly savings.
First things first, you have to increase your monthly savings in order to make your first investment. The perils of earning more money is the attraction of having the lifestyle that goes with it. As a parent, you want the best for your children, but your child doesn’t need every latest toy, or have that extravagant birthday party that breaks the bank. Don’t get caught in that trap of keeping up with the Jones’, forgo activities that will get you spending more than you’re actually earning.
3. Invest in positive cash flow properties.
There are 3 types of properties. The first is the type you invest in for capital appreciation, these are long-term investments. The second type is cash flow properties, or properties that you can rent out which enables you to earn from the property you purchased. The third type is cash flow properties that also appreciate over time.
We cannot predict our earning capacity in 20-40 years, so investing in cash flow properties while we are young can help reduce our risk as we diversify into property investment.
Properties that give recurring income without physical daily operations are lots for lease, apartments and condominiums, office units, warehouses and the like.
4. Use installment as forced savings to buy your property
As parents, we know that saving for our retirement and our kid’s future is very important, but more often than not, it is pushed to a later time for something more present, whether it is a necessary expense or not. For most of us, we go by the adage live for the day, and tomorrow will take care of itself. If you end up spending what you earn unnecessarily, you may want to develop forced savings through a property purchased on installment. It can be a strategic step to force you to save first before you spend. Just make sure you have calculated your income properly, and that you can afford the monthly payments.
5. No Dipping
When you’ve pooled enough funds, it is tempting to dip into your long- term savings account with the mindset that you have enough. By locking your payments into a property purchase, you psychologically commit yourself to preserving your property. It is also not as easy to spend versus a more liquid instrument such as bank instruments or stocks.
6. Involve your child.
At the appropriate age, depending on your child’s interest and capability, involve your child and ask for help to manage your property from keeping track of monthly payments to managing your tenant and the rent. Involving your kids early in your property business can teach them business concepts like income versus expense, collection and appreciation.
Carl Dy, is a property investor and President of Spectrum Properties, a property portfolio management company. He has more than a decade of experience in the property business, and is continually building up his portfolio with an ultimate goal of living on passive income from property. He believes that property investment, just like business is not an automatic money generating product. One must have a passion for it, create and execute a strategy and give time and effort for the investment to flourish. If you are interested for him to share his talk on Securing Your Child’s Future Using Property, feel free to contact him at +63917-5316310 or email@example.com