Wednesday, April 25, 2018

Did you give away your equity freely?

I wanted to share this idea regarding child caring. The default way these days is for both parents to work while hiring a foreign domestic worker (or two) to take care of the kids. That is the most economic and financially savvy way. Hiring a domestic worker is much cheaper than going to infant care or child care, and have more utility. That is also the reason (I suspect) why my mum-in-law insists on wanting us to hire one. I vehemently refuse.

I seek to explain why here. But let us go to a separate domain of raising capital for companies first. I'll show you why knowing that stray bit of information is important in understanding my decision in not hiring a domestic helper.


HOW TO RAISE CAPITAL 

There are two ways in which a company can raise capital. Either give up some ownership by selling equities or retain ownership by borrowing money using debt. Most companies do a mix between these two extremes because there are some advantages and disadvantages for doing so.

If a company raises capital by selling equities, they lose ownership in the process. Future profits might be more but the original owners will get a lesser cut out of it. On the other hand, they don't have to pay anything now (let's exclude the fees to raise the equities now to simplify matters). The 'payment' is taken from the potential future profits of the company, which may or may not materialise. The company essentially raises cash in the present by paying from their future. Examples of raising capital by issuing equities are issuing new shares, rights and ipo.

If a company raises capital by borrowing money, they lose money right now in the form of interest paid on the borrowed sum. On the other hand, they retain full ownership and they don't have to pay any potential future profits to their debtors as the interest is fixed at the time of borrowing. The company is essentially raising cash in the present by paying right now. Examples of raising capital by issuing debts are loans from banks and bonds.

I want to highlight that neither methods are superior in itself. It's all based on circumstances. However, there seems to be a bias against borrowing money. Well, don't be. Borrowing money is perfectly fine, especially if you didn't over leverage and have the means to pay off. Businesses borrowing money to earn a greater profit by taking on projects that they can't otherwise undertake, is perfectly normal.


HOW TO RAISE HELP FOR CHILDCARE 

There are two ways to do this. You can ask someone to do it or you can do it yourself. When I mean someone, I mean anyone other than the parents. It can be a foreign domestic helper, a nanny, your mum in law or any of those commercial child care services.

If you raise help by asking someone else, you are like a company issuing equity. You are giving up ownership of your child to them. That someone else have a claim on the future relational profits that came from taking care of your child. Some parents are afraid that their hired helper (or mum in law) is getting too close to their child, to the extent that they prefer to be with the helper rather than the parents. This is a good example of a future claim on relational profits. The disadvantage is that you can't control formation of habits and values because transmission of such things are formed through daily contact, and you had already given up ownership on this.

If you raise help by doing it yourself, you are like the company borrowing money by issuing debts. You have full ownership of your child, and what values and habits you want to inculcate. Any future relational profits will be yours to gain. The drawback is the time spent and the potential income lost from doing it yourself. That is the interest you have to pay for 'borrowing', but you retain full ownership of any relational profits (or losses) yourself.

Most parents do a mix between these two extremes. Some activities they choose to do it themselves, while others they choose to seek help. The actual percentage varies according to circumstances, just like how the companies will choose their own debt/equity ratio. I've seen extreme cases too, where a household hires a foreign domestic helper while both parent works. Maybe a grandma stays in to watch over things. This is nearly 100% equities already. Another extreme case is where father works, mum quits her job to be full time housewife. She takes care of home matters all by herself. That's like a 100% debts scenario, based on my definition.


CONVERTIBLE BONDS?

This way of looking at child caring in household leads to interesting situations if we take the model of raising capital by companies to the extreme. Let's take a look at just one funny case.

Companies sometimes issue convertible bonds, so it's a mix between debt and equity. It's initially a bond paying fixed interest until a certain call date where the holders of the debt can convert it to equities, thus having a partial ownership of the company's future profit. If we extend the concept of convertible bonds to raising help in child care, then it's like a household hires a nanny to take care of the child, then after a period of time, marries the nanny into the family and thus the bond becomes an equity! Sacrilegious!

