What To Do With Your Children's Hong Bao Money

What To Do With Your Children’s Hong Bao Money?

Happy Lunar New Year! Wishing everyone here good health and may your wealth multiply in the years to come. Hopefully, the last 4 days have been one where you have been giving/receiving or your child has been receiving hongbao. One common question that I go from parents with regards to financial planning is what they should do with the money. Most of them are keeping it for their children as emergency funds. This is a good initiative. That being said, is this an opportunity to share money lessons with your children?

What To Do With Your Children's Hong Bao Money

What To Do With Your Children’s Hong Bao Money (Source)

 

Your intention sets the tone

What do you want your child to learn from receiving the hongbao? Is it gratitude? Is it charity? Is it spending? Is it emergency funds? Your intention sets your child’s tone. By default, people will stick to the easiest thing of all: Not doing anything. This is precisely why most parents are keeping their children’s money as emergency funds. (PS: I’m not saying that emergency funds is a bad thing. It is also important.)

However, as the child do not have much ownership of the funds, they do not really learn from that concept. To them, it is their parents are keeping their money for them.

So what can you do this year to inspire your children to take charge of their money. This may or may not be applicable and felt by you depending on your relationship with money. Here are some suggestions.

 

Happiness of Spending Money

Wait a minute. A finance blog asking me to spend money? Yes. It came to my attention that “saving money” or “spending money” has became such a pain for people. As our education on money commonly involves parents screaming at us to save money (or that they don’t have money), it has become very hard for some people to spend mentality. Each time you spend, you will feel a pinch when you see your bank balance drop. That’s commonly known as the poverty or scarcity mindset. Eventually, you might grow up with enough money in your bank but feeling miserable that you don’t have enough.

What To Do With Your Children's Hong Bao Money Spend It

What To Do With Your Children’s Hong Bao Money Spend It

As parents, one of the best thing you can do for them is let them buy something that they have already wanted for a long time. Take 20%, $30 or whatever amount (be reasonable) in their hongbao money and bring them to the shopping center. Let them buy whatever they want. Let them feel the happiness of what money can buy. You will be surprised that some children will buy books, stationaries and of course toys. You can take this chance to introduce to them the 4 Quadrants Shopping Guide.

Let them take charge of their finances, the earlier they do, the more responsible they will become.

 

Delayed Gratification

To balance it up with spending, delayed gratification is next. A simple game you can play with your children is called The Marshmallow Test. I won’t explain too much here. Wait this hilarious video on how children wrestle with waiting to eat a marshmallow in hopes of a bigger prize (more marshmallows).

In finance, the timeline would be longer than this test. The intention is to get the children to save their hongbao money for a longer period of time so that they can get back more at a certain age. This could be done by a simple endowment plan or just Singapore Government Bonds that matures after a set period. When they receive the money after xx years, you can calculate with them (do it with them) how much they have put in and compare it to how much they have received. This can be done with your financial advisor.

 

Investing Lessons

This opens up many lessons for young children. You can share with them about volatility, about index (example if you invests in a Country ETF), about companies (example: when apple makes money, you “make” money too), about value or about growth.

One of the easiest way is to invest in companies that they already know. For illustration, my example will be SBS Transits.

Disclaimer: Not a buy/sell recommendation here.

For children, they probably will be familiar with certain products such as the IPhone, Bus services, Netflix etc. When you invest their money (they can only open a brokerage account when they are 18) for them, they get to see if their money grows in terms of capital appreciation or dividends. You can consider investing for them once a year as a dollar cost averaging approach for them to build up their portfolio.

For those of you would like to have something simpler, consider investing into country ETF like the STI Index, China ETF or S&P500. When the particular country does well, they are able to see the value of their investment grow as well. Similarly, do consider a dollar cost averaging approach for your children and invite them to ask questions. This is a great opportunity to for your children to learn about investing either with yourself or your trusted financial advisor.

What To Do With Your Children's Hong Bao Money Investing

What To Do With Your Children’s Hong Bao Money Investing (Source)

Final thoughts by Wealthdojo

I cannot imagine how much of a head start your children will have if they start learn these money lessons as some adults take decades to learn these. Let me know what you guys think in the comments below.

We wish you a Happy Lunar New Year!

 

 

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.

Parents Alert Your Secondary School Pocket Money Guide Summary

Parents Alert: Your Secondary School Pocket Money Guide

Dear Parents and Children,

Congratulations for making through your PSLE. It is time for fun, leisure and also putting the Singaporediscovers vouchers to use. But save this link because you will be needing it next year when your children start their secondary school.

 

Your Secondary School Pocket Money Guide

Your child is 12, capable of making good decision (although sometimes you might disagree) and entering into their next phase of their lives. It will be an exciting journey for them. As parents, one of the best things you can do is to prepare adequately for them financially (This is what you can do to help yourself: 6 Levels Wealth Karate). The day to day cost of studying in primary school and secondary school are very different. In this article, I hope to give a guide on how much pocket money to give your children.

