Giving Z a future

If my job doesn’t require me to plan ahead, I would still do so because that is what I do.

Or like to do.

So I look at this world and the emerging trends and I wonder.

And then Z was born. And I worried.

In my father’s time, there was retirement and pension. In my time, there is still retirement, but no pension for the likes of us.

In Z’s future, will there even be retirement?

With the CPF in place, pension went extinct. Well, mostly extinct.

And now, with “re-employment” in place, retirement might be extinct.

And jobs are changing.

What would Zoe be when she grows up? What would she do for a living? Can she make a living?

Big Data and programmes that can understand natural language (or at least English – Watson) can digest volumes of data to provide insights, find investment opportunities, diagnose illness, vet legal documents, prescribe treatment, and even write news articles.

Maybe this blog is being written by Watson, after it has analysed my writing style.

The jobs of the future, may not exist as yet, today.

And that should worry most Singaporean parents. Me included.

Singaporeans are said to be “Kiasu”. Look it up. It’s in the Oxford Dictionary now.

Literally, it means “scared to lose”. Or scared to fail.

So you know what I think? I think what Singaporeans really want, is the freedom to fail.

I would like to give Z that – the freedom to fail. Or more precisely, the freedom from worrying about failing, and falling.

Most parents want to give their child opportunities, – like education.

BUT… is education really the answer? Firstly education is getting expensive, and more people are educated to a higher level today than ever. In the 70’s only about 2 to 5% of the cohort was a graduate. Today, about 25%. Another 40% are polytechnic diploma holders. Is there an inflation of educational qualification? By 2030, 2/3 of Singaporeans will be white collar workers.

Is there an education bubble, like the housing bubble pre-2008?

Separate from the education bubble, is the question of relevance of education in the “Second Machine Age“. The theory is that the second machine age will render much of education irrelevant.

The possible conclusion may well be that in the future, education may not guarantee even a decent job.

In fact, if there is educational inflation, higher qualification might just mean that you have “graduated” to a more competitive level. With more people competing for the same job.

Too much education, argues Nassim Taleb, stifles entrepreneurship. Education serves only to preserve wealth, it does a poor job of creating wealth.

And in the new economy, wealth can be created with very few workers, and work may not guarantee a decent income.

Life-long employment (as epitomised by post-war industrialised Japan) is an anachronism. Today, “long-service” is 5 years. Maybe 3. In the future, jobs may be short-term, project-based, and temporary.

The jobs of the future, may not exist as yet. The jobs today, may not exist in the same form or even at all.

Careers, as we know it, will be rare – like pensions are today. Retirement may even go the way of pensions. In the future, we may not be able to retire. We may have to work “forever”.

And by “we”, I mean Z.

Of course, I could be worrying over nothing. All these are trends, extrapolations or projections of trends, and speculation. Educated or informed speculations, but not facts.

And yet…

Maybe I am too enamoured by these scenarios, and my intellectual pride wants them to come true to validate my theories. But I think for many of the scenarios, there is a good chance, they may come to pass.

So I imagine Z with a very good education competing with many others also with very good educational qualification for a limited number of jobs, and all offering only contract, short-term, project-based work.

It would be like the hundreds of thousands, if not millions of actors in Hollywood, all hoping to make it, but only a few are A-listers who make enough to be called “stars”. The rest struggle to get employed, to get recognised, to make a living.

I want to give Z a future and for most parents, this means giving them an education.

I already explained why I think that is not the solution. Or rather, not the whole solution. It’s not enough now.

No. To give Z a future, to give her the freedom to fail, I want to give her the chance to retire.

Two things happened recently that set me on this.

First, there was the recommendation of the CPF advisory panel, and how we should respond to it.

Then, I got a letter from the CPF board informing me that the govt had provided baby Z with $1500 into her CPF account as part of the marriage and parenthood benefits, and $50 had been deducted as premium payment for Z’s Medishield insurance.

So Z has a CPF account.

I had planned to make sure that PL has enough to get an Enhanced CPF Life payout when she turns 55 ($242k) and I think she should be able to top up her SA.

BUT… what if I put $50k into Z’s SA when she is 5 years old?

At just 4% interest, when she is 55 years old, the $50k will be (at least) $355k. She can likely use that to get an Enhanced CPF Life payout. More importantly, she can retire.

Or if things are worse than I can foresee, maybe she can at least take it easy and “semi-retire”.

So this is what I mean by “giving Z a future”?

No, this just assures her she can “retire”. Maybe.

How would that give her a future?

