MONEY talk can be a taboo topic not only among couples but also between parents and their grown-up children. Once the children start working, how much of a cash allowance they give their parents on a regular basis often becomes a touchy issue.
Give too much and the children might suffer financially; give too little and their parents might not be able to maintain their current lifestyle.
Let's look at two contrasting examples. Computer consultant Diana Low, 42, gives a token monthly sum of $200 to her parents, who are retired comfortably.
This is in contrast to her colleague, Ms Joyce Chua, 43, who gives $950 per month to her parents, who are less well-off than Ms Low's parents. She also pays the phone bills at her parents' house.
Both earn about $11,000 monthly and are married with two children.
Clearly, Ms Low's amount will look meagre compared with Ms Chua's. But advisers such as Mr Stephen Teo, Alpha Financial Advisers' business director, believe that the amount that one gives ought to be a matter of financial capacity and not filial piety.
'Filial piety to me is about the commitment to take care of your parents when they need you and should not be measured by the amount of money you give them,' he said.
Mr Tony Tan, a consultant with independent private wealth manager Providend, suggests that if parents are working and can comfortably support themselves, 'the gesture of giving is more important than the amount itself'.
He explains that this is especially so in traditional Asian societies that hold filial piety in high regard. 'This act of giving symbolises our gratitude to our parents for their unconditional love and nurturing all these years,' he said.
Ms Low said: 'My parents don't need money from me, so the $200 monthly allowance is just a token sum.'
On the other hand, Ms Chua considers herself part of the 'sandwich generation' - those who have one source of income but two sets of dependants' financial commitments to be fulfilled - ageing parents and growing children.
Anecdotal evidence suggests that many children do not discuss budgets or other money-related issues with their parents early enough.
Nevertheless, good communication regarding finances is critical to a healthy relationship not only between couples, but also between adult children and their parents.
Many start communicating only when it becomes unavoidable - for instance, when their parents are suddenly taken ill and the question surfaces as to who should foot the bill for long-term care.
In Ms Chua's case, her brother Alvin, 37, gives a monthly allowance of $800 to his parents, in addition to footing the annual premiums for their hospitalisation plans.
Ms Chua's parents are retired and totally reliant on their two children to support them. In this case, it is important to know how much would be sufficient for them to lead a comfortable lifestyle.
Mr Teo proposes that before deciding what amount to give your parents, you should have a clear idea of your own financial situation. Only then would you know how much you had in excess to meet various other financial commitments.
Factors that affect your financial capacity to give an allowance to your parents include: income, expenses, the number of dependants that you have, and other financial goals such as housing, education and retirement.
Mr Tan estimates that, as a minimum, $600 a month 'should provide a decent standard of living' for one retiree living in his own flat. This is based on certain assumptions such as a fully paid-up home mortgage and a moderate lifestyle, including one annual regional vacation.
For two parents, he worked out that the minimum monthly allowance would be about $1,000.
This amount is sufficient to cover basic monthly expenses such as utilities, groceries and transportation.
As for himself, he gives $1,000 every month to his parents, to be split equally between his mum and dad.
The actual payment can be made in various ways such as cash, Giro, cheque or directly into an investment portfolio.
MOST of us are reluctant to bring up the subject of financial planning with our parents, and sometimes put it off until they have become incapacitated or squandered their savings.
'By that time, actions are often taken under very stressful conditions without the benefit of thoughtful, detailed, clear decisions that could have been made had the subject been broached at an earlier time,' said Mr Goh Yang Chye, the managing director of GYC Financial Advisory.
By discussing these issues with our parents early, we can enjoy greater peace of mind.
1. Living expenses
This can be a delicate subject. Your parents need to feel comfortable about their situation and know that you can help with any money worries.
In some circumstances, simply rearranging the way monies are held in deposit, or how investments are made, can help improve income, said international financial advice and investment group ipac.
2. Medical history
Educate yourself about your family's medical history.
You might need to make health insurance inquiries on your parents' behalf, and you want to ensure that the information you are giving is accurate, to avoid disputes during future claims.
3. Medical fund
For older parents who might not be in the pink of health or who might be too old to buy health insurance, Mr Tan said it is practical to start a 'medical sinking fund' for them.
