NTUC Income sought the help of a media agency and produced a great video advertisement.
I think the video have gone viral.
Its the kind of advertisement you enjoy a lot that was produced by Thai Media Companies. Only this time its done on our local shores.
Here it is.
I think I connected with it a lot.
I like the way the photos in the video was so washed out, unpolished. It accurately reflects the photo montage we see in weddings over the years. They weren’t perfect but realistic.
It somewhat reminds a lot of us how we grow up in the past. Many little portlets of joy. Little moments of our life where we gone through some significant milestones.
NTUC said the video’s aim is to challenge mindsets.
Now I wonder what kind of mindset do they want to challenge. To do that, you need a degree of understanding of what is the prevalent mindset.
I felt this is the current narrative in people’s minds:
- An aspiration for better things, as you become more affluent
- Giving your children the best of things, within your means
- Banking on your children for the retirement
NTUC Income Chief Marketing Officer said the idea behind the video came from observing the people around the team. They observe that many parents was quick to invest in their children financially to give them a better head start in life, a better quality of life.
At the same time a Nielsen study was commissioned to help quantify and qualify the impact of investing in children. The focus is mainly on the parent’s retirement planning and children’s perceptions of their parents readiness in that regard. 400 parents and 200 youths was surveyed.
The youths have low confidence that their parents can have enough savings for retirement. They see that they have to make personal sacrifices to support parents financially.
The Video tell us that accumulating for retirement, is not just for yourself. The video shows a set of parents that, even if they can afford, they refrain from spending based on what they have and could afford to, but to balance saving and spending for multiple important life goals.
At the same time, they can still provide the child with a very rich life experience growing up.
Something extremely valuable was that
- The child fully understands that spending money does not always equate to happiness
- The virtues of not going all out in getting whatever you want by spending down your last dollar
Here are some of my thoughts.
You won’t always get Proportionate Return on Investment for Spending Everything on Your Kids
There are a lot of intangible and of course some tangible returns.
However, I felt that the message of this video is that just because you put in everything, doesn’t mean that you get a bountiful of upside.
If we were to quantify things, we can put in $500,000 over a 25 year period for your child.
It does not guarantee you that you enjoy a recurring stream of income that is worthy of this amount of money put in. For example, we have seen parents listening to their children, providing for a medical degree in UK.
The next thing you know, they decide they want to do urban farming in UK.
They are still great human beings, but did that investment work out tangibly? Its hard to say. I would contend you can argue that experience broaden the child’s network and got in touch with a subject that he truly cares about.
And eventually he created financial success out of it.
However, that degree became a sunk cost, if the success is otherwise.
I am not saying intangible benefits does not matter.
However, money is a scarce resource for many of us. And at some point you have to realize that if you give them everything, it is like putting all your money in DBS stock.
It is a sound decision most of the time, but it is fundamentally unsound from a portfolio risk management perspective due to the overly concentrated nature.
If that low probability scenario happens, you are left with not a lot. Your child also left with not a lot.
You can Balance between Different Life Goals
I don’t want to call it financial goals since the driving factor is what we want in our life not what we want financially.
For a long time, our parents’ retirement is their kids.
In the past they have more kids.
In the past, they contend the cost of living versus their life time income is much lower.
But I contend they do it because money is rather scarce back then. They do not have much of a choice.
Given the choice, I think they would want to build up some buffer as well.
Since NTUC Income is an insurance company, the underlying message is, if you go all out and you do not build wealth for your retirement, every one suffers in the end.
I wouldn’t say its prevalent, but there is a reason we are known as the sandwich generation.
Consider a couple who married and start a family. They have their own expense to cope with.
If both of their parents invest all their money on them, and they do not have enough for retirement, the siblings have to set aside money for their parents.
For our couple, it means the cash flow needs to support 3 households (better if the couple are not the only child)
With such cash out flow, could they still save for their retirement?
If the couple have that worry, it might further emphasize that their parents investment is not proportionate to the eventual return (their child’s earnings power) or that the parents was not able to support them through the years financially.
Just like the title, if you choose to give them everything they asked for, they might not have what they had now.
This can be the free cash flow to fund their own life goals, such as retirement, options in life.
The groom further emphasize this point by saying “You didn’t do it for yourself, you did it for us.”
Retirement Planning is a Luxury for Those with Excess Personal Free Cash Flow
It has to be said, if your disposable income can barely cover all your household expenses (after trying your best to optimize it), then you do not have much free cash flow.
If you do not have much free cash flow, a few financial options such as retirement is closed off to you.
Thus, if a lot of the poor cannot be upwardly mobile in their financial situation, this becomes a worrying social situation.
Everyone Might End Up Suffering Because of an “Invisible Contract”
An invisible contract is an agreement not written down, but has became an obligation that you need to do for someone.
In this case, it is that if your parents have provided for you, you have to provide back for them in retirement.
Put it in another way, it could also be imaginary worded as, I gave you everything, now you must follow some terms and conditions for your wedding.
And children are not aware of such invisible contracts.
Often this is where the tension and frustration is for the whole family.
And often, we cannot just avert this problem by putting it in legal writing. That would be awkward most of the time.
When this video was posted in Facebook on BIGS World, I had a friend who thanked me for pulling me out of her rut. In truth, I don’t think I did much other than some help making sense of financial situations, and guiding her to do envelope budgeting (which not many people can do, and stick to it).
The main problem have been that invisible contract.
When one of her parent gave her a lot of things, some how, the parent think she has some stake in her life right now and is able to dictate her life. I guess that is the frustrating part for many young couples.
This sort of obligation, manifest very much out of giving too much, a lack of independence, but also of not balancing life goals.
Its not that They have Not Planned For Retirement….
But their idea of what is adequate is wildly inadequate.
The honest assessment is that we all think and say money is important, but only a subset of people practice seeing money as an important resource.
We haven’t build our competency on money enough because we didn’t prioritize to study it, we may also not be interested (despite us saying it is important)
Thus we think we save adequately for retirement, or adequately protected against risks.
The reality is come 55 years old, you realize that the projected surrender value of your policies is too little for the current cost of living.
You also didn’t realize some tactics of life optimizations that might save your retirement.
If the reality is wealth management is not a core interest area for you, you will be in for a greater shock as you realize your plan is rather flawed.
Here are My Topical Resources on:
- Building Your Wealth Foundation – It is imperative you know these stuff as early as possible, because this is the most important stuff
- Active Investing – For the active stock investors. My deeper thoughts from my stock investing experience
- Learning about REITs – The Deeper stuff on REIT investing
- Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
- Free Stock Portfolio Tracking Google Sheets that many love
- Retirement Planning, Financial Independence and Spending down money
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