It would free her to pursue her passions, without worrying about whether the passions pay well enough to fund her retirement. She can do what she likes instead of doing what pays well. She can be an entrepreneur and not worry if she fails, and it is likely that she will fail at least once or twice.

Or more.

She can do all this, and when she is 65, when she has run her race, and she wants to take it easy, she can.

I can give her an education (and I will), but I do not know if it will be enough.

I can prepare her for the world, teach her (I hope) to be strong in mind and spirit, be confident, be kind, be curious and brave, to not be afraid to try, to fly, to fail, to fall, to pick herself up and try again. And if I do my job well, she will do all that, and find herself, at the end of her working life, desolate and penniless.

Because the world is changing, and jobs and careers are changing, and we can’t be assured of retirement.

There are of course some questions, some worries. Putting $50k into Z’s CPF is betting that the CPF and Singapore will be around in 65 years to 90 years. Can anyone be sure that SG will still be around in 90 years? or even in 50 years?

And why CPF? Would it not be better to invest in some life-indexed funds or shares or unit trust (a.k.a. Mutual Trust) funds?

Well, if there are any questions about SG surviving 90 years, we can be even MORE sure that there will be more probable questions about any specific company surviving that long. An S&P 500 company used to last 61 years (1958). This fell to 25 years in 1980, and now (2015) it is less than 20 years (maybe 18 or 19). So would putting money in any investment managed by any company, be “safe” for 60 – 90 years?

Moreover, there are uncertainties about the economy, or rather the economic system. Unconventional economics are pushing the world into uncharted territories and possibly to the brink. The brink of what, I am not sure. Maybe it is just hyperbole. Economists are remarkably boring people, so perhaps they need to drum up excitement in their profession.

Or they may be right. Well, some of them. The problem of course is that if you take 100 economists, you will have 105 opinions. So some of them may be right. The problem is which ones. If the prophets of doom are to be believed, a) the Capitalist system has had a good run, but it has swung too far and is broken, b) finanicial/monetary policy economists in their hubris have engineered the death of the economy, c) we’re doom. Doomed! DOOMED!

I don’t understand most of their mumbo-jumbo, but I get the “doomed” part.

In any case, I’m not an investor. I have no confidence in investments and my track record with it has been lacklustre. I believe investing is little more than gambling. If you want to reduce the gambling element in investment, you will need to invest like Warren Buffet, and study the stocks, the company, and predict their business in the future.

And why would I invest? To get better returns?

The CPF Investment Scheme allows CPF members to use their funds for investment. One study found that about half made less than the 2.5% returns or lower than the CPF interest rate. another third of investment made as much as if the investor left the money with CPF – 2.5%. Less than one-fifth of the investment made more than 2.5%.

The CPF will give me or rather Z, 2.5% in the ordinary account. If I put it in her Special account, it gets 4%. Meanwhile, banks in Europe have started to give negative interest rates for savings account (part of the unconventional economics).

In such a climate, 4% and even 2.5% sounds very very good, indeed.

CPF offers a simple solution. I put in $50k when Z is 5 (and I’m 55 and can withdraw my CPF). If I put it in Z’s Special Account it is locked in until she is 55 at least (assuming they do not change the rules). I do not have to track the investment to ensure the funds are making money. I do not have to write a will to ensure that the funds go to Z when I die. I do not have to retain a lawyer or a law firm to ensure that my wishes are carried out for Z’s retirement. The money is already in her CPF account. It is done. No mess. No fuss. No additional cost.

Of course I am projecting my own concerns.

I am not saying that I have dreams to pursue but which I feared to pursue because I felt “trapped” by the need to save up for my retirement. I am not that entrepreneurial. Or that adventurous.

But maybe Z will be.

I certainly hope to raise her to be a bigger risk taker than her dad.

Well, she certainly can’t be more timid than her dad.

So maybe she might pursue a career in some volatile profession or career – like film-making, or the performing arts, or be an entrepreneur. Maybe she will take my roast pork and make a business out of it!

Or maybe she might not be that adventurous, but the careers of the future will be that much more difficult to secure. So all she might have, are simply a series of jobs that will pay her enough to survive, but not enough to save for a retirement.

That is my worry.

Well, in that bad-case (not worst case) scenario, she can do her best to get by, and after years of slogging, she will at least have a chance to have a retirement. In her silver years, she hopefully can at least take it easy.

Don’t we all deserve to take it easy in our retirement?

Perhaps in the future, “rich” means being able to retire. That may be quite sad, but may be quite true.

 

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