I'm sure readers can think of even more ridiculous application, so do share at the comments below.


I've seen a family with a household of 3 maids. One to cook, two to take care of household chores because the home is damn damn big. He is one of the bigshots of a media company living in the heart of Orchard road. Of course, this suaku Singaporean that is me is stunned like vegetable. Still yet to see a house filled with a harem of manga inspired 'maids'. That will be a sight to remember, haha


MY HOUSEHOLD

I work at home, so do my wife. Sometimes we have to go out for work, but that's just a few hours. My mum comes over to help out during the day, but leaves at night, so we take over the night duty. It's my wife who mainly handles the night part while I'm the backup because I have more work than her so I can't rest during the day time while she can (when my mum takes over). Selected activities are done by my mum while the rest are taken up by both of us. So, I'll say for my household, we're like 40% equities, 60% debts. Remember? Equities mean giving up ownership by asking for help, while debts mean retaining ownership by doing it yourself. So, I'm about 60% hands on and 40% outsourced.

My brother does quite the opposite from me. He hires help and outsourced the work to my mum who stays for about 6 years at his place. Both wife and himself are working full time, so it's a 100% equities for his household. I can see that the child is more attached to the helper and my mum, and there are periods of tension between my brother's wife and my mum because of this relational profits issue. They should have known better I suppose, because by issuing equities, they are giving away future relational profits to the very people who took care of the child. It's unavoidable - we like people more if they spend time more with us. Being a parent is not a right, it's something you have to spend time to grow into. Learning from this experience is also why I am a bit more cautious in giving away equity so freely.

Not wanting to hire help is a personal choice and personal preference. To be honest, I've seen families work well too with both parents working and the kids are taken care of by foreign domestic workers. But take note, usually the success cases I've seen are where the helpers are staying with the family for prolonged periods of time. 5 to 10 yrs? The helpers are not the come and go type. And there must be a family member at home together with the helper, so it's usually the grandma from either side of the parents. There is also a critical period too, usually before the kid enter primary school. Hence the first 6 years is the most important part of the kid where a lot of things are set right or failing which, it'll be hard to reverse.

Dad working + mum working + helper - family member at home = High chances of failure. Not going to take the chances after seeing what I see.


FINANCIAL SENSE NOT EQUALS COMMON SENSE

You are losing common sense if everything fulfills financial sense. These days, everything seems to be poisoned by financials. If it doesn't make sense economically, it's a bad decision. You weigh the decision of whether to have a child by looking at money. You weight the decision of buying a car by looking at money. You weigh the value of a university degree by looking at money. It's not wrong to make a decision by analyzing it financially; it's wrong if you make a decision only by analyzing it financially.


Look at a typical school based question. Container A has 10 kg of say milo powder selling at $4.50 each. Container B has 15 kg of the same milo powder selling at $7.50 each. The typical question is, which of the two containers should a fictitious person, say Mary, buy?

The unit price for container A is $0.45/kg, and that for container B is $0.50/kg. If you did not choose container A because it is cheaper per kg basis, I'm quite sure you'll be marked wrong. A more clever question is this: given that container A has a lower unit price, why should Mary buy container B instead?

a) Mary needed between 10 to 15 kg but not more than 18 kg, so 2 containers of A will be too much but one container of B is just enough

b) Mary needed the size of container B to store things

c) Container A has an expiry date that is nearer than container B

d) Mary likes the green colour of container B. She hates blue.

Must everything be in dollars and cents? That's just one perspective, isn't it?

Financially, it's better for both parents to work to earn the income, hire a foreign domestic helper with the earned income, take care of the kids and settle everything. In reality, it doesn't work as nicely as it should be. I've seen a lot of cases where the parents did not build a strong foundation with the kid, and when the kid starts to have behavioral issues (especially when they started school and mix around with others) and the parents start realising something is wrong. One of them, usually the mum, quits her job to oversee things, but it might be too late. If the parent did not reach a certain level of trust in the relationship, he or she can't start issuing advice. The kid just won't be able to accept. This is especially so for boys, because I think they are genetically programmed to rebel against his parents in order to forge his own sense of identity.

