Turning Ang Baos Into Teachable Moments About Money
As the vibrant decorations go up and the air fills with the anticipation of the Lunar New Year, families around the world are embracing a time-honoured tradition that not only celebrates the coming of a new beginning but also serves as a perfect opportunity for teaching and learning. Among the most cherished of these traditions is the giving of ang baos, or red envelopes, a symbol of luck, prosperity, and well-wishes from elders to the younger generation. But beyond their bright exterior and the excitement they bring, ang baos hold a deeper potential—they can be your gateway to teaching your children invaluable lessons about money.
Lesson 1 - Understanding the Value of Money
Money's Worth: A Tangible Lesson
The moment your child receives an ang bao, they're handed not just a gift, but a tool for learning. Start by encouraging them to understand what money represents. It's not just paper or a number; it's a means to acquire things they need or want. Take this opportunity to discuss with them the concept of money's worth. For instance, how many ang baos would they need to buy their favourite toy or game? This conversation can help them grasp the tangible value of money and the importance of thinking before spending.
Saving vs. Spending: Introducing Choice
With the ang bao money in hand, your child faces a choice: to spend immediately or save for later. This is the perfect moment to introduce the concept of delayed gratification. Explain how waiting and saving can lead to more significant rewards in the future. You could even turn it into a game by setting a savings goal and offering a reward once they reach it, thus making the process of saving as exciting as spending. You may decide to match dollar for dollar with their savings depending on what they're saving up for to create an incentive and teach them about the compounding effect of interest.
Lesson 2 - Budgeting Basics
Planning with a Purpose
Budgeting is not just for adults. Children can learn this vital skill using their angbao money as a starting point. Sit down with your child and help them create a simple budget. What do they wish to do with their money? Perhaps there's a toy they've been eyeing, or maybe they want to save for something larger. Guide them in allocating their money for different uses, including savings, spending, and even giving back. Teach them how charities work, and how to explore which charitable causes actually matter to them.
To reinforce the concept of budgeting, encourage your child to keep track of their spending. This can be as simple as a notebook entry or a piggy bank for savings and another for spending. The act of physically dividing their money can help them better understand where their money is going and the value of keeping track of their finances.
Lesson 3 - The Power of Saving
Introducing Savings Accounts
One of the most exciting adventures you can embark on with your child is opening their first savings account. This not only makes the concept of saving more tangible but also introduces them to the banking world in a friendly manner. Explain how a savings account works, emphasizing the security it offers for their money and the concept of interest—how their money can grow over time simply by being in the bank. Many banks offer accounts specifically designed for children, making this an accessible and educational outing. In many countries, this may be more challenging, so create a separate bank account in your own name with the account itself named after your child can create the same outcome.
Setting Savings Goals
With the idea of a savings account introduced, the next step is to help your child set a savings goal. This could be anything from a new bicycle to a video game console. The key is to make it attainable within a reasonable timeframe to maintain their motivation. Discuss how much they need to save each month to reach their goal and the satisfaction of watching their savings grow. This lesson imparts patience, goal setting, and the rewarding feeling of reaching a financial milestone.
Lesson 4 - Generosity and Sharing
The Joy of Giving
Generosity is a value that enriches the giver as much as the receiver. Teach your children about the joy of giving by encouraging them to set aside a portion of their angbao money for charity. Discuss with them causes they feel passionate about or people in need within your community. This can be a powerful way to teach empathy and social responsibility, showing them that even a small amount can make a big difference in someone's life.
Supporting Family and Community
Generosity extends beyond charitable giving; it also encompasses supporting family and community projects. Whether it's contributing to a family savings goal, like a vacation or a home improvement project, or donating to a local community garden, teach your children the importance of pooling resources for a common goal. This lesson in communal responsibility and teamwork shows them that their contributions, no matter how small, are valuable to the larger community.
Lesson 5 - Investing for the Future
Introduction to Investing
After mastering saving and understanding the value of generosity, introducing your child to the basics of investing is a natural next step. Investing might seem like a complex topic for a child, but it can be simplified to suit their level of understanding. Begin by explaining that investing is a way of putting money into something that could grow in value over time. Use relatable examples like planting a seed and watching it grow into a tree, which then produces fruit year after year. This can help them grasp the concept of money growing over time through investment.
Start with simple concepts such as savings bonds or even a piggy bank that represents investment in their future. You can explain that some investments are like their savings account in the bank but have the potential to grow faster. If appropriate for their age, you might introduce the idea of stocks and shares in companies, likening it to owning a small part of a company like their favourite toy manufacturer or video game developer. Highlight the importance of patience and the long-term nature of investing, emphasizing that it's about waiting for the right time to see the benefit of their investment.
The Concept of Compound Interest
An essential concept in investing is compound interest, often referred to as "interest on interest." It's the principle where your investment earns interest, and then that interest earns interest, leading to potentially significant growth over time. Use visuals or simple online calculators to show how money can grow. For example, if they save a portion of their ang bao money and it earns interest, next year there will be more money to earn interest on, and so on. This visualisation can be a powerful motivator for children to start investing early.
Practical Activities to Reinforce Learning
A fun way to introduce children to investing is by creating a mock investment portfolio. They can choose companies or products they like and "invest" their angbao money in those. Track the progress together, discussing why some investments might be doing well and others not, reinforcing the concept that investing involves risks and rewards.
Turn saving and investing into a game. Create a chart that tracks savings and hypothetical investments over time, showing how both can grow. Set targets and celebrate when they reach these milestones, reinforcing the concepts of saving, compound interest, and investing in a fun and engaging way.
Building on the momentum of teaching your children about saving, generosity, and investing, it's crucial to also focus on the broader picture: the importance of financial responsibility and how to make informed financial decisions. This next section will guide you through engaging ways to foster financial literacy that goes beyond the basics, preparing your children for a lifetime of wise financial management.
Principles of Money to Pass On
Making Informed Decisions
Empower your children to make informed financial decisions by involving them in family financial planning conversations. Discuss the family budget, including how and why you allocate funds for certain expenses, savings, and investments. This transparency helps them understand the real-world application of the concepts they're learning and the importance of making thoughtful decisions with their money.
Understanding Needs vs. Wants
A critical aspect of financial literacy is distinguishing between needs and wants. Use the angbao money as a practical example to teach this lesson. Before they decide how to spend their angbao money, ask them to list items they believe they need versus items they want. Discuss the difference and help them understand why prioritising needs over wants is essential in budgeting.
Setting Financial Goals
Encourage your children to set short-term and long-term financial goals. Whether it's saving for a new game in a few months or saving for college, goal setting is a powerful tool in financial planning. Help them break down their goals into achievable steps and track their progress. Celebrating these milestones will reinforce the value of setting and working towards financial goals.
Conclusion: Celebrating Financial Literacy as a Family
As you conclude this Lunar New Year celebration, reflect on the lessons of financial literacy you've shared with your children. The journey doesn't end here; it's an ongoing process of learning, growing, and adapting. Celebrate the steps your children have taken towards becoming financially savvy individuals, and continue to encourage their curiosity and involvement in financial matters.
Remember, the ang bao is more than a gift of money—it's an opportunity to instil values and lessons that will guide your children through life. By turning these traditional gifts into teaching moments, you're not only honouring your heritage, or as Australian expats helping them learn about a new culture, but also investing in your children's future, teaching them to manage money wisely, make informed decisions, and contribute positively to their communities.
Incorporate these lessons into your family's Lunar New Year tradition and watch as your children grow into financially responsible and savvy adults. Here's to a prosperous and wise New Year!
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd - No: 200305462G | MAS License No: FA100035-3
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*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.
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