Well, some people actually read this blog, so I guess I should start writing something more useful to do them justice.
So gather around, I am going to show you how I actually make sure my kids can afford to go to University should they wish to. Or they can choose to be a Youtuber, influencer, content creator, etc. university degrees may not be that relevant in the future?
But as parents it is good to be prepared, here is the steps to make sure the children can go to Uni
Step 1: Make sure the kids learn German
Step 2: Send kids to Germany because University is free even for International students
The End, thanks for reading.
Just kidding, but for real though. Gemany has free Uni education, my cousin actually went there and studied Civil Engineering. But of course you will still have to pay for living expenses etc. but definitely something to consider.
So let me show you and the wife what I have been doing. I have started to set aside $600 a month for the kids. So that makes:
$600 x 12 = $7200/ year
Assuming 10% growth per annum = $1.10x $7200 = $7,920
So in 25 years total = $198,000 in savings for the kids
 |
| Following me so far? Good job! |
THAT IS TOTALLY WRONG! The only way this can be correct is if we take out the 10% growth every single year, meaning pocket the $720/ year PROFIT somewhere else instead of letting it grow (someone’s idea of saving money *roll eyes*) This is partly why I am not letting my wife handle our family finances.
Here's a simplified simulation based on 600$ per month with 8% per annum return. I do this by dollar cost averaging into ETFs.
So that is about 187K out of my pocket assuming I continuously
invest $600/month for the next 25 years. At annualised return of about 8%, by
the time the 3 kids graduate, I would have paid 237k in Uni Fees for the 3
brats, and still left with 190K+ for me to buy my BMW. Ok fine maybe I
distribute to the kids instead.
Now I hope you and the wife sees the power of COMPOUND GROWTH. In Singapore this is why the government is forcing you to save money into CPF and not able to cash out before retirement to let it compound growth at a measly 2.5%. Because many are financially illiterate. Sad but true.
My estimate is based on Singapore university fees which is heavily subsidised, if you want to send your kids overseas, then I guess you better save more money per month then. My kids want to go overseas to study? then they better study hard to get scholarship or at least pray hard I achieve financial independence soon
Simple right?
You shouldn't be. I haven't even tell you how to do get 8% per annum on average.
We do this buy the following 2 concepts:
1. ETF (Exchange Traded Funds)
An ETF is a stock / security that consist of a compilation of selected companies. It is similar a mutual fund minus the ridiculous yearly fee, and highly liquid as these ETF are traded in the stock exchange, meaning you can buy and sell anytime as long as the market is open.
There are a lot of ETFs out there, some tracks different index in the US, like Dow jones, Nasdaq, or go by sectors like tech, healthcare, finance, etc. And there are also ETFs that tracks other countries, China, HK, developing countries, or even the whole world.
The ETF that I like is the "SPY" which tracks the S&P 500 Index. So when you buy SPY ETF, you are literally buying shares of 500 large cap companies in the US market.
Buying index based ETF is considered a safer choice than investing in a single stock because in the long run SOME index is 'rigged' to always go up. For me my go to ETF is S&P500 for US and A50 for China/ HK, I split my monthly investment 50/50 between these two.
2. Dollar Cost Averaging (DCA)
The idea is very simple, just set aside a sum of money and religiously invest that amount at regular interval, be it monthly, quarterly, yearly it is up to you. The amount will depend on how much money you can set aside, and what is your targeted amount at the end of the investment period. I am not the expert, there are dozens of articles out there about pros and cons of dollar cost averaging, go and read. But generally if you don't have millions of $$ lying around to invest, the only way to invest is to gradually throw money at it, and in the long run it will grow exponentially.
Some might argue of buying only at the lows to get better return. Sure, if you can predict the future, DM me and let's get rich together. But no seriously, time in the market is much more important than trying to time the market. Just throw your money at it and close your eyes, look at it many years later, and then buy me a meal cause it really works.
All you need is to be disciplined with your savings.
What's that? how to buy these ETF? how to setup a regular savings plan?
You bunch are so lazy... But that is good, why bother wasting time with trial and error when someone else who has done it can teach you right? there is nothing wrong with copying other people, just make sure you find the correct person to copy.
Well I cannot say for sure, I am the one you should follow, but let me go through step by step.
I am feeling generous and in a good mood today, because my Swab test just came back negative for Covid-19.
How to Setup Regular Savings Plan
Go to https://www.interactivebrokers.com Open an account, deposit funds, regularly buy your chosen ETFs
OR
Go to https://tdameritrade.com Open an account, deposit funds, regularly buy your chosen ETFs.
Or just go buy through any broker of your choice
More detailed method:
This is more applicable for Singapore Residents, other countries I am not sure, you need to go find reliable brokers.
2. Use My Referral (optional)
Sign up for an account use my account as Referral (P0391909) or not, up to you I think it is just for some points which can be exchanged for reward.
3. Choose Account Type
You can either choose Personal or Beneficiary (difference is, appointed beneficiary can easily access your account when you die)
Beneficiary account FAQ
4. SETUP Regular Savings Plan
Once your account is opened and approved, Setup your Regular Saving Plan More explanation here:
RSP FaQ
Too lazy to read? fine this is pretty much all you need to know,
Funds will be automatically deducted every 8th of the month. One tip: use the mobile app, I find the interface easier to navigate.
Some ETFs you might be interested in as mentioned before. Read the prospectus, what companies are in the ETFs, past annual returns, and expense ratio.
Now this is very IMPORTANT. Make sure you have funds ready before the 8th, and this funds must be in their respective CURRENCY! meaning if you are buying USD ETFs, make sure you have converted your funds into USD, same thing with HKD, etc. If your fund is not in the required currency, there will be no funds bought for that month. If you missed the date, you will have to wait for the next cycle.
Are there risk involved? of course there is, all investment carry some degree of risk, and your investment portfolio should be suited to your own risk appetite. If someone tells you high return without any risk, RUN, run far far away from such investment because I guarantee 99.9999% it is a scam or ponzi scheme.
So for investing in ETF? some risk maybe if the ETF you are investing in has significant drop in value (that's why choose the right ETF!), the fund house collapse, etc. but these are generally unlikely but not impossible, because you never know. FSMone they have a FAQ for that :
IF FSMone Ceases operation
Clear? This is the basic of the very basic in investing, simplest, relatively low risk, regardless of market conditions because you are investing in the long run. You will not be a millionaire overnight, but remember when it comes to investment. TIME is your best friend, so you young people like me better start early and be disciplined, plant that seed now and you can enjoy the fruits when you grow older.
Older people? good luck to you just hope your children can give you enough allowance. Just kidding, it is never too late to start, please don't rely on your children for your own survival, that is highly irresponsible.
Remember Ferry is not an expert financial advisor so do you your own due diligence!
I hope that I managed to ferry some sense and eventually some $$ to you.
What?? Not convinced, and You still got questions??
How do i know i can get about 8% from S&P500 ETF?
How do i know that index will always go up in the long run??
Why not invest in STI index, isn't it safer??
Just wait for my quarterly report where I track all the different strategies of my investment, maybe in 5-10 years time I can finally show you conclusive result ok?
Cannot wait 5 years?
Wonderful bro.... BMW getting nearer but must also include increase in price for it too
ReplyDelete