Hong Kong is a unique place to work and, thanks to its tax breaks, it’s also a fantastic place to save for the future. That said, many expats find that the non-stop whirlwind of job and social life leaves little time left for financial planning. That’s all very well if you are a singleton with few responsibilities, but as soon as you bring a family into the mix it becomes more important to plan for the future. With this in mind, we asked Expat Living readers to pose some questions on financial planning and responsibility to Mark Rawson, CEO of The Henley Group.
“I’m a happily married father of two young children but I’m embarrassed to admit that I have done very little in the way of financial planning. Is it too late to start?”
It’s always best with any form of financial planning to start as early as possible but it’s also never too late to start. In fact, 95 percent of our first-time clients do not have a strong financial plan; they may have covered some areas but they haven’t looked at the complete package.
We offer a holistic approach and answer specific questions so we know where people want to be and how they plan to get there. We’re one of the only companies in Hong Kong to offer both financial planning and wealth management.
“We’re thinking about educating our children back in our home countries for their senior school years. What’s your advice on planning for this?”
It doesn’t matter whether you intend to send your children home to boarding school or continue to educate them here in Hong Kong, our best advice is to start planning and saving as early as possibly. A good education and university degree are probably the most important gifts you can give a child, but they’re also the most expensive. Current figures estimate that educating a child from kindergarten to graduation costs almost half a million US dollars.
Be as specific as you can when planning for your child’s future. Decide where and when you want to send your child to senior school as this will have implications on your savings plan; aspects such as inflation levels in your home country compared to Hong Kong will play a part.
Consider the hidden costs of education, too, not just the fees. Obvious extras such as uniforms, books, school trips and accommodation during university years all need to be considered, as well as hidden costs such as the effect of inflation on tuition fees during the term of your savings. In general, the level of inflation in private school fees will far exceed the general level of inflation in any country.
In the long run, the investment should be well worth it as current statistics show that children with a degree are earning on average 50-percent more than those without.
“We’re planning to return to the UK when our son starts senior school at 13. Are there any financial implications with this that we need to consider?”
Yes, there are lots of things that you need to consider, the most important being cleaning your books, so to speak, in terms of the taxation implications of returning to your homeland. Aside from high income tax, the UK has capital gains tax and inheritance tax to consider. You’ll want to maximise your Hong Kong opportunities and minimise the implications of returning home. While it’s is often difficult to pinpoint exactly when you might relocate, we advise our clients to give themselves six-to-nine months of planning time, just to make sure they’ve cleared all potential UK taxation hurdles effectively.
“Although we’re delighted to be giving our young children amazing life experiences in Hong Kong, we’re also worried that they’re becoming spoilt. How can we make them realise the value of money?”
As a father of three children who’ve been raised in Hong Kong, I have hands-on experience on this subject. There is no doubt that expat children here live in a very affluent society, and although we are giving them amazing life experiences, there are also dangers associated with this slightly sheltered upbringing. As parents, we often say “Money doesn’t grow on trees”, but we don’t quantify this; so in fact it means nothing. Again, start teaching your children as early as possible about the relationship between resources, needs and desires. Explain this in very tangible ways such as giving them pocket money if they complete certain household tasks and then sitting down and discussing what that money is to be spent on. If they want to save up to buy a Wii then they will also learn the lesson about budgeting and saving.
“My son is about to go to university back in our native Australia. Up until now, he has been very sheltered from the realities of the real world. How can we prepare him?”
We run seminars in several Hong Kong senior schools on this very topic and there are many teenagers in the same boat. The key is to decide what you are willing to pay for and what you see as outside the parameters of parental responsibility. Then, if they spend all their allowance and don’t have the funds for that trip to Thailand, they will be on their own. Give them practical advice about budgeting for their rent and what their allowance has to cover, and alert them to the hidden pitfalls of debt and credit cards. An average student in the UK leaves university with debt of £20,000, so it’s a worthwhile lesson to teach your future scholar.