Parents, don't just be an ATM to your kid, please.

24 comments :

Blursotong King said...

LP,

This is awesome!

Unintelligent Nerd said...

Hi LP,

Another great post!

Speaking of equity and debt, maybe it is time for UN Corp to issue coffee equity to a certain sophisticated trader friend. :)

(....and I live the nearest to you and I've not met you in person yet. zzzzz)

la papillion said...

Hi blursotong king,

Haha, thanks bro :)

la papillion said...

Hi UN,

Oh, I didn't know you lived near me :) There'll be a chance. Or how about this, come this June (when the kids have holidays and I have my evenings less tied up), you organise something with the rest and I'll come along? :)

Singapore Man of Leisure said...

LP,

"Success" is what we have to give up to achieve it, isn't it?


As a single, I'm free and easy. My paypack is when I grow old. The last thing I want is to die alone in my flat and my body won't be discovered until weeks/months later :(

That's sad.

Then again, the way some parents are raising their children, its not far off from being "single" themselves. Everyone is "busy" making money.

Young you outsource taking care of children to others, old your children monkey see monkey do - outsource their parents to nursing homes.

What comes around goes around.


CharlieK said...

The maid can also be hired to do housework to free up time for parents to spend with their children. Cooking, cleaning, laundry, ironing, marketing time adds up. If the kids are in daycare during the work day and the maid takes care of the housework, then parents can spend time with their children on weeknights and weekends. That's what we do with our kids. Sometimes quality time with the kids is more important than quantity. Some stay at home parents get burned out and leave their kids to watch TV or play iPad. I think it's healthy for kids to interact with others at daycare, with grandparents, etc. as long as its balanced. Based on your description I think you would benefit from having a maid to help with housework even if it's part time.

Anonymous said...

I mean anyone other than the parents. It can be a foreign domestic helper, a nanny, your mum in law or any of those commercial child care services.

You sexist ??

Parents is different from mum in law ?

Mum in law is equivalent to nanny ?

Feel sad for your wife.

Anonymous said...

Nice post and good reminder. Life is finite so it’s what we all make of it.

Aside, you know that these discussions are taboo in US? There are heated debates and arguments over stay at home mum and working mum, you will get lynched for bringing it up. Much like apu in Simpson’s, the world has gone mad. Or saying you want Alfie to keep fighting to live. You just can’t say certain things anymore.

Maybe that is why you will get people shouting that hey? It’s quality time over quantity time. Could be the smell of guilt.

Don’t get me wrong. I am a working mum. I suffer from guilt.

But I don’t get all huffy puffy and defensive when people talk about the trade offs of not spending more time with kids. Unless of course they are being judgmental.

I just don’t understand why people must point out that a happy working mum who spends 2 hours with her kids is better than a grumpy housewife who spends no happy time at all. I mean, we were talking about keeping itherbfactors constant rihhht??

Anonymous said...

hmm, its your MIL who wants her daughter to go out to work and let someone else take care of the kids? Maybe just maybe she is worried about her daughter's finances and future?

Studies have shown that companies actually prefer a jobless person than a ex-working mum who chose to take a break to stay home for the kids.

not to mention that most people tend to overlook the non financial work that the stay at home mum brings to the table. cue the uproar whenever anyone talks about maintenance of wife, or the splitting of matrimonial assets for the mother who stayed at home.

a stay at home mum is financially very dependent on the husband. it is not easy for a woman to return to a job after staying at home. if anything happens to the marriage or the husband (Choy for both), it will be a very very tiring period for her and the children.

Maybe you need to assure your MIL that your wife's equity in you will reap good returns.

2 roti prata said...

You must be a good EQUITY to your parent.lol.

la papillion said...

Hi SMOL,

""Success" is what we have to give up to achieve it, isn't it?"

It's true. I always want to know what you have sacrificed before I am envious of you. Usually the good part is shown to everyone, but the sacrifices and the cost are all hidden away. This asymmetry of info makes pple jealous or envious, but it's not really necessary. If you want, take the cost too!

