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Buying for our ‘future’ children… literally

We are used to reading articles on the importance of buying property for our children’s future. This is because when they are adults, they will likely be able to afford only a very small sized home or one that is very far away from us.

Therefore, one reason why parents buy for their children is so their kids can afford to stay in a place not so far away from them.

They also buy property so that when their kids require funds to further their studies, the property can be sold and the money used for their education.

In one particular advanced country, it is reported that some parents buy property even before they have children – yes, they are buying property for “future” children.

The reason? They want their children to have the best quality of education.

In an article in news.com.au entitled “Childless buyers line up for sought-after school zone”, it was reported that young couples in Brisbane feel that education is important.

As such, they are willing to fork out money to ensure their children get the best quality of education possible. Many buyers are weighing the costs of private school fees and the mortgage of properties in the area of well performing schools.

Here, public school fees are only $110 a year whereas it can go up to $30,000 for private schools.

Thus, many parents are buying properties in school catchment areas to future-proof their children’s education.

The article quoted a parent, Paul Lynch who said that when he bought a home in 2007, his main concern was that the property be located within a $5 cab ride of Brisbane’s CBD.

With that in mind, he and his wife opted for a low-maintenance lifestyle in a four-bedroom apartment in West End so they could still be within the school catchment area.

It was his opinion that this was the main reason why people desperately wanted to live in the school catchment area.

Actually, this is already something which parents in Malaysia are doing, except that most are only doing this after they have kids.

A friend moved to Sri Damansara so that her kids could go to a nursery within walking distance from her house and a primary school of her choice less than five minutes away.

The cost of that terrace home was just RM1 million, plus a few hundred thousand for renovation.

Kids are the future of all the investments we make today, whether it’s for them or due to them.

Think about it. We want our kids to grow up healthy and strong but we do not currently live in a place where they have the space to run around every day.


Source: Free Malaysia Today

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Why is the savings rate in Malaysia on the decline?

The last generation was more disciplined about savings – no matter how little or how much they earned. And they made it a point to instil the savings habit in their children.

However, it seems that these days, Malaysians in general tend to save less.

An article in the theedgemarkets.com touched on this very issue, reporting that the pace of growth of individual savings had weakened in 2017 compared to previous years.

Sunway University Business School professor of economics Dr Yeah Kim Leng said the rising household debt-to-gross domestic product ratio was a contributing factor to declining savings.

He said, “When household debt goes up, you can expect savings and fixed deposit balances to decline as there would be less income available for savings, and [monthly income] would instead go towards financing assets that include property investments.”

Socioeconomic Research Centre executive director Lee Heng Guie said the weaker growth rate of savings could be the result of many having to repay debts using their savings.

Lee said a pick-up in savings was seen from 2011-2012, likely due to the normalisation of the overnight policy rate.

He said, “After the 2008 global financial crisis, the central bank slashed the interest rate, and this started to normalise from 2010 onwards. So the role of interest rates is an important factor here especially for pensioners when deciding where to put their money.”

UOB Malaysia senior economist Julia Goh also said the growth rate of household savings was on the decline.

“The compound annual growth rate (CAGR) of household savings declined from a growth rate of 7% in the periods of 2000 to 2005 and 2006 to 2010, to 6% in 2011 to 2016,” she said in an article in theedgemarkets.com.

It’s true that it’s hard to save more, these days. Let’s talk about those who actually could save IF ONLY they did not buy that new handbag, that new handphone or take those weekly trips to the cafe for a RM15 latte.

Actually, what the stats continue to tell us is that the disparity in income will likely become wider everywhere in the world. Earlier article here.

Those who can somehow save and use their savings to invest to earn higher returns will likely be better off many years in the future compared to those who do not save at all.

Whether it’s an investment into equity for good returns at low management fee or buying a property and letting it increase in price slowly, all these will help even as the savings rate continues to decline.

Better understand it and start early. Starting LATER will come sooner than we think.


Source: Free Malaysia Today