The Chinese New Year is not complete without giving and receiving of angpaos. Our children are major beneficiaries, but how can we use the occasion as a learning opportunity for them?
As parents, we naturally want to ensure our children's money is well managed. Here are some tips we got from listening to Ringgit & Sense, a financial literacy podcast from BFM 89.9, which carried out a poll with their listeners on what they would do with their children's angpao money.
- Save
Yup, as simple as it sounds, savings seemed to be the most preferred choice among BFM listeners. Children may not feel excited to save, but if the counting was done as a family together, it could be fun! Your children can practice their Math addition skills whilst you can quietly guess who is the most generous relative!
And if you really want to show the value of delayed gratification, you can reward your children ringgit for ringgit if they agree to put their money in the bank. And bring them to the ATM to show them how to deposit their savings, and show them the ATM deposit receipt. Now they know that the ATM does not operate in one (outward) direction only.
- Invest
The second preferred choice is to invest. With several robo-advisers licensed by the Securities Commission in Malaysia, any amount is enough to start investing. And as a parent, you can co-invest with your child. A good way to start is to simply label a robo-adviser portfolio with your child's name, and park her savings there.
Check the portfolio together with your child every few weeks and explain the ups and downs of her portfolio. When your child sees how calm you are during the downs, you are teaching her not to fear markets, but to learn how to navigate them (if you need help with any explanation, just check out the market summaries published by the robo-advisers).
By being a financial coach to your child, you have to brush up on your own financial literacy too, and that's not a bad side benefit.
Tip 1: Do NOT invest your child's savings in cryptocurrency
Tip 2: Since your child has so many years of investing ahead of her, invest in an equity-based portfolio, which generally generates higher returns over a longer period of time (e.g. 10 years).
- Spend (but wisely)
An angpao is a gift after all, and whoever gave your child an angpao will definitely want her to be happy. So set aside a proportion, say 20-30%, for your child to spend on something they value. Ask your child to think overnight about what she wants to buy for herself, and help her weigh her options. Definitely do not send your child to the shopping mall without a shopping objective, she will be likely to buy something on impulse, which she would tire of very quickly.
So yes, do encourage your kids to save, help them invest and let them shop smartly with their angpao money.
Here’s wishing you a roaring Year of the Tiger and may you and your family be blessed with abundance of wealth in 2022.