Here's a handy guide on how to help your children make the most of their hongbao windfall.
#1: Save First, Spend Later
While it's okay for your children to spend a bit of their hongbao money on whatever they want, cause them to become do so prudently through getting them to save a significant part of their hongbao money before spending the rest. For example, you can implement a rule that at least 70% of their hongbao money has to be saved first. Bad spending habits tend to be carried into adulthood. It's important for parents to show their children how you can spend wisely, and teach them the habit of saving before spending.
#2: Understanding how to Budget
Money spent on a video game today cannot be spent on a Attacking young boys concert tomorrow. Money is finite (for most families a minimum of), and fogeys can guide their kids regarding how to allocate the remainder of their hongbao money for different needs.
For teenagers, this can are a lesson on budgeting as well. Consider sharing with them how the family budgets each month. Let you know that expensive is put aside for necessities such as food and utilities, short-term goals like a family vacation, and long-term goals such as their future educational needs. Encourage them to create a budget for their very own money the same way. Should there be a concert they want to attend after the entire year, they should put more income away for that longer-term goal.
#3: The main difference Between Needs And Wants
As you guide your children how best to spend their hongbao money, another money management lesson to talk about could be explaining the difference between needs and wants.
Parents can highlight what qualifies as needs (things you canrrrt do without) and desires (things that aren't essential but give you happiness). Show your children the amount they plan for their needs should be much larger than the amount for their wants. For example, they can allocate 60% of their hongbao money to needs and 40% to wants.
Read Also: How you can Save An Additional $1,000 Without Trying
#4: Set A Good Example
Children improve by watching what the adults around them do. The easiest method to obtain the lessons above to stay would be to model them. Parents can let their kids observe how they distinguish between wants and needs by saying no thanks to something fancy and dear, or by turning down pricier upgrades.
#5: Grow That Hongbao Money
To help your children have more from their yearly hongbao haul – and hedge against inflation – consider investing the money for the kids, rather than leaving everything in the bank. The hongbao money they've put aside in order to save can be invested in low-cost eft's (ETFs), along with any other cash gifts they might receive throughout the year. This provides a kind of dollar-cost averaging as well where you avoid the risks of mis-timing the marketplace and help your kids take advantage of the long-term market growth.
For simplicity, let's imagine you help them invest $1,000 of the hongbao money each year for 18 years. Assuming a typical annual return of 7%, their hongbao money would have grown to $36,379 by the time they head off to college! The same amount left in a kids savings account that provides 0.05% annual interest would have netted only $86 after 18 years.
For a fuss-free method of helping your children invest their hongbao money, choose Syfe. Creating an account takes a short time and you may help each child invest since multiple investment portfolios can be produced within one account. (When your kid turns 18, they can subscribe to their very own Syfe account.)
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