How to teach your kids to use their hongbao money wisely

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The annual arrival of Chinese New Year always presents us with a slew of dilemmas. Just how many pineapple tarts should I consume? Remind me of what I should say during the “lo hei” again? How many kids are going to show up and how much hongbao should I give them?

But the biggest question of all is: What should we do with all that hongbao cash?

Each family has its own custom – some parents keep all the hongbao (reasoning that it’s because the parents spent a lot on giving out hongbao), while others let the children keep it to spend or save as they see fit. In our family, we split the difference. We save half for the future in an account kept strictly for the child, and we allocate the other half for spending throughout the year. This way, the kids do get a little something straight away, while ensuring at least part of it is saved for the future.

How you split the hongbao cash is up to you as a family, but whichever route you take, Chinese New Year is an ideal time to sit down with your child to talk about the basics of saving and money management. Where does money come from? What is it worth? What should we do with it? Children learn most readily by example, so use the hongbao season as a way to practically demonstrate to your child how to decide how much to save, how much to spend, and how you make these decisions.

If you’re spending…
Make sure you spend it on something worthwhile. Research shows that the secret to happiness is to spend money on experiences and not material goods. Think a family trip to Universal Studios, instead of a new set of clothes.

Or consider spending it on something educational. After all, investing in your child’s education is an investment in the future. If you’re after an educational experience, how about a sleepover at the zoo? Or a school holiday enrichment course? Or perhaps your introvert child would prefer you spend it on a stack of good books?

Another excellent use of hongbao money is to contribute a portion of it to charity. Chinese New Year can be a prosperous and exciting time for most families, but there are always some who are left behind. Encouraging your child to think charitably can build his capacity for empathy and raise his awareness of others.

If you’re saving…
Do your research. Different banks offer different perks for children’s saving accounts, so shop around. This is a great time to talk to your child (in an age-appropriate way) about interest rates and the power of compounding interest. Hopefully, doing so will spark a life-long interest in money matters.

Discuss your goals. Saving makes a lot more sense to a child if there’s a concrete goal or benefit to it. Perhaps you can designate a portion of the hongbao towards saving for a big ticket item, like a new mountain bike or computer. Set aside a lump sum and then work out with your child how much he needs to save each month to reach his goal, and how he plans on earning the money to achieve those goals.

Also, if you haven’t contributed to your child’s Child Development Account, now’s a great time to do so! Not only can savings in the CDA be used to pay for certain expenses, any contributions to the CDA are matched dollar for dollar by the government.

No matter what you do with that hongbao, here’s hoping that the Year of the Rooster is a successful and prosperous one for you!

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