The phantom child
Scientists tell us that parental love is one of the most powerful forces in nature.
Across the animal kingdom, parents invest enormous amounts of time and energy caring for their offspring. Birds feed chicks that never seem to stop eating. Elephants protect their calves for years. Even the smallest mammals instinctively nurture their young.
But humans may be the most devoted parents of all. Unlike most animals, our children require support for many years before they become fully independent. As a result, parents willingly make sacrifices that often defy logic.
A father who refuses to spend P1,000 on himself somehow finds even a higher amount for a school project. A mother who delays replacing her aging phone has no hesitation paying for tuition, uniforms and tutorial classes.
Every Filipino parent knows the feeling. We complain about school fees, transportation costs, food expenses and enrollment requirements. Yet somehow, we always find a way.
Why? Because nature has wired us to care deeply for our children.
But what if I told you that every family has another child? One who cannot be seen, one who never sits at the dinner table, one who never asks for “baon,” a new cellphone or money for a field trip.
Yet this child may have as much influence on our families’ future as our biological children. He is called the phantom child.
The phantom child is our families’ financial life. Like a real child, he is born the moment a family begins earning, spending, borrowing, saving, investing and making financial decisions. Like a real child, he requires constant care.
Ignore him and problems begin to appear. Neglect him long enough, and the entire household may suffer.
Unfortunately, many parents devote all their attention to their biological children while completely neglecting their phantom child. The result is something we see all too often.
Parents work tirelessly for decades, yet have little savings. Children receive good education, but the family accumulates overwhelming debt. Parents sacrifice for everyone else but fail to prepare for retirement. The biological children are nurtured but the phantom child is abandoned.
Then one day, the neglected phantom child demands attention. An illness strikes and there is no emergency fund. A breadwinner loses employment and there are no reserves. Retirement arrives but insufficient assets have been accumulated. Suddenly, the family discovers that the child they ignored has become the family’s biggest problem.
The good news is that the phantom child does not require expensive gifts. He simply requires consistent care.
Over the years, we have found that family financial security rests on four pillars: cash management, debt management, risk management and wealth management. At Personal Finance Advisers Philippines Corp., we collectively call these four pillars EnRich CD-RW, which is short for cash, debt, risk and wealth management. Just as a child needs proper nutrition, education, protection and guidance to thrive, the phantom child requires attention to all four pillars to grow into a healthy and productive member of the family.
Together, these pillars create a strong financial foundation for the household and help ensure that parents can continue providing for the people they love most.
In terms of cash management, a family’s cash flow and emergency fund are the daily meals of the phantom child. Without them, the financial household becomes weak and vulnerable.
In terms of debt management, think of debt as unhealthy food. A little may be manageable but too much eventually damages the health of the entire family. When debt becomes excessive, resources that should support future goals are diverted toward interest payments. Principal repayments also strain cash flow and impair cash management.
When it comes to risk management, every parent wants to protect their children from harm. The same is true for the phantom child. Insurance and other protection strategies help shield the family from financial disasters caused by illness, disability, accidents, or death.
Finally, with wealth management, just as parents hope their children will grow, mature and eventually thrive, families should help their financial resources grow through disciplined investing and long-term planning.
A healthy phantom child becomes stronger over time. An unhealthy one becomes increasingly dependent and may eventually impose on the biological children.
Be wise and take care of your phantom child.
Send questions via “Ask a Friend, Ask Efren” free service at personalfinance.ph, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram and Facebook. Efren Ll. Cruz is a registered financial planner and director of RFP Philippines, seasoned investment adviser, bestselling author of personal finance books in the Philippines and a YAMAN Coach.
