Giving Your Parents Monthly Allowance? Here’s How You Can Make Full Use Of It!
Giving your parents monthly allowance is one way Asian demonstrate their values of being filial piety. It is every child’s responsibility to ensure that their parents are taken care of when they retire. In fact, failure to do so can get one involved in a lawsuit under the Maintenance of Parents Act, and an increased chance of getting smitten by lightning.
81% Of Us Give Our Parents Monthly Allowance
We conducted a survey on our Facebook Group to explore how much Singaporeans are giving their parents. Out of the 85 responds we received, 51 allocated less than 20% of their take-home pay as their parents’ allowance, while 18 responds state that they will do the same with 20-30% of their salary.
If you do give your parents a monthly allowance, is the way you give them their allowance the most optimal?
Here is the key question to ask:
For further reading, we did a more detailed comparison:
My Parents Depend On My Monthly Allowance
If your parents are no longer working and your monthly allowance is what they depend on to survive, passing them their allowance in cash or transferring their allowance into their bank account will be the only option.
You can, however, ensure that they spend smarter. One of such will be to get them the best credit card according to their needs. It is always good to do up a quick comparison for all the cards.
Assuming most of our retired parents’ main bulk of expense comes from groceries, we list down some of the best credit cards for groceries.
- Which category the main bulk of their expense fall under?
- Where do they frequently shop at?
- How much do they spend on these shops on average?
My Parents Do Not Depend On My Monthly Allowance
Some of our parents have savings from their years in the workforce and the little reliant on your monthly income will mean that you can put the money to better use. One method that is gaining a lot of popularity amongst Singaporeans these days will be to top up the CPF of their parents.
Here’s how much CPF top-up your parents can receive:
To further evaluate this option of a CPF Top-up, we put CPF contribution side-by-side with some other financial products.
Assuming a low-risk product with regards to our contribution to our parents, CPF top-up allows a low-risk moderate return.
On top of that, the benefits of a CPF Top-up to your parents’ CPF are:
- Your parents earn up to 5% p.a in interest for the amount of money you put in.
Unless you have a sure work investment that can exceed 5%p.a, a CPF top-up will be a viable solution.
- By contributing, you get to enjoy tax relief for every dollar you top-up, up to $7,000 per the calendar year.
If you are able to help your parents meet their retirement sum, your parents will get to enjoy a monthly payout under CPF Life of at least $700 throughout the rest of their lives. Hence, this approach seems like a win-win situation! In fact, according to some of the comments on our Facebook Community, this seems to be one of the best ways for the kind of returns.
You can apply to top-up your parent’s CPF by logging into your CPF with your SingPass, under “My Requests” option.
If your parents are very against the idea of CPF (I know some Singaporeans are), you can always look at helping them buy into the Singapore Savings Bond which is rather risk-free and definitely better than putting it in the bank. The return is definitely lower than in the CPF, but beats parking the money in a usual savings account. We have previously written about the step-by-step guide to applying for Singapore Savings Bond here.
The Asian Thinking
The greatest hurdle most of our users has is to convince our parents that a CPF top-up is the best method. Given the traditional way of thinking, most parents prefer seeing physical cash more than anything else, despite that not being the most optimal option.
If your parents are open to ideas, having a talk with them to get your point across definitely helps!