Setting Your Kids Up for a Bright Financial Future with SG Budget Babe Dawn Cher

Episode summary

Dawn Cher aka Budget Babe joins Philipp to share how you can start to build an investment portfolio for your children's future needs.


Episode transcript

Philipp: Welcome to another episode of In Your Best Interest. Every two weeks, we bring you new topics covering personal finance, investing, and entrepreneurship. I’m your host, Philipp Muedder, and today, we will be chatting about investing for your children. Investing for your children could mean a lot of different things, such as saving up for school, or university tuition, or perhaps even helping them get a head start on a down payment for a house.

Whatever the use case of the funds might be, it is critical that you combine both savings and investments in order to achieve those goals. This really builds up on our last episode, where I spoke with Freddy Lim, the CIO of StashAway, about the importance of investing in our daily lives versus just saving.

So, if you have not listened to that episode, I encourage you to check that out after today, so you can learn a little bit more about the “saving versus investing” piece of the puzzle. Of course, I have another fantastic guest to join me today, her name is Dawn, and you will probably know her as Budget Babe in Singapore.

Dawn has a huge following through her personal finance and lifestyle blog, which has garnered more than 11 million readers so far. Her work has also been featured in many government statutory boards, as well as in mainstream media, including The Straits Times, CNA, [02:00] AsiaOne, Money FM, and many more. So, thank you so much for taking the time to join me today, Dawn.

Dawn: Thanks for having me.

Philipp: Yes, it's very good to speak to you. I’ve been following your blog, I’ve read a lot of the posts before, and it's so good to speak to you now in person. So, before we dive right into the topic that I just mentioned is, we always like to introduce our guests a little bit more to the audience, so we get to know you a little bit better.

And for that, I like to go a little bit backwards, right? And, kind of, understand a little bit more about, hey, where does Dawn come from? Like, I know, you're in Singapore, but what was it like growing up? Maybe even when was the first time you even thought about anything personal finance-related?

Dawn: So I think a lot of who I am and how I approach and think about finance was in-built in me from a very young age. Because I grew up in a family who was badly affected by the Asian Financial Crisis, and seeing my mom having to go around borrowing and taking out credit card loans, loans from family and friends, and relatives to pay for our daily expenses, that really left a huge impression on me.

And I think, later on, I wanted to go to university, but my parents didn't have money to send me there because they didn't save up for it. And I remember, as a kid, I really resented them for it. I know I shouldn't, so in hindsight, I’m actually glad that they didn't because their lack of planning made me really independent. I found a way to fund myself through my studies.

So, I took on lots of part-time jobs, I taught tuition, and I got myself a scholarship, and then I went to the US to study, and that was in California. And when I was in the US [04:00], unlike many of my peers, I didn't have what we call a PMS, a “papa mama scholarship” or an ATM to draw on from.

So, I really had to be very conscious of every dollar I was spending, and that was when I had to seriously budget every single cent, every dollar. And, in the US as well, you know how the whole culture around coupons are, really big there. You literally get those in your meal.

Philipp: I remember being a high school exchange student a long time in the US, I think 2003, and that's the first time coming from Germany to the US. When I saw the newspapers, they're so big, and 90% of the newspaper is actually coupons.

Dawn: Yes, exactly. So, I was introduced to that, and those coupons helped me so much because it really helped me to save on my expenses. So, that helped inculcate the budgeting habit in me, and when I came back, that just naturally rolled over. So, I would have to say, on hindsight, I thank my parents for not having a plan.

But it was a very painful process, and my sister didn't have that same privilege of going overseas. So, it's something that I hope I don't have to do for my kid in the future, and that's really why I’m so passionate about this topic. I started the blog because it really just is a reflection of my other-self. And, since I don't get to talk about finance, and I don't get paid to write in my job.

And it's really something that I love; I actually studied journalism and communications in university; I’ve always wanted to be a writer. So, with the Internet, that's a great and beautiful thing, right? If you are not hired for something that you love and want to do, just go ahead and do it yourself, so that's what I did.