A big thank you to Josarah, Vivien, Yitong, HongMing, Xueting, Alcina and many others who helped made this article possible.

 

Our Secondary School Journey

Although time and cost may have change, the main structure of secondary school education remains the same. I remember those mornings where I flew out of bed in fright because my mom used to shout from the kitchen

“还不起来?!730了!“。(Are you sure you don’t want to wake up? It is already 730am)

730am is the timing I have to reach/report to school. Otherwise, there will be detention, writing 1000x of “I will not be late” and I absolutely hated that. Every morning, I jolted out of bed only to find out it was only 615am. Strangely, this worked for me even though I knew my mom was calling bluff. Recess break around 1030am and also lunch break at around 130pm. I had band practice in the noon only to go home around 5pm every day. My Saturdays were also filled up by band practice. We usually had lunch at 12pm and finish about 4pm to go home.

Coming from a humble family, Saturday lunch wasn’t exciting as I couldn’t afford anything more than a mixed vegetable rice with 2 vegetable and 1 meat. I watched in envy (sometimes sadness) as some of my friends ate at MacDonald or drink bubble tea. Hence, I was determined to have a good relationship with money so that life will be better.

In any case, here is the ultimate secondary school pocket money guide for your planning in 2021.

 

Ultimate Secondary School Pocket Money Guide

Food

We are talking about growing children here. We eat and we eat a lot during this age. After getting some data from some of my friends who are teachers, these are what they have shared with me.

Recess: From $1.80 to $4

Lunch: From $3 to $10 (In secondary school, the duration are longer and sometimes students might want to eat outside school. The cost of lunch will increase if they order from food court/starbucks/KFC etc)

As this is the most important expenditure (at least in my opinion) for students, there are financial assistance scheme which you can take advantage of. Please ask your teachers for more information as I’m unable to find more on the web. Here are some references from Pei Cai Secondary and also the MOE Press Release. From those website, those eligible students in secondary schools will receive subsidies of $2.90 per meal.

Parents Alert Your Secondary School Pocket Money Guide Food

Parents Alert Your Secondary School Pocket Money Guide Food (Source)

 

Transportation

Depending on the location of the school, your children might need to take the public transport to school. As this is a fairly consistent expenditure, you may want to consider whether a concession pass or which concession pass will make sense.

Parents Alert Your Secondary School Pocket Money Guide Transportation

Parents Alert Your Secondary School Pocket Money Guide Transportation

The cost of transportation may be between $26 to $54 (in the most extreme). If the school is within walking distance, you would have saved on this expenditure.

If you are an adult, this will be applicable for you. Save Money on Transportation Singapore.

 

CCA

Depending on the CCA, the cost will be slightly different. I used to be in the military band and I had to pay the treasurer $2/month (In 2000) as band fee. The $2 was used to pay for printing of our scores, our reeds and the maintenance of our instruments. While it is not a hefty sum of money, it is good to note that your child is paying for this too.

 

Enjoyment/Hobby

When I spoke to my friends who are teachers, 100% of them observed most students will drink bubble tea. I do not have much experience with bubble tea as I was unable to afford in the past. However, I have noticed that bubble tea is one of the things that will give students joy. As adults, we have an occasional good meal as a way to celebrate our hard work. Why not students then?

According to statista, it seems like an average cost of bubble tea cost around $4.

Parents Alert Your Secondary School Pocket Money Guide Enjoyment

Parents Alert Your Secondary School Pocket Money Guide Enjoyment (Source)

Secondly, some of our passion may develop at that age. It could be a card game, a sport, a book or perhaps just an item that they want because of peer pressure. I believe that they are at the age to start learning about personal finance and this is one of the best ways to start.

Let them explore and the lessons will become.

I would suggest starting with $50/month for enjoyment/hobby fund. They can use the opportunity to save the rest to start a good personal finance habit.

 

Final Thoughts By Wealthdojo

This is the summary of secondary school expenses. I strongly encourage parents to start off with giving weekly allowance. This is to encourage them to plan their money wisely. We want to start good habits especially when they are young. We want to avoid them growing up spending majority of their money right after their payday and then live like a monk for the rest of the month. This is a simple way to start.

After they matured, you can consider giving them monthly allowance. I would also advice not to give the bare minimum as it will create a scarcity mindset in your children. I would suggest this is a great chance to share with them about these concepts which I have written an article about.

Parents Alert Your Secondary School Pocket Money Guide Summary

Parents Alert Your Secondary School Pocket Money Guide Summary

We wish you all the best! Take care and stay safe. Let me know what you think.

 

Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.  

Feel Free To Reach Out To Share Your Thoughts.

Contact: 94316449 (Whatsapp) chengkokoh@gmail.com (Email)
Telegram: Wealthdojo [Continuous Learning Channel]
Reviews: About Me

The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.