I've a very sad case of a student. Father is FI, mum is still working, but the kid is very rebellious. He told me one day that he don't like his dad because he don't do anything. Sometimes drive him to school which is like 15 mins away, because he is late, he also won't do.

Makes me think a lot about post FI status. really.

la papillion said...

Hi CharlieK,

I don't ever want to hire helper. I want my kid to see me fold the clothes, sweep the floor and mop the floor. I want him to help out washing the dishes and do some age appropriate stuff to help the household, as soon as he can do it. I work at home, and I want to him to see me work hard, so that he knows that money is not easy to come by. Every toy or fancy that he wants to buy comes at the expense of less 'daddy-time' or 'mummy-time', because daddy and mummy have to work to maintain the household.

I think some of this things might be lost if one hires a helper. I could be wrong, but I put my skin in the game by experiencing it with my own kid.

I do have a part time helper to do some chores, once every 2 weeks, but it's more to help that person earn some extra income.

Another thing I didn't mention in my post is that with regards to hiring a helper, the true cost of her help cannot be calculated. She is displaced from her home, possibly at a young age, to come take care of a household. Nah, if I have to include all the cost of these stuff, I don't think I can hire one. Can't afford.

Thanks for your comments :)

la papillion said...

Hi anon 615am,

You can call me a sexist if you say I put in the manga inspired maid picture in the post, but how can you call me a sexist in this sentence

"I mean anyone other than the parents. It can be a foreign domestic helper, a nanny, your mum in law or any of those commercial child care services."

I'm thoroughly disappointed! It should be a parent-ist, if such a word exist. I consulted my wife, she is in agreement with me, so don't feel so sad for her.

In that sentence, there's only 2 groups - parents or non-parents. And I proceed to give examples of non parents, like a helper, a nanny and the contentious mum in law. A helper and my mum in law is similar only because they exist in the same group of 'non-parents'. If you divide a group of 4 objects: car, pen, apple and banana, into 2 groups of 'fruits' and 'non-fruits', then under the 'fruits' group, there should be apple and banana, right? But in no way am I saying an apple is equivalent to a banana. Don't jump to conclusions.

Do leave a nickname so that I can address you properly, thanks.

la papillion said...

Hi anon 822am,

You are based in US? wow, I didn't know such topics are contentious. I'm just saying what's on my mind.

Hey, I get guilt trips too...even when working at home! I can only imagine how bad it will be if I'm situated outside most of the day, or even those dreaded company trips.

la papillion said...

Hi anon 1158am,

It's my MIL's thinking that both parents should work and hire a helper or send the kids to childcare. She herself did the same for her daughter (my wife), but my wife is adamant about not following her own mother's example.

I encourage her to work a little, not so much because of the money but because it is a break from child caring. Personally I find it easier to go work than to take care of kids, and even feel guilty thinking like this. But I guess it's natural to feel fatigue.

But thanks for reminding me to think of my MIL's perspective. Perhaps her reason is more out of care and concern for her daughter, like you said, rather than to her grandkid. Important perspectives too, to consider.

la papillion said...

Hi 2rotiprata,

I think I am actually. Some of my peers take money from parents, or get their parents to pay for a bit of their downpayment, or something like that. I didn't. Not to bad already I guess, haha

My 15HWW said...

Hi LP,

I read this late. But there's more benefits to reading a blog post later because you get to scroll through the comments. =p

Now I also understand why SMOL blogged about quality time!

At first, I was surprised that there were some "nasty comments". But after a while, I realised that you were challenging a sacred cow!

Having taken time off from school to take care of my Mum, I fully understand that "quality time" is an ex-post concept, not ex-ante.

CharlieK said...

Hi LP,

I thought you didn't hire a helper because you wanted to spend more time with your kid due to the equity thing. If it's because you want to teach your kid to be independent and value money that's great. As long as it doesn't interfere with the equity thing. It's also great your job allows you so much flexibility.