I wasn't sure if any publishing company would want to publish a book by some random girl who had huge aspirations of being an author, so I was like well, I’ll just self-publish then. And, that's how the whole SG Budget Babe thing started.

Philipp: No, I think it is an awesome story, very awesome story. And, I think, you speak to a lot of people too when you say, these events in [06:00] life that are difficult or challenging, that's when you either rise to the occasion, or not. In your case, you didn't have the funds to go to university from your family, right? So, you had to find other ways of doing this, right? Having a part-time job, paying for yourself in college.

But, you still made it to the US, you still achieved those goals, right? I think it's very commendable. And I always like to hear these stories because I think there are a lot of people that, you know, just give up, right? Or don't follow through on their dreams. Just because there are roadblocks, but I think there's always a way to get around them, and I think it's a very inspiring story for people to hear.

Because I actually did the same thing, I paid for my own college as well, and I went also as an exchange student abroad. And I think it's doable, right? It's finding the resources in today's world, especially. Also, you have a financial blog; there's a lot of blogs out there that actually help people now finding that information through the Internet.

Dawn: Yes. I think it's so much easier now, but in our time, it was so difficult because a lot of those resources on how to earn extra money to fund your own studies weren't readily available. So, I think it was a lot more difficult. But yes, where did you go for your exchange in the end?

Philipp: So, I did a high school exchange in the US, but that was, obviously, that one I did get a scholarship for. So, that was a long time ago, it was in the US that was on the West Coast as well in Portland, Oregon. And then in university, I went on exchange in Canada, in Toronto.

But yes, I think for anyone listening, I think one of the best investments you can ever make for yourself is to try to live in a foreign country. Because it will instil so many new perspectives, and it was life-changing, both high school as well as university, to live abroad.

Dawn: Yes, it is. It's a worthy investment, extremely expensive, really painful if you don't have parents who can pay for that, but worth every [08:00] single cent.

Philipp: Absolutely. So, then with that being said, we kind of understand now where you came from and what inspired you to start the financial blog, right? If I take a step back and just about getting into the topic of saving for your children, I just wanted to know from you, what was your first investment, or the best investment you have ever made? Either of those, or maybe both.

Dawn: Oh, my best investment would not be in like an actual financial instrument; it would be in my exchange.

Philipp: That's good. I think we have now 10 or 11 guests so far, and everyone had something else, and mostly, it was not in financial investment.

Dawn: Yes, exactly. I think a lot of the best things in life that have the best returns can't be quantified with money. So, it's also why I take a very qualitative approach. It basically governs like maybe 60% or 70% of my analysis. And that's my huge belief, right? Money is an enabler. It gives you the opportunity to achieve the goals and the dreams that you want.

But at the end of the day, the best investments are always things that you cannot buy with money. Things like spending time with your family, being able to go overseas on an experience, on a holiday. Being able to bring your parents overseas to thank them for raising you. This is the stuff that money cannot buy. And every cent spent on those kinds of investments is going to be the best time.

Philipp: No, absolutely. Great answer. I think I wholeheartedly believe in that as well. So, let's switch gears then, let's talk about today's topic, right? It's investing for your children. It's quite broad because you can invest for a lot of different things for your children.

But I think every parent, we're doing a lot of webinars and events for customers and the public, and it always comes up, right? When do I need to start saving for my kid’s education? Should I put it ahead of my retirement planning, right? [10:00] And things like that. So, I know we spoke before, and I know you said, I think you have a two-year-old son, right?

Dawn: Yes.

Philipp: So, what is different now for you and your family in terms of investing as well, right? What has changed? Like how did you make that priority between saving for maybe kids’ education or putting retirement may be on hold? How did you prioritise that?

Dawn: So, I think it's about achieving all at the same time and striking a good balance between both. In the same fashion where I realized saving alone would not help me hit my retirement goals, and I needed to invest if I really wanted to be financially free by the time I reached my golden years. 

It's the same concept applied to my child's education fees. Because at the end of the day, that's really just inflation, right? Saving alone and leaving your money in the bank is not going to help you. Now, I think today we're in a slightly different climate because you have all these high-yield savings accounts like DBS Multiplier, or UOB One, and OCBC.

