I have an obligation from my past marriage that costs me about 40,000 baht per month, which is about half of my net monthly income. I will retire in 10 years, and I'm concerned that my daughter will be only 17 when I retire. It means that I need to take care of her for at least the first four or five years of my retired life, so I have to seek an investment to make as much money as I can. I have 3 million baht in savings, all in cash. I need your advice as I don't have any experience of investment.
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA Divorce can be a big economic setback and you need to be thinking about your finances before the ink dries on the divorce decree. Things often change radically after divorce and you will need to rethink your financial goals. Here are some of the main points you need to ask yourself:
- What is your future earnings potential compared with your spouse's?
- Do you have adequate retirement savings?
- Are your investments right for your goals and your risk tolerance?
A good financial planner should be able to help you get back on track again. With 10 more years to go before retirement and 3 million baht in the bank, it's not that difficult to come up with a plan to meet both your goals of retirement and child support.
My four-year-old daughter will go to school very soon. I will start a budget and educational fund for her from now until graduation. I want to know how much per month I should save and the minimum amount of funds I should have. I have begun with a long-term equity fund (LTF) into which I pay 10,000 baht a month and a deposit into which I pay 5,000 baht per month.
ANSWERED BY... Teera Phutrakul, CFP, Chairman, TFPA Join the club. I have a four-year-old myself and, given the cost of private school education these days, it lends new meaning to the old proverb of costing an arm and a leg. Although every family's education funding needs and goals are unique, for most people it is a long-term commitment that may last more than 20 years. Therefore, the earlier you start planning for it, the better.
Here are a few tips to get you started:
- Don't procrastinate. The sooner you start saving, the better. Even modest savings can multiply quickly if you give them time to grow. Investing just 10,000 baht a month for 18 years can yield 4.8 million baht, assuming an 8% average annual return.
- Put your retirement first. This may seem like a selfish attitude, but your children will have more sources of money for college than you will have for retirement.
- Stocks are best for a college savings portfolio. With tuition costs rising faster than inflation, a portfolio tilted toward stocks is the best way to build enough savings in the long run. As your child approaches college age, you can shelter your returns by switching more money into bonds and cash.
- Keep it simple. Investing in mutual funds puts a professional in charge of your savings. Stick to funds that have solid three- to five-year track records and low expenses. You can make use of automatic monthly withdrawals from your bank account to force you to save.
The first rule of thumb is to make sure your investments grow with your children. Most investment planners recommend that you base your asset allocation on your child's age.
The main strategy is to take more risk in the early years when you have enough time to make up for inevitable short-term market fluctuations. Then, as your child grows and nears college age, gradually scale back your risk exposure to protect your principal without unduly sacrificing returns.
The Thai Financial Planners Association is the Certified Financial Planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through email@example.com or the TFPA webboard, www.tfpa.or.th