Present Value of A Child
It has been a while since I've updated my blog. Too busy I guess plus a bit of laziness as well. Last week I was sent to a 3 day course conducted by this Aussie gentlemen. The title of the course is Modelling Yield Curve Using Excel. At the start of the session, we were asked to introduce ourselves in the form of name, current role, objective of attending and also no. of child. I was initially surprised by the last info. What's a child got to do with this course!!
We were later thought about the time value of money. The concept of present value, future value, annuity and what not. From a lay man's perspective, a dollar today is not equal to a dollar tommorrow and vice versa. So, the instructor ask us on the expected cashoutflow per annum of a child from he/she was born until they reach an independent age of 21. Obviously the outflow increases when they grow up. We projected a total of RM1.1 million over that 21 years. Cost includes basic necessity such as food, clothes and education (assuming no scholarship) and also inflation factor. Then we had to present value the future outflow to today's value and calculate the amount of saving we had to make in order to meet the outflow.
Here's come the surprise. The result was astounding. For that amount of casflow, we basically have to save about RM8 thousand per month. Yes not a typo ...8 thousand per month!!! Is he nuts! I guess not... The exercise made us realize how expensive it is to nurture a child. Of course some would say money is not everything but like it or not this would surely be applicable to most of us.
This was really an eye opener for me personally. Can I save that much money. Bear in mind...8k per child per month. What if we have 4 children. Thats a crazy 32k per month. I'm sure I can't save that much...not even half of it. But at least I'm aware of it. Thank you to that gentlemen. Oh well, the points I 'm trying to get accross to my blog readers are the following:
1. Save first then spend.
2. Maximise your opportunity.
3. Don't afraid to take calculated risk.
I'll be writing soon on how can u maximize on your credit card spending.
Signing off at 12.45 p.m.
We were later thought about the time value of money. The concept of present value, future value, annuity and what not. From a lay man's perspective, a dollar today is not equal to a dollar tommorrow and vice versa. So, the instructor ask us on the expected cashoutflow per annum of a child from he/she was born until they reach an independent age of 21. Obviously the outflow increases when they grow up. We projected a total of RM1.1 million over that 21 years. Cost includes basic necessity such as food, clothes and education (assuming no scholarship) and also inflation factor. Then we had to present value the future outflow to today's value and calculate the amount of saving we had to make in order to meet the outflow.
Here's come the surprise. The result was astounding. For that amount of casflow, we basically have to save about RM8 thousand per month. Yes not a typo ...8 thousand per month!!! Is he nuts! I guess not... The exercise made us realize how expensive it is to nurture a child. Of course some would say money is not everything but like it or not this would surely be applicable to most of us.
This was really an eye opener for me personally. Can I save that much money. Bear in mind...8k per child per month. What if we have 4 children. Thats a crazy 32k per month. I'm sure I can't save that much...not even half of it. But at least I'm aware of it. Thank you to that gentlemen. Oh well, the points I 'm trying to get accross to my blog readers are the following:
1. Save first then spend.
2. Maximise your opportunity.
3. Don't afraid to take calculated risk.
I'll be writing soon on how can u maximize on your credit card spending.
Signing off at 12.45 p.m.
posted by Cool Blogger at 12:21 PM
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2 Comments:
a few years ago our friendly insurance agent ran a similar projection exercise for my wife and i. like you, our eyes have not been shut since :0
looking forward to your comments on maximising credit facilities.
Hmm... Someday you may be able to write a book on the subject. I planned to write stuff like that and i also planned to write a book later. I'm a entrepreneur-wannabe and i'm still learning now. Hope to hear more from you.
Btw, my name, Jerry.
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