But all of this we don't know how long they will last, and while they're a good temporary solution, you need something that will give you a lot more in the long run because inflation is going to eat into your returns. And, if you look at how much your university fees are projected to increase over the next few years, there’s a really good graphic that I took from DBS, whereby they estimate that it's going to go up to even $60,000, or even $80,000 in a year, if your child is going to go for high-value courses like in law, or medical. And Dollars And Sense has one where they divide these by non-medicine versus medical, which is 5 years, and they project that by the year 2035, this is going to literally double, or even more than double [12:00].

Philipp: Yes. We can put some links here in the show notes for the people listening to find those.

Dawn: Yes, exactly. So, how are you going to save that much, right? Our incomes are not literally doubling.

Philipp: And this is exactly what I mean by even starting from a step back, it's like why should you even invest for your child's portfolio. We're already touching on these subjects, right? But you mentioned inflation. And I think inflation is already the silent killer. Even if we just talk about regular inflation, where the government across the world are trying to be right around 2%, usually in terms of inflation. But maybe you have some numbers there, but inflation for education has been skyrocketing, right? I don't remember the last numbers I’ve seen. But, that alone is a reason why you should invest. But maybe you can explain a little bit more there.

Dawn: Exactly. So, I think like the highest rising inflation rates are across your healthcare, education, and weddings. So, if you're looking at your own retirement, health care bills are going to be a silent killer. And for your child's future, education is going to be the key. Now I also hold a slightly contrarian view, because I think in line with how the whole world is changing, I’m of the view that maybe my kid doesn't even need university in the future, who knows, right?

Philipp: Who knows? Online education, especially with this COVID situation, right? People will think twice of paying these high tuition fees if you can't even be in person in class, right?

Dawn: Exactly. But I don't want to be in that position whereby if I’m wrong about this, and if my kid needs a university degree. Maybe because he wants to pursue a field where you do need that qualification, at least like in law, in medicine. I don't want to be stuck in a position where I’ll be like telling him, “Son, I can't pay for you, I’m sorry, but you need to give up on your dreams”.

I don't think any parent would ever want to do that. Of course, like with hard parenting, I may not hand over [14:00] the money to him. I may not spoon-feed him, because having gone through the grill myself, I know that there is some value. And it teaches your kids to be more resilient and learn about grit when you don't give them everything on a silver spoon.

But at the same time, you know I want to have a backup. Like I can tell him, “You need to forge your own way, but if anything else fails, mommy and daddy are going to be here for you”. So, I can't do that if I don't invest, and that's why I believe so strongly in having to invest for my child's future.

Philipp: It's all about having a plan, right? When I give financial planning seminars and things like that, I always tell them, “Hey, have a plan, save for your retirement one pot of money. Save for a different, if you have multiple children, in different pots of money, they all need different portfolios”, which we will get into later. But have them separate and save for them on a monthly basis as early as possible, because even if they never go to university, right? You still have the money saved up. You can use it for yourself or on something else, help them on a down payment of a house, or whatever it may be, right? But having the plan is actually what makes you also less financially anxious, right? You don't have to worry about it so much. So, thinking about that, how do you normally plan, or how do you structure your financial plan, then?

Dawn: So, I think a lot of the structuring has to be done by first examining your personal circumstances. Because we're all in different positions whereby we have different amounts of free time, skills, and even capital sums to start off with, and one needs to undergo that reflection process before they can actually determine what is a good solution for them to go ahead and invest for their children.

So, for example, you could go through different methods, right? You could look at investing through, say your robo-advisors like with StashAway. You could also go through exchange-traded funds, a basket of them. Or even active stock selections through a DIY strategy. [16:00] But a lot of them will only have clearer answers after you've assessed how much free time or how much time do you even have to spend on this portion of your life. The other thing is then what kind of growth are you looking for? Are you just saving up for maybe a holiday? Maybe to bring your kid through a local university? Or, to potentially save up and grow your money, to have enough to send him overseas if he needs to. So, you need to know what is your time, your growth, your long-term outlook, and what kind of skills and emotional capacity you're in. If you're someone who is always reacting very emotionally whenever prices go up and down, then a more active selection strategy may not work, right? So, that's the first step that anyone needs to undergo when they want to invest for their kids.

