Don't burden our kids (in the future)

I came across this article in today's thestar.com.my, it was talking about how malaysians generally are not well prepared financially for retirement. basicly, while many would agree that sound financial planning to face retirement years is important, not many have actually made that effort. (do read on, as this is no usual emo or what-i-did-today or manchester united blog entry =P)

so, do we expect that our children will take on that financial burden for us? i don't think that is very wise simply because, if you look at children as investments, one that will generate some sort of future income for us (and we certainly are thinking that way if we expect them to provide for us), they are really very insecure investments. how certain are we they will turn alrite, enough to provide for us financially? how certain are we that we are good enough to nurture them well such that they wont ditch us? how certain are we that somewhere between now and 35 years from now, nothing screws up? nope, we cant largely depend on them, its too risky and its not right for us to demand so.

a short sidenote here though, while we cant and shudnt really depend on our children in the future, i believe we as children should always try our best to help our parents financially. u c, this is a responsibility for children (like us now) to realize, but not for parents (like us in the future) to impose on.

now, my dad runs a small business at a fish market in JB, and my younger brother (now 20) helps him. although businesses dont have compulsory EPF (KWSP), every month he will put some money for himself, my brother, and also for my mom (not working). now my dad or mom never went to uni to learn finance or things like that, but i think this whole concept of saving early for the future is easily understood, and it makes sense. hence, its really up to everyone to have a lil effort to put aside whatever we can afford for the future.

here is one simple diagram that demonstrates the power of compounding interest, and in short it sez, saving early is better than saving later, even if you plan to save more later.


(i dont know why the name 'Michael' and 'Terrence')

now, you dont need to understand the maths behind this (although its actually not difficult if you want to) but i can assure you thats the truth. insightful?

then, there is the classic question of - 'will the money be enough?'. now, thats widely discussed in the article on the star and it demonstrates that: depending solely on EPF(KWSP) will not provide enough, given the price inflation expectations and how much we get in return from the savings. how to get about this? well, generally, few suggestions would be - save more (than what's compulsory under EPF) or invest, on top of EPF, in other instruments.

however, it is understandable that sometimes its very difficult, given that wage is not high, and we have other commitments too. but think this way, is it really not enough or are we spending more than we should (like, x ukur baju di badan sendiri). for example, maybe if we buy a car, we should consider, can we really afford this car? and some people say they can afford them because its within their budget, given their income. but did that budget include savings? "oh i'll save later" - behold, the trap.

yes, there are those who are unfortunate, where their wages really cant allow for enough savings for the future. i really do think thats where the government should come in with some sort of a safety net. although, i think thats really not easy to implement - easier said than done.

that is pretty much it from me, do read the whole article here (<--click). beware though, i think the article is slightly biased and a lil too conservative. this is simply because in it, its mainly people from the investment banks or insurance speaking, i mean, of coz they want u to use their products. plus, the part about inflation expectations is definitely a lil overstated and conservative (possibly to scare people)- inflation is unlikely to be 6% every year for the next 40 years.