It’s that time of year again, when your child has found herself with more red packet money (also known as ang pow or hongbao) than she knows what to do with.
There’s nothing wrong with her wanting to spend it – it’s her money, after all – but you’d prefer if she saved most of it, or at least used it wisely.
“Teaching them to save is a great thing, but you should also be mindful not to nurture a hoarding instinct in your children,” says Lee Cheon Loon, a certified coach with Executive Coach International.
“When they are at this young age, you should talk to them about the long-term benefits of saving. It’s also a good time to have a conversation about delayed gratification and how to time their purchases correctly.
“Children who exhibit self-control from an early age continue to show greater will power as adults, and tend to be less impulsive and reckless with their spending.”
He shows you how to motivate your child to be smart with her ang pow money:
1. Praise her for exerting control over her desire to spend all of it right away. The more encouraged she feels in this regard, the more inclined she will be to save his monetary gifts.
2. Explain why big, long-term rewards are often better than quick, short-term gains. Then, tell her that the choice to enjoy a bigger reward is always hers to make.
3. Be a role If you want your kid to be prudent with her money, you have to be the same way. “Your children observe everything you do, so be a good example for them,” says Cheon Loon. “You, too, need to show them that you have control over your spending habits.”
4. Have a conversation about money Explain the value of money and ask your child why she thinks it’s important. If she wants to spend all her loot, ask her why, and find out what she wants to spend it on.
The purpose of such a discussion is to encourage her to talk openly about money and to understand its importance as a resource, so that she can make smarter decisions about it as she gets older.
Choose the right kid’s savings account
Alfred Chia, chief executive officer of financial advisory firm Singcapital, suggests opening a separate savings account for your child for her hongbao money and perhaps her pocket money, too, and letting her watch this investment grow. The more interest she collects, the more enthusiastic she will be about saving.
“Look for an account that offers you a no-minimum deposit and fall-below fee until your child turns 21,” says Alfred.
“This way, managing the account will be stress-free for you. There should also be no coin-deposit fee until your child turns 16. If she gets her pocket money in coins, she can deposit it into her account as is. The account should also earn daily interest.
“Yes, the interest rate may be pathetic, but it’s the principle of it and your child may learn a thing or two about investment planning. Finally, make sure you can track the statements online. Your child will love watching her funds grow.”