Philipp: No, it makes perfect sense. And for the listeners, I do agree with this because that's what I preach every time as well, right? You have to know your time horizon. You also have to understand if you're busy at work, right? How much time do you really want to spend on this?

And you can automate a lot of the different items so that you don't forget. But taking another angle here, right? I mentioned earlier. Where would you position saving for retirement and saving for a child's education on a priority list? I know you said you should be doing both, but everyone has a finite amount of income coming in every month.

Dawn: Yes.

Philipp: How would you suggest a savings percentage to go towards each of those goals? 

Dawn: So, I don't really have percentages fixed because it can vary month-to-month based on how much income you're bringing in. If you have any bonus, or if it's like Chinese New Year, you get angpows for your kids, so that's like a boost. But to answer your question on the priority list, retirement needs have to come first. [18:00] Because if you take care of your child's university fees, but not your own retirement. And touch wood if something ever happens in that golden years, what's that fund going to be used for? It's likely that it's going to be used for your own healthy expenses first, rather than sending your kid overseas. So, it needs to be done in tandem, but when it comes to prioritising it, I would definitely, and this is what I’m doing. We put more money into our own retirement; we have a lot lesser for our kid. And I think also for parents you need to determine how much and what percentage that would be comfortable for both of you, especially if you're going to have more than one kid. 

Because if you have, like in our case right now, we only have one child, right? But we're hoping to have more children. And, I can't possibly divide our income right now, say let's say after deducting 40% for daily expenses, then I have 60% left, and I divide 20, 20, 20 for the three of us. Then what happens when my next kid comes along? My kid, unfortunately, is going to have less than his elder brother? Just because like his elder brother was born first? That doesn't make sense either, right? So, I think it's about working with what is comfortable. And how I approach this is before I finalize the number of kids that we'll have, we first start investing with the money that we are comfortable to put aside for our kids, regardless of the number. And also using the funds from the baby bonus that we got from the Singapore government.

Philipp: Yes. Which is a good segue because I think I always tell people as well that you want to save for retirement for all the reasons that you just mentioned, right? Before you even think about kids' education. Because in the worst-case scenario, there are still student loans available, right? For people to go to university, but there is not a loan for you when you want to retire. And that's a very big thing to understand. But for parents, it's very difficult, right? Because they also think like the time horizon to college is much, a lot of times a lot sooner [20:00] than retirement, right? So automatically in their mind, they actually say, “Oh no, I need to start saving for university versus retirement first”. But I think all of those points were well received, and I think they all make perfect sense. So with that being said, when then should I start investing for my children? Should I start when I know if they want to go to university? Should I start when they're born? Do you have any suggestions there for listeners?

Dawn: Yes. The earlier, the better, because with compound interest and compounded returns, their magic formula in there is time. So, the sooner you start, the more you'll be able to grow your money. But if I had to fix an age to it, I would suggest that parents start when their kid is one year old. So, the ideal answer is to start when you're pregnant, right? Or before you even give birth to your kid. But having gone through the process myself. I can honestly tell you the first year of parenthood is such a huge adjustment. And I think parents need to take that first year to give themselves a break first, get adjusted to how life as a parent is like. And once they begin to settle into the new tandem of things, then that's when they'll be able to come up with better, clearer answers on how they can invest for the longer term. Like to give an example, when I was pregnant, I had all these ambitious goals of what I was going to do with my maternity break. I was like wow, four months of maternity leave. I’m going to complete a novel; I’m going to produce ten children's books. And I’m also going to start my child's investment portfolio. And guess what? I didn't complete even one of them. Because when it came down to it, the four months were so difficult. And I was busy breastfeeding and getting used to knowing how to take care of my child. And that lasted, I think, for at least a year before I got comfortable, and really got used to the whole pattern and adjustments of things. So, I would recommend for first-time parents especially [22:00], give yourself one year break. And once you kind of settle into things, then after your child turns one, take that time to really start reflecting and decide what is the investment strategy that you want to do for the long term. You can start off being very ambitious and be like well, I’ve always managed my own portfolio actively, so I’m going to do the same for my kid. But if your kid comes along and you need to be spending a lot of time with them, then you are not going to have that luxury of time anymore to do active stock investments for them, much less yourself. So, this is where your priorities and your commitment level may change, and that's the best time to really evaluate and start.