Instead of giving parents, say, $500 a month, the children can pool together a portion of this regularly and put it into the fund - an emergency source of ready cash if they fall ill.
'This will also minimise potential disputes as to who should foot the bill, in what percentage and so on, and this can be done easily by opening a bank account,' he said.
Mr Patrick Lim, the associate director of financial advisory firm PromiseLand Independent, recalled how his financial expenses spiked during the last few years of his mother's life after she was diagnosed with diabetes.
'The hospitalisation and miscellaneous costs exceeded $50,000, not counting the $1,000-plus I gave every month to hire a domestic helper and for my mum's living expenses,' he said.
4. Annuities
In their younger years, your parents might have bought some whole-life or endowment plans that have matured or that they can cash out. With this lump sum, say, $100,000, they can opt to buy an annuity that will provide them with a basic monthly income for life.
An annuity helps to ensure that one does not outlive one's resources as it pays out a regular sum of money for as long as the policyholder lives.
5. Long-term care
Everyone should make plans for long-term care.
Do your parents want to live in their own home, with you, or in a home for the elderly?
Insurance and careful management of remaining Central Provident Fund savings can be used to meet long-term care bills.
6. Investment portfolio
For parents who do not need the money, children can help them start a regular savings plan and put this money on a monthly basis into an investment instrument such as a unit trust.
The type of product will depend on factors such as the investment time horizon. Generally, the shorter the timeframe, the more conservative the investment vehicle, but it should achieve higher returns than the typical savings or fixed deposit accounts.
Take Madam Yong Hong Chew, 64, who placed some of her retirement savings into an investment portfolio four years ago. Formerly a cook in a restaurant, she was looking for higher-yielding products than bank deposits and enlisted the help of her son, Mr Moh Hon Meng, financial services firm iFast Financial's group executive director.
With the intention of buying and investing long term, Madam Yong sunk a five-digit sum into a portfolio that her son had constructed.
'The money set aside is money she won't need for the foreseeable future. Her total return has been about 40 per cent over the last four years, or an annual average return of about 8.7 per cent. Over a longer period of time, I expect that the average return of her portfolio should fall to within the 5 to 8 per cent range,' said Mr Moh, who gives his mother $800 a month.
Calling it a relatively conservative portfolio, he says 80 per cent of her money is in a bond fund, the UOB United Gems Portfolio, while the balance is split equally between First State Regional China Fund and DWS Asian Small Caps.
7. Sublet parents' home
or opt for reverse mortgage
For those who are unable to give the amount their parents need, one way to raise funds is for the parents to sublet a spare room for additional income.
A reverse mortgage on the parents' house is another option. This is where the borrower receives an income stream in the form of a monthly cash advance by mortgaging his flat to a bank.
The loan is repayable only when the property is sold, which is typically upon the borrower's death or the expiry of the loan term.
However, the parents will need to decide whether to release the equity in their home or not. And it is important that they understand the overall value of their home will diminish if they opt for a reverse mortgage.
As this has an impact on your parents' estate, it is vital for the whole family to be in the picture.
Your financial planner might be able to suggest other ways to raise funds, said ipac.
8. Downgrade or live with children
Parents with larger flats can raise funds by downgrading to a smaller home, or move in with their children.
'Parents can then either rent out their own homes and use the monthly rental for their income stream during retirement; or sell off the property and invest the lump sum in a portfolio that lets them draw down periodically to fund retirement needs,' said Mr Tan.
9. Power of attorney
This can be arranged through a solicitor and gives one or more people the legal right to manage your parents' financial affairs. If they become ill or mentally incapable, someone with the appointed power of attorney can do practical things such as sign cheques or even sell property.
10. Will
Those who die without a will run the risk of their savings not going to the people they want them to.
Review wills with a solicitor at least once every five years - grandchildren might have been born, relatives might have died and marriages might have been dissolved.
11. Legal documents
Ensure all legal documents are kept in a safe place known to the executors of your parents' estate.
A will is useless if no one knows it exists!
12. Estate planning
Broach this subject by asking your parents what they want to happen to their estate when they are no longer around.
