Financial Checklist for OFWs Starting a Family

For many, starting a family is a milestone in life. And for Overseas Filipino Workers or OFWs, this comes with its own set of challenges, especially in terms of money.

Working abroad usually means dealing with high living expenses, fluctuating incomes, and the financial obligations to loved ones back home. That’s why it’s essential that OFWs are prepared with their finances before having a family.

Being financially stable ensures that you’re ready to handle unexpected situations, and it not only provides peace of mind but also lays a solid foundation for your future family.

So let’s list down the important things you need to prepare financially before taking this big step.

1. Emergency Fund

As OFWs often face uncertainties when it comes to employment contracts and economic conditions abroad, it’s even more critical for them to have an emergency fund.

Ideally, save 3 to 6 months’ worth of expenses to cover unexpected situations like job loss or medical issues. Start by setting aside a portion of your income every month into a separate, easily accessible account.

If you need a much longer time to find a job or you’re supporting an elderly parent or sibling who is dependent on you for medical expenses, it might be important to have at least 8 to 12 months’ worth of expenses as emergency funds.

Having a larger cushion will make sure that you have enough resources to handle emergencies without putting your family’s finances at risk.

2. Life Insurance

If you’re the primary breadwinner, this means your family depends on your income for everyday living expenses, education, and other financial needs. Life insurance makes sure that your loved ones are taken care of even if you’re no longer there to support them.

As a rule of thumb, get a life insurance policy that covers at least 10 times your annual income. However, it might be more prudent to actually calculate your needs if you can or engage a trusted and knowledgeable advisor to help you navigate this.

Generally speaking, a good framework is to start calculating how much you actually need based on your debts/liabilities, income replacement, college education for kids, and estate taxes (D.I.C.E.). You can check my previous article about it here.

After you’re done calculating your needs, look for life policies that will be suitable to address these needs whether it’s a term insurance, whole life policy, or investment-linked policy. Usually, I will gravitate towards term policies as it is the cheapest type of risk protection insurance you can get with the highest coverage value.

Then lastly, apply the budget to filter which benefits you would need to prioritize based on your affordability. In short, look for policies that fit your needs and budget ensuring they will provide sufficient coverage for your dependents in case of an untimely demise.

In Singapore, there is good global coverage available that residents and non-residents (people who fly in to buy) can avail. Usually the cost of insurance in third world countries is much higher, some are 300% to 500% more expensive than those policies issued from Singapore, so this is something you can take into account before availing any life insurance.

3. Health Insurance

Medical emergencies, hospitalizations, or even routine examinations can result in significant expenses that can deplete your funds or put you in debt. For OFWs, access to quality healthcare can be costly without proper coverage.

Make sure you have adequate health insurance for yourself and your future family. Review available plans and select one that covers essential medical care for emergencies, regular checkups, and childbirth if you’re planning to have kids,

Most of the time, a local plan is sufficient enough unless you’re the type who requires coverage from outside your country, you travel frequently, or your job requires you to be posted in different jurisdictions over the years. If you are such a person, then a global coverage might be more suitable.

4. Retirement Fund

Without a retirement fund, you may find yourself financially dependent on others or needing to work longer than planned. So the earlier you begin saving for it, the more time your money has to grow through compounding.

Begin contributing to a retirement plan like an investment account you can automatically contribute every month. Starting early is crucial but having the discipline to invest regularly without fail is paramount. Allocate a percentage of your monthly income to this fund and monitor its growth regularly.

A savings of $1,000 a month growing at 6% annually can reach $1,000,000 in 30 years. If you save more aggressively, you can end up reaching your numbers earlier or having a much more substantial result.

By investing in and saving for retirement, you create a safety net that will sustain you during your non-working years, enabling you to keep up your standard of living, and pay for necessities like housing, healthcare, and daily expenses.

5. Children’s Education Fund

If you’re planning to have kids, setting up an education fund for them is essential. As costs of quality education continue to rise, saving money now will help you be ready for future tuition fees, school supplies, and other related expenses.

Set up a dedicated fund for your future children's education. You can start with a small amount and grow it through regular contributions or long-term investments such as mutual funds or unit trusts.

Grow this fund over time to reduce the need for loans or having your children stop school or be forced to become a working student.

6. Estate Planning

Prepare a will or trust to ensure your assets are properly distributed in the event of your passing. This helps avoid legal complications and ensures that your family is financially protected.

It also provides peace of mind, knowing that your loved ones won't face unnecessary delays or disputes when accessing their inheritance. Additionally, having a clear estate plan can minimize taxes and fees, preserving more of your wealth for your beneficiaries.

Estate planning covers a lot of scenarios like allowing you to designate guardians for your children or even when decisions regarding your health and finances need to be made.

Financial preparation is essential before beginning a family. You can provide a stable future for your loved ones by creating an emergency fund, getting life and health insurance, and making plans for retirement and your kids' education. Estate planning is also equally important as it’s crucial in safeguarding your assets and ensuring they’re passed on properly.

The key is to start early and be consistent. By following this checklist and adjusting as needed, you’ll be able to meet the financial challenges of family life head-on.

Remember, having a solid financial plan helps you and your family feel secure knowing you’re covered no matter what life throws your way. So take action now so you can be financially secure and have a worry-free future for your family.