It is a fact of life that younger people with moderate savings actually need more money than older people with a cushion of monies and regular income. Equipping young adults with monetary reserves that they can dip into when needed to kick off their lives is easier for parents when it’s a slow saving than if they have to fork out a lump sum for college tuitions or a condominium down payment later. "There are several advantages of starting a savings or investment plan early," says Benjamin Tan, Customer Relations Manager at Citibank’s International Private Bank in Singapore.
"First, there is really a growth opportunity even when conservative options are chosen such as regular savings plans or investment funds. Secondly, by involving the child or teenager in monitoring how the savings develop, the young person gains a kind of financial literacy that will be helpful for investments at a later point of time."
A defensive savings plan, let’s say a contribution of $500 (about Dh1,836) a month at 3 per cent annual interest from year one would produce — at compound interest — $142,769 when the child hits 18.
"When I started investing for my daughter, I thought that 18 is not always the best age to have a large lump sum to hand over," says Richard Kranebitter, an Austrian expat, who works in the offshore oil rig business in Singapore after similar jobs in Dubai. "An account held by your child becomes legally theirs when they reach 18 in most countries. However, she decided to take just half of the funds to pay off her college tuition and let the other half grow by contributing from the income from her part-time jobs," he adds.
