How to grow your child’s hongbao money

The Lunar New Year is a time for family reunions, food and celebrations. For the children in the family, it’s also a wonderful time of collecting hongbao or red packets. While it can be tempting — especially for children — to spend this money on toys and treats, it’s an opportunity for them to learn valuable lessons about saving, budgeting, and investing.

Here are ways you can help your child make the most of their hongbao money:

1. Teach them about budgeting

Get them into a habit of managing their own money and be mindful about their spending habits. Teaching your child how to budget will help them understand the difference between needs and wants.

For younger children, you can guide them to set a saving or spending limit. For example, you can establish a 75% savings rule (ie if your child receives $100, they would have to save $75, leaving them $25 to spend).

Older children and teenagers can be more involved with their own budget planning. By getting them involved in financial discussions, they will learn about fiscal responsibility. 

2. Let them set a savings goal

Encourage your child to set specific savings goals. Start with short-term goals at smaller amounts. When they reach their goals successfully, they will have a sense of achievement and be motivated to save more.

3. Help them set up a savings account

Once you’ve established savings goals and budgets with your child, a good next step would be to find a place for them to put their savings.

For younger children, a piggy bank or something similar will be great, especially if it’s transparent. A glass jar is a good option. This will allow a child to physically watch their savings grow as they add money.

For older children, setting up a savings account is an important step towards adulthood, providing opportunities for them to learn more about banking and personal finance. Most children’s savings accounts require a parent to open an account with the child unless your child is above 16.

While savings accounts generally don’t offer high yields, your child will be empowered with knowledge on managing personal finance and learn to appreciate the sense of achievement when they meet their savings goals.

4. Multiply that hongbao money

Another way to grow a child’s hongbao money is to invest it on their behalf and get them actively involved on the investing journey. This will also allow you the opportunity to impart knowledge on financial literacy along the way.

For new investors who do not have a huge amount of capital to start with, you can consider low-cost and low-risk investments such as index funds, exchange-traded funds (ETFs) and bonds as they allow you to invest passively.

ETFs and index funds are a collection of stocks constructed to match the performance and behaviours of a certain market index such as the S&P500.

Bonds come in different investment grades, so it’s important to do your due diligence before choosing which bonds to purchase. Low-cost bond investments you could look at include retail corporate bonds and Singapore Savings Bonds (SSBs).

If you’re looking for a place to start an investment portfolio for your child with the added benefit of insurance protection, check out HSBC Life savings and investment plans.

Help your child become a fiscally responsible adult

Encouraging your child to save or invest their hongbao money can help them learn valuable lessons about money management that will serve them well throughout their lives.

And remember, it's never too early to start teaching your child about the importance of saving, budgeting, and investing. With the right strategies, your child's red packet money can grow into a significant sum over time.

To find out more about HSBC Life savings and investment plans, leave your details below to get in touch with one of our Financial Planners.

Disclaimer:

This article is for general information only and does not take into account the specific investment objectives, financial situation or needs of any particular person. The views expressed herein do not necessarily reflect the views of HSBC Life (Singapore) Pte. Ltd. and should not be construed as the provision of advice or making of any recommendation. There is no intention to distribute, offer to sell, or solicit any offer to purchase any product. We recommend that you seek the advice of a qualified financial advisory professional before making any decision to purchase an insurance or investment product. Whilst we have taken reasonable care to ensure that all information provided was obtained from reliable sources and correct at the time of publishing, information may become outdated and opinions may change. We are not liable for any loss that may result from the access or use of the information herein provided.

Information is correct as at 3 February 2023.

This advertisement has not been reviewed by the Monetary Authority of Singapore.