Philipp: Yes. And I think you just mentioned it a little bit, but compound interest is very important, right? When it comes to investing in general because compound interest is your best friend in reaching those goals. And there we come to a good starting amount, right? So again, people are in different situations; we all have different discretionary spending amounts that we can use to save for our children. However, what would you say is a good starting amount? Would you do it on a monthly basis? Do you say hey, you take your bonus and just put it all in there? And then just let compound interest do its work? Is there a preferred method that you like to use?

Dawn: I would say it depends on your time and capital amount that's comfortable. So, let me use the examples to illustrate, right? If you, after reviewing your own priorities and time commitment, you realize that automating it through robo-advisors would be the best way forward. Then a monthly deposit would work. Or alternatively, if you find that you're already having a hard enough time keeping up with monthly bills, maybe you need to do like just a one lump sum deposit each year, then you can go for an annual approach. If you're doing active stock investing and picking, then obviously that has to be when the time is [24:00] right for you to buy the stocks. And it really all boils down to your own objective, your time, as well as your capital. 

For some people who are overly-stretched, I always say you need to first take care of your downside, before caring about your upside. And what is your downside in life? That's insurance, right. So, make sure that you first have all of your insurance settled. And then whatever money you have left, that's where you start putting that into investment. So for someone who doesn't earn a very high income, the amount that they start with is definitely going to be lower. And this is where I think we're really lucky today because you can start for as little as $100 a month; that option was not available in the past. So, that could be one for people who are not earning a super high income to start. But for others who are lucky enough to be in jobs that pay them a lot more, then what they could do is you could use your bonus, or you could set aside a fixed percentage of your income every month. 10% of a $10,000 pay is a lot more than 20% of a $2,000 pay. So, people need to customize this to their own circumstances and go with the one that's best for them to sustain with over the long run.

Philipp: No, good points. You already mentioned it a little bit, right? We talked about why you should start, what's a good starting amount. So, when looking at starting to invest, you already mentioned a few ways of getting started like robo-advisory, picking your own ETF portfolio, or picking stocks by yourself, right? There are also different methods of investing, right? To my mind, before the show even started, we talked a little bit about value investing. But there are different ways like index investing, dividend investing, growth investing when it comes to choosing a method. Which one of those do you usually enjoy the most, or had the best success with so far?

Dawn: [26:00] I personally enjoy active stock selection the most. And for my child, I apply more growth value-oriented strategies, rather than just dividends or value approaches. Because my child has a much longer runway for his investments to grow versus myself. But I have to first disclaim that my approach may not be the best for everyone. So, for all of you listeners on this call, if you don't enjoy analysing businesses like I am. I’m quite a geek that way. I really love learning about how companies operate, how they make money, how their management sees the future like. I love having those discussions and research on them. But if you don't enjoy it, if you fall asleep reading that, then automating it might be a better way for you.

Philipp: No, absolutely. And I think from my point of view, I think I did my exchange here when I was in high school in the US, and my host dad was in finance, so that's when I started to get interested in finance. And I started with him; I think I was 15 years old or something. But I made my dad in Germany open an account because I was discussing with my host in the US a lot, always about different stocks. So, this is also how you can teach children a little bit, and get them excited about investment and actually start it on personal finance. Because I think this is one of the topics that is so underserved and underrated because it's not taught in school, which I always plead with everyone to start putting it into the curriculum. Just like math and reading, it's probably the most important thing. Is there something that you're like thinking of doing for your son, or is this something you grew up with as well?

Dawn: I didn't grow up with it; literally, my circumstances shaped me into it. And I have to be honest; you want to know what's the fun thing on why I started investing? Take a wild guess; I’m sure you wouldn't be able to guess it.

