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Commentary: How to teach kids about value of money and invest for them, starting with this Chinese New Year

It is never too early to start learning about money matters. Chinese New Year, with its tradition of giving hongbaos (red packets in Mandarin), is an opportune time to teach your children the importance of saving their hongbao money.

Commentary: How to teach kids about value of money and invest for them, starting with this Chinese New Year
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It is never too early to start learning about money matters.

Chinese New Year, with its tradition of giving hongbaos (red packets in Mandarin), is an opportune time to teach your children the importance of saving their hongbao money.

Starting early will enable them to inculcate good financial habits and in turn, save parents from potential headaches when their children reach adulthood.

By weaving learning opportunities through simple everyday activities and leading by example, kids can learn the value of money and make responsible financial decisions as they grow up.

With the current high inflationary environment, some parents are also looking for ways to make their kids’ savings work harder, beyond simply saving them.

Here are six tips on how to educate your children on money matters and how to invest on their behalf.


The Chinese New Year festive season is a great time for parents to strike up a conversation with their children about money.

Educate them on the meaning and values behind the exchanging of hongbaos, which are typically given during auspicious occasions as tokens of good wishes.

For pre-schoolers, cultivate a habit to let them pass their red packets to you for safeguarding and teach them how to count the hongbao money.

For older children, discuss with them how much of their hongbao money should be saved and advise them to save all, if not most of it.

Guide them on how they can set goals and use their hongbao money prudently, so that they do not spend it frivolously.


Take your kids to the bank to deposit the hongbao money as well as any cash gifts they may receive in a year, so that they know where it goes to.

The act of giving your child the responsibility and personal ownership of the account will instil discipline and create a saving mentality, which helps increase their financial awareness.

Explain that saving their money in a bank account earns them more money in the form of interest. This can be shown when you log in to their online bank account and highlight to them the interest earned.

Make this a once-a-year affair to help them realise how their finances have grown during the year — pretty much like what we all do!

By doing so, they will be empowered with financial know-how on how small amounts can add up to a significant amount of money over the years.

This helps them learn about the virtue of deferring gratification for bigger gains in the future.


Money knowledge can be learnt in a fun way through engaging in simple daily activities.

For pre-schoolers, bring them along with you for grocery shopping trips.

Explain to your children that the items must be paid for with money before leaving the shop. Let them hand the money over to the cashier to increase their awareness.

For school-going children, let them calculate the change they will get back after making payment for purchases.

You can also let them have a go at choosing from different brands of the same item and using the price tag to teach them about choosing a cheaper brand or a higher-priced item with better quality.


For pre-schoolers, start by taking out the different types of small notes and coins and teach them to learn and differentiate the value of the small notes and coins.

You can allow them to choose a transparent piggy bank for them to deposit loose coins from your purchases, as well as save money from daily allowance and/or cash gifts.

Deposit the savings when the piggy bank is full.

Make it a point to explain that they can use the savings to buy items that they desire instead of asking for money from Daddy and Mummy.

However, remember not to indulge your children by buying them everything they ask for. Help them to discern “needs” from “wants”.

As they get older, consider getting them to “earn money” through completing household chores.

In addition, you can encourage this positive behaviour by matching your children’s savings dollar for dollar to grow their bank account.

POSB also empowers children with financial literacy through workshops conducted via community partners that targets kids aged 4 to 12 years old.

Through the workshops, children learn about the value of money, how to save, and healthy spending habits.


For parents who adopt a long-term investment approach, the child’s Central Provident Fund Special Account (CPF-SA) is a viable savings scheme that compounds over time.

The first S$60,000 of the combined CPF balances enjoys up to 5 per cent annual interest.

As the money cannot be withdrawn till your child is 55, he/she can leverage the long time horizon and take advantage of the power of compounding.

If a parent is to make a cash top-up of S$500 (of the child’s hongbao money) to the child’s SA every January for 20 years, he will have about S$15,500 in his SA after 20 years. This is based on 4 per cent interest per year.

If the parent has a windfall and tops up, say the prevailing Full Retirement Sum of S$198,800 in his baby’s SA, after a long-term period of compounding based on 4 per cent per annum, the amount would have grown to about S$1.72 million when the child reaches age 55.


Some parents invest their kids’ hongbao money, usually with the objective of growing it for their education.

After all, enrichment classes, tuition and university studies can amount to a big sum. With inflation, this figure can only head north.

Depending on your risk profile, you can choose to set aside a portion of your child’s hongbao money for investments in a joint investment account, such as in a diversified portfolio of unit trusts, index fund or exchange-traded funds.

This could allow your child’s savings to obtain potentially higher returns.

One way to get started is via robo-advisory platforms that offer curated diversified investment portfolios. Another option is investing through regular saving plans.

With a low minimum investment amount from as low as S$100 a month, you can encourage your children to save more and invest in these funds on their own when they are older.

And while investing, don’t forget to use the opportunity and share with your children about the benefits of investing and financial planning!

Some parents prefer to park the savings in an endowment (savings) insurance policy which is earmarked to fund their children’s varsity education. Endowment plans allow you to save in a disciplined manner while providing some guaranteed returns.

The government-issued Singapore Savings Bonds that pays half-yearly interest is another low-risk avenue if liquidity is preferred.

It is flexible as you can redeem the bond at any point in the 10-year duration and you will be paid back the principal and any accrued interest in the following month. You can also start with as little as S$500.

Besides helping parents to bond with their children, doing the above steps will help pass down the traditional values of thrift and prudence.

Studies have shown that learning how to manage money from an early age will help to shape positive money mindsets and habits. And there’s no better time than today to begin this journey!



Lorna Tan is Head, Financial Planning Literacy at DBS Bank.

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