My mom in law is retired and helps us with the kids. She asked us not to rely only on her though because she wants some flexibility and freedom to enjoy her retirement too. That's why we leverage child care and helper too and of course our child care and annual leave too.

I'm not sure what's better single family income but having to work until normal retirement age or dual income but being able to FIRE much earlier. We're doing the latter for now but maybe we'll change our minds in the future if we feel we're not spending enough time with the kids. Hopefully it won't be too late.

la papillion said...

Hi 15hww,

I didn't know that I am challenging some sacred cow lol

I feel the same too. Some time has to be 'wasted' when we meet someone after a while. Talking about the weather, slowly easing into things, but we talk about things we really wanted to talk about. That part is the quality part. Or if we want to train for 2.4km, we run for about 1.6km to 2km with relative ease. These are wasted effort because we don't get better by the first few laps of run. It's the last few rounds that we push through that improves us. Same for weightlifting too.

I suppose it's not much different when we're spending time with kids too. A huge quantity of time is spent so that we can get some quality out of it. Hopefully.

la papillion said...

Hi CharlieK,

From my experience, I think anything lesser than 6 yrs of age is the easiest to change. Once they start school, their stage of growth will be to move away from family towards outside, so might be harder to change.

As long as you are observant and notice something wrong and take the sacrifice to change, I'm sure you'll do fine. There are some parents who are so busy with their work, and so comfortable with the arrangement that they don't know what's happening to their kid. Usually parents tell me their kids are very good through primary school, then suddenly they turn so rebellious. It's sad.

Anonymous said...

Hi I am anon1158am - curious, why does your wife feel like she doesn't want to follow in her mother's footsteps? she did turn out well (assuming since she got married and has a job and seems like a happy well adjusted individual).

EY said...

Hi LP,

When my boys were little, I outsourced many things to my helper so that I can afford quality time. It's probably not the outsourcing in itself that is the problem, but what exactly is outsourced. I chose to focus on character building to make sure they would grow up with both feet on the ground and not becoming some spoilt brat. I'm glad they have turned out pretty ok and I'm more of a friend to them then a mum. We share plenty of things and hang out together. I guess my strategy kinda worked. :)

I agree that we should role model the values we wish to imbue in our kids. Kids need to learn about responsibility, humility and grit. Yes, they definitely need to know money is hard-earned! :) Although my boys never did much housework, I have successfully influenced them to take up some rank and file work. Shaun went to work as a kitchen helper in a Korean fast food restaurant after his 'O' levels and continues to do so during his school holidays. Shein is working as a waiter now while waiting for NS enlistment. Both of them are well liked by their bosses and colleagues because they show initiative and do their work diligently. When they are free, they would find work to do and volunteer to help other colleagues. I think I could proudly say that my outsourcing didn't much affect the way my boys have turned out. I just didn't sweat the small stuff and focus on things that matter.

I have to agreed with you about the sacrifices that domestic helpers have to make. I am fully cognisant that I have lived this good life at the expense of my helper and her kids. :( She has been with me for coming to 12 years and that is how long she has been apart from her family. She could only spend 'quality time' remotely with her kids by calling them everyday - the best she could do. Her kids turned out pretty ok too. I suppose each of us would have to make the best out of our circumstances.

You can probably go a bit easy on yourself. 80-20 rule. :)

la papillion said...

Hi anon1158,

I guess my wife feels she didn't really know her mum well, as she is brought up by her grandma. Her mum is working all day and even when she became a grandma herself, she is still working. Personality also not very compatible, hence maybe that's why my wife don't want to follow her mum's footsteps.

la papillion said...

Hi EY,

You're definitely a role model :)

Thanks for sharing your story with me and the rest of the readers. I think it shows that the other way, 2 parents working + 1 helper also works. I'm definitely not the voice of authority over here with regards to parenting and I'm only journalling what I am doing right now. Thanks for giving me another perspective to think about :)

Your two boys are really good boys, hands down, nothing much else to say :)

I'll be easy on myself ;)