FAMILY BUDGETING: It has been said that it takes a village to raise a child but a recent study reveals that it may also take a quarter of a million ringgit. Audrey Vijaindren crunches the numbers to find out what it costs to bring up a child today
WHILE it's impossible to live on love and fresh air, raising a child in today's economic situation is a challenge to even the most frugal of parents.
According to a recent international report, a middle-income family can expect to spend about US$234,900 (RM742,000) on food, shelter and other necessities for a growing child. Transportation, childcare, education and food represent the largest percentage of increase related to raising a child since 2010.
Financial planner Ng Chee Yong says although there are no local statistics on the cost of raising a child in Malaysia, the rough estimate seems alarming, that is, nothing less than RM300,000.
"There are many variables when it comes to calculating the cost of being a parent, including providing food, shelter, transport, education and healthcare. It also heavily depends on what type of lifestyle you want to lead, either a simple or a glamorous one."
Ng says the golden rule is to spend about 40 per cent of your salary on expenses, another 40 per cent on debt repayment and 20 per cent on savings.
"However, as children get more and more 'precious' these days, some parents are even digging into their savings to cater for their children's needs. This type of spending is known as emotional spending."
Ng believes Malaysians are lucky to live in a country that has abundance of resources which, unfortunately, some parents take for granted.
"In Malaysia, many middle-income families can afford to have one working spouse, whereas in countries like Hong Kong, both husband and wife have to work or the family can't survive.
"Unfortunately, some families in Malaysia take this privilege for granted. For instance, shopping has become a culture in Malaysia."
Ng says most people claim to only window shop but as soon as they leave the house, they incur petrol and parking costs.
"Once in the mall, children will usually choose to eat in expensive places, which will cost nothing less than RM70 for a family of four. It's not enough to have just a burger any more."
Even when it comes to buying gifts for children, it's all about brands and top of the line items, asserts Ng.
He says children tend to compare their electronic toys with their friends; a handphone must be a smart phone, otherwise it's deemed worthless.
"Some parents give in to their children's demand because they want to compensate for the lack of time they spend with them during the week. Others do it because everyone else is doing so."
Because emotional spending can be damaging, Ng believes it is important to ask yourself three questions before embarking on impulse buying.
"When you're considering spending a significant amount of money, ask yourself what the objective of the purchase is, whether you need it urgently and whether you have other options.
"Does your child really need that extra set of play cards or educational toy when he has something similar at home?"
Although there's nothing wrong in wanting the best for your kid, Ng says it's important to take stock of one's assets and expenditure before forking out the money.
"Similarly, some parents can't afford to send their children to private or international school because of their earning capacity. However, they do it anyway because they want to keep up with the Joneses.
"If you can have a surplus of RM2,000 each month, why not send your children to a government school and use that money to reduce your debt or add to your savings?"
Ng suggests that every couple prepare a financial blueprint to assist them in achieving their financial goals, as soon as they plan to get married.
"Before tying the knot or having kids, it's important for both parties to discuss what type of lifestyle they want, how many children they wish to have, who should take care of the children, what type of education their children should get and whether there's a need for a bigger house and car when the family grows.
"Without talking about the when and how of these questions, parents will make abrupt decisions, which will affect their financial plans."
Ng reminds families that clarity is power, and every family needs to prioritise.
"If need be, there's nothing shameful about settling for the second best. If your child can't afford to study medicine in England, what's wrong with sending him to Russia or India? Adjust your life goals and be open about deferring your goals to a later date."
According to Financial Planning Association of Malaysia (FPAM) chief executive officer Chan Chow Hun, an increasing number of Malaysians are concerned about their children's future, especially education.
"Malaysians used to be concerned about retirement plans but now, parents are more worried about their children's education.
"In my era, most of us went to public university on a scholarship. It wasn't an 'in' thing to go to a private college or to study abroad then. Also, it wasn't expected of parents to provide for their children's education. In fact, when children entered local universities, their parents had a kenduri to celebrate."
These days, he says, parents don't think twice about spending RM500,000 to RM1 million on their child's college education.
"Since many of us from past generations have become successful, our expectations and aspirations for our children have naturally changed, I believe that directly affects one's budget."
Meanwhile, Federation of Reproductive Health Associations Malaysia (formerly Federation of Family Planning Associations Malaysia) honorary secretary-general Dr Kamaruzaman Ali says it is a fact that Malaysians now cannot afford to have as many children as our forefathers.
"Our country's fertility rate has decreased, and it's evident that our family size is getting smaller. The main reason is attributed to the high cost of living in Malaysia, especially healthcare and education."
But he feels there is an urgent need to live modestly, spend wisely, save more and keep oneself and his or her family healthy because prevention is better and cheaper than treating an illness.
"Unfortunately, some parents fail to provide immunisation for their children. Although it may be costly, the alternative is far worse. It's important to provide them with a well-balanced diet and encourage them to exercise regularly.
"Also, many parents spend a lot of their salary on tuition classes instead of teaching them at home. And, why not utilise public facilities, including schools, universities and hospitals? This may work as an advocate for the government to do more for the public."