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How CNY can teach your children about money

SINGAPORE — Red packets are one of the favourite parts of Chinese New Year for children and young adults alike. After all, children can use these hong baos to buy their favourite toys, clothes or gadgets. Rather than allowing children to spend everything they receive, though, parents would be better off using the red packets to teach their children wisdom about spending while still saving, donating or even investing much of the money.

Rather than allowing children to spend everything they receive, though, parents would be better off using the red packets to teach their children wisdom about spending while still saving, donating or even investing much of the money. Photo: TODAY

Rather than allowing children to spend everything they receive, though, parents would be better off using the red packets to teach their children wisdom about spending while still saving, donating or even investing much of the money. Photo: TODAY

SINGAPORE — Red packets are one of the favourite parts of Chinese New Year for children and young adults alike. After all, children can use these hong baos to buy their favourite toys, clothes or gadgets. Rather than allowing children to spend everything they receive, though, parents would be better off using the red packets to teach their children wisdom about spending while still saving, donating or even investing much of the money. 

SAVE OR SPEND

It is easy to suggest that parents should put all the hong bao money that their children receive into a savings account. Parents seem to feel that saving is best too: 95 per cent of respondents in a UOB survey last year said they will put the money their children receive from hong baos into a savings account. Realistically, though, saving everything is less valuable than it might seem. 

“A habit of saving cannot be encouraged by taking the entire ang bao collection away to the bank without your child having an experience of it,” insurance firm Aviva advised. “This merely means that you’re doing the saving for them.” Instead, parents should involve their children in the process so they feel responsible for their own little pot of money. “Let your child actually handle the money as you explain its uses – that it can be a tool of good and the not-so good. Tell them that the money belongs to them.”   

Saving some of the money is important, then, if it is done the right way. When you are talking about spending and savings, you can explain the difference between saving for short-term goals that are fun and meaningful, and saving long-term for a better future. As University of Minnesota Professor Sharon Danes noted, though, “it is hard for a 10-year-old to appreciate the little interest his $100 earned this month in the college fund when he couldn’t get a special toy.” You can also talk, then, about how accumulating money from hong baos each year can help them reach a longer-term goal such as university education, and explain how long it will take. 

While views vary on how much to save vary, and the savings may depend on the total amount a child receives, financial advisors often suggest saving at least 50 per cent and sometimes 80 per cent or more. 

To make saving more tangible, parents can take their children to a bank to deposit their money so they can understand where their money is going. Some banks make the process even more attractive. At OCBC, for example, children may receive a lunch box set when they deposit at least S$300 or a colour-your-own backpack when they deposit at least S$1,200. Parents can also download the Mighty Savers app and use interactive games to make money management more fun.  

MORE THAN SAVING

Beyond just saving part of the money, parents can use the hong bao to teach far more. 

Rather than asking children what they are going to buy with the money they receive, which inculcates the value that money is for spending, parents can focus on how receiving the money gives them a chance to save and share as well as spend.  

Parents can also reinforce the concept that each person is important regardless of how much or little money they give. “People have different financial status,” DollarsAndSense.sg writer Timothy Ho observed. “Most adults know that. When it comes to children, t is important to explain to them the true meaning of red packets, and that it is not about how much they receive. Rather, we should show appreciation and thanks to the giver, regardless of the amount. We should not judge the self-worth of others based on the red packet amount they give.”

As Aviva also noted, “all festive seasons are a good occasion to reflect on the blessings we have and to be thankful for the anxieties in life that we’re lucky enough not to have to suffer through. There are many organisations that accept donations for the less fortunate during festive occasions.” You and your child can pick one and make a contribution. 

To make it easier for children to take these lessons to heart, parents can use apps, books and tools to make explaining the concepts easier. Apps such as Savings Spree or Save!, for instance, have games that children can play to learn about managing money well. Books such as “One Cent, Two Cents, Old Cent, New Cent” by Bonnie Worth or “Rock, Brock and the Savings Shock” by Sheila Bair can teach children about money using old-fashioned storey-telling. And children can also put their money in a Money Savvy piggy bank or soccer ball bank with separate compartments to save, spend, donate and invest. 

MAKE HONG BAO A LASTING GIFT

With Chinese New Year coming up soon, it is time to plan once again for what to do with the red packets your children receive. By giving them a chance to spend some of it and then save or donate the rest, you can turn one-time presents into gifts that last a lifetime.

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