Philipp: The fun thing why you started to invest?

Dawn: Yes, like what prompted me to start investing, take a wild guess.

Philipp: [28:00] Because you, well, good question. You bought something, and you liked the company, and you wanted to do some more research because you're using it.

Dawn: No. I think most people wouldn't be able to guess it, but the truth is I’m a beneficiary on my blog as much as people have benefited from my content there. So, I started investing because, with my very first blog post, that unexpectedly went viral, which was titled, “how I saved $20,000 in a year”. That was back in December 2014; right after that, I had a lot of readers coming and leaving comments. And quite a few of them were saying that with that sum saved up now, I should really start to look into investing and growing that for the future. And that was when I was like, oh wait, what exactly is investing? What is this about? Why are so many people asking me to do that? So I started researching, and I was very lucky because I got to meet people who actually knew about it, and as I spoke to them, that was how I understood how investing really works. Before that, the only exposure I had to investing was through my investment-linked fund, the ILP, right? And then after learning how investing work, I was like I'm going to cancel my ILP, because why am I paying for this when the returns are not that fantastic. When in fact, investing can actually be a long-term skill that you use, and it's part of a basic financial literacy. You use that to really grow your returns for the long run, so that's how I started.

Philipp: Oh wow, yes, that's really interesting. So, the blog started more on the savings side before actually, it went more into investing. Very good, I did not know this. And I think we can have a whole another episode just on understanding how you did the $20,000; I would love to hear more about this. So, super exciting that that was the first blog post and got you viral as well. Because I think that first comes savings then comes investing, of course, and then ultimately, you start doing both.

Dawn: Exactly. Taking a step back, first, come savings, then comes insurance, then comes your investments.

Philipp: [30:00] That's true. And with that, you said earlier you had an ILP, and you mentioned you got out of it because the fees were high, the returns were not as good. A lot of times, what I see, it's not very popular in the US or in Europe. But here in Southeast Asia, it's very popular; something called an endowment plan, right? That they use to save for children's education. So, it's oftentimes sold as pretty primarily for this. So, what's your experience with this? Have you ever done any more analysis on those? Do they still make sense; especially with interest rates so low, right? And we said earlier inflation on education is so high; it might not make sense. But I would love to hear your opinion on that.

Dawn: Okay. I think I have a good impression of endowments because, in my family, I have a cousin who's from a single mother family, because unfortunately, her dad passed away due to an accident. And if not for the fact that they took out endowment plans, I don't think her mom would have been able to send her to university. And it's such a pity because my cousin is an incredibly smart and intelligent woman. And because of that endowment plan, thankfully, she was able to go to university without having to go through that financial headache and complete her studies. So, I think endowment plans are still a great tool to use. But the question is in the past, where we didn't have as much information. It wasn't as democratized as what it is today, because the Internet was not a huge thing back then. People were very focused on working at their jobs. So, the endowment was what helped them to stay disciplined and save up for their child's education. Because they weren’t as literate or didn't have that kind of information to companies and businesses, much less financial reports and analyst statements. So, they didn't really know how to invest, it would be really difficult to learn how to. So, the endowment plan was a great [32:00] option to do that. Now an ILP can also be a good tool for some people. I only recommend it to people who have almost zero discipline. If you're someone who's going to just take your bonus and spend it on a holiday or a branded luxury bag, or anything. And basically, any money that comes to your hand leaves you really quickly. And ILP may actually be a decent tool because it kind of locks in your commitment, isn't it? So the value of it is really in the discipline, the forced discipline, rather than the actual returns itself. But for people who can't actually discipline their own spending habits and keep their budget in track, then that's where you may want to look at tools that are easier and stuff that you can do on your own. So, if time is a problem, I really think robo-advisors are a great solution. If you do have spare time and you enjoy it, then active stock selections is a great way to go. And the thing I love about active stock investing is that it really just is part of living in this world, isn't it? If you have conversations with people on where the future is going, you talk about things like digital payments. You recognize the value of e-commerce and moving online, even before COVID-19 started. You would have been able to reward yourself by jumping on those trends, through investments in companies that create those solutions for people.

Philipp: And I think you made a good point, right? If you have the time and you want to spend a certain amount of hours a week to do that, there absolutely are. Like my guess was that you liked the product and then you bought it because you buy the product, right? I think that's always if you do; I’m mostly passive; I use robo-advisors, of course.

But I always had some individual shares still, but it was from companies that I buy products from. Because I think that's a very good gauge, right? [34:00] If you and your friends and everyone buy their products, it's a very good first step of analysing a company. Because it means it has some value to yourself, it has value to your friends.

And then you can kind of build yourself a portfolio of, you know, different stocks that fit that criteria, there are obviously many different options that you can go that route with. But I think it's a good start. But again, it takes time, so if you like it, you do it yourself. Otherwise, there are a lot of different options like robo-advisors; you can also buy ETFs as you said and build your own little diversified portfolio in order to reach those goals.

Dawn: I can share one tip; I don't usually give like specific stock names. But that really forms the core of how I approach my child's investment. So, my son is called Nate, and his investment portfolio, the way I strategised for him, I’m looking at it right now, because it's up on my whiteboard. I have the passive part, which is investing into ETFs, so that's where I don't do too much work. But I do also have a portion which is on active growth; because I think that this fraction of the entire pie can potentially grow to become a huge multi-backer that can give great returns on our money. And how I select those stocks in the active portfolio is that I look at the trends of what I think it's going to be core in his time, when he grows up in 20, 30 years. And we can already start to see some of those manifesting, right? Digital payments is definitely the way to go. You also have things like cleaner driving, solar energy, chips, with so much going online now, you are going to increasingly need more savvy, more advanced chip makers, and that's how I position his portfolio in. So, like, for example, or even if you look at entertainment, right? Let's get real, you cannot run away from entertainment, and I’m a huge fan of Disney. [36:00] Seeing how they have innovated, transformed in recent years gives me that confidence that they will continue to be a core brand in the future of entertainment as well. So, that's also one portfolio in my son's investments. So, things like this, that's the fun part, right? Just being a user and thinking about how that future looks like can be your first step to figuring out what stocks to pick. And if you're not confident of going through the rest of the analysis, then that's where you can go into robo-advisors that fit those themes. Or if the robot advisors do not offer specific ETFs for those themes, then you can invest directly into the ETFs through other methods and do the whole rebalancing and buying in yourself. 

Philipp: And I liked your point of having a passive core and then an active on the top layer. I think it will resonate with a lot of people, because I think at least like hey, your base, your core portfolio, if you use like a robo-advisor, for example, it will just grow, it's managed, you know it will get me towards a goal. But in order to have a few multipliers in there as well, you can add these individual shares on top, right? In different accounts, you can just buy them, and I definitely liked your thinking about how you think about the future and then incorporate what's going to be most relevant in 10, 15, 20 years’ time is a great approach towards that. So, I think building a portfolio like this is quite a good step. I always told clients back in the days to also limit this stock picking, maybe to 5% to 10% of your portfolio on top of the core. Just to be, because this portion might go from 10 to 20 or 30 very quickly, right? So that at least you rebalance again, you put it back in the core, and then you maybe pick some other shares or keep the same ones. But at least that way, you're being very systematic and [38:00] disciplined about the way you handle your investment portfolios.

Dawn: Exactly. I don't know if you have seen, there is this article on my blog where I talk about the coffee can portfolio. And that story really struck home because it tells the difference of two investors. One's a female, and one is her husband. And the female investor worked on every recommendation that her broker or whoever it was advising her on, so there was a lot of buys and sell. Whereas her husband took a lazy approach, he just basically bought everything that she did but never sold any of them over the years. And in the end, it was oh sorry; I can't remember it was the other way around like maybe it was the husband who was doing the active one, and the wife wasn't. But the idea is that at the end of the day, the one who was passive, who didn't sell anything at all, grew to such a huge amount that totally beat the returns of his or her spouse. And a lot of it was also due to one main stock called Zero. So, I think that's a really good story of how your growth portfolio cannot and should not be the core of your entire investment holdings, because that's not very good risk management. But when you do it right, you don't need all of them to be winners, you really just need a few to be multi-baggers, and that will supercharge your returns. So that's why I think it makes sense to think from an overall, you need to go back to the basics. People always focus on what are the tools I can use, tell me how I can invest? But before you go into the how, it's very important to understand what is the why. Why do you want to invest? What's your goal? How much time do you have to invest? What's your skill level at? What is your passion, your interest at? Will active stock-picking make you very emotional? Because you look at prices, go up and down, and you react to that. And if that's the case, then you have to make sure that the solution you choose then fits your character and your long-term goals. I would add one more layer of objective in there, which is for me, [40:00] aside from making returns on investment; I also want to use it to teach my kid about financial literacy. So, the second layer of objective I have in the portfolio is to be able to finally give it to him and teach him how investments really work. Because I think that's a great skill that I want to give my kid for navigating in the future. And that's why like when it comes to investing, you can look at index investing. You can look at dividend investing; you can also look at growth stocks. And I have all of this in the portfolio as well. So I can actually teach him when I bring him to Disneyland, I can point to the tower on the floor and say, “Hey son, that's kind of like your tower because you're a Disney shareholder, did you know that?” And then when we go to a Disney movie, I can tell him, “Look, you're actually contributing to the company's profits.

And you are going to get dividends paid out on that, and this can be your bonus pocket money”. And that's how I basically strategise, which is why my portfolio for him looks the way that it does. But to simply have someone else replicate that same exact portfolio with different objectives is not going to work. So, instead of people asking for answers, I think what people should do is to learn how to find the answers for themselves.

Philipp: No, absolutely, I think that was a perfect wrap-up to the show. Because I think you just really brought it all back together and gave people really something to think about, so Dawn, again, thank you so very much for being here today.

I think this will be super valuable for everyone listening, and yes, thank you very much. Before we wrap up the show, though, is there anything you want to share with our audience? Maybe you can remind people where they can find you and learn more about your writing and videos, etc.?

Dawn: Yes, definitely. So, I mostly write on my blog at I also have a YouTube channel that I set up where I basically teach easier financial concepts, [42:00] including investments. And I also have a course, so on the blog, if you click through to academy, or just go straight to There are a few courses that I’ve designed to help people learn how to do all of these solutions by themselves. And the same thing goes for investing for the children; I do have a course on that. And the course will basically take you through what we've talked about. How to identify your strengths, your weaknesses, your time, and it goes through all of the different solutions, including robo-advisors, ETFs, and even active stock selection, and how you can find the way to pick the one that works best for you and your personal situation. So, it's all about learning how, it's about empowering people, that's something I strongly believe in. I think you guys are doing the same, isn't it? Even though you do have the solution for busy professionals to want that returns on their money. And whether it is for their own retirement or for their child's investment portfolio, you also have all of this content to help people make better financial decisions and learn how to do it themselves. And that's where if they want to go ahead and learn even more, then my blog has really great resources and courses around that.

Philipp: Totally second that. I know we're always also very big on education because we believe with education it comes knowledge, and then people can pick the right solution for them. But yes, education is super important for us at StashAway as well. And also why we have this podcast, so we can bring in all kinds of different views. Even if they're not 100% aligned with what we think, right? It's always very important to know everything, and this is where the Internet, podcasting, blogs have really created a new space of knowledge for people. So that they're not just being sold investment products, so this is awesome. Again Dawn, thank you so much; it was a really a pleasure speaking with you. And I’m sure we'll cross path again, and have you maybe on another show as well. Thank you so much.

Dawn: Yes. Thank you so much for having me. Thank you. [44:00]

Episode notes

In this episode, Philipp and Dawn Cher aka Budget Babe talk about how you can approach creating an investment portfolio for your children. It might be to help them with the rising tertiary education fees or to give them a headstart in whatever they choose to pursue. Dawn shares with us how she approaches the topic.

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Episode contributors

  • Dawn Cher (SG Budget Babe)
  • Philipp Muedder (Head of Financial Planning at StashAway)