Investing in your kids' future with their Chinese New Year red packets

Start inculcating the right financial values from young

Before the age of 15, I had a money diary that my mom would keep in her safe, of the money I received during Chinese New Year (CNY). At the end of every long day of house visits, I would run to her room, get my money diary, and stack bills and coins in piles, ready to count and put them in my ledger.

At some point, this ledger was finally replaced with a bank account. But it had not grown passively over almost two decades of accumulation — in fact, it didn't even grow at bank interest rates. 

I remember setting up my first bank account and immediately being pushed to buy some "hot" funds of that period. Not knowing any better, I paid a sales charge and bought some products from the banker at our local branch, to put my capital in the markets.

Years went by. I’ve changed the funds a few times, but have not really used this bank account since — and it has not grown much at all, unsurprisingly.

Reflecting on this experience, I identified two points of failure:

• To my loving parents (who may chance upon this article), the act of saving was taught, but not the simple principles of inflation, interest, and compounding wealth.
• To me, I had the opportunity to reverse the fate of this money once I learnt how to invest, but turned a blind eye in my frustration and did not give it the care and attention it needed to be put on the right course.

What if my lai see money was invested over the years?

Looking back and doing some quick maths, my lai see or hong bao money would have grown to more than 4.3x — or +335% return — since my first CNY in 1990, if my parents had helped me invest on my behalf in something like the MSCI All Country World Index (MSCI ACWI). The global equity index comprises large and mid-cap stocks across developed markets and emerging markets.

Let's attach some numbers to this example to make it more tangible:

• Assume that I received S$500 in red packets every Lunar New Year from generous relatives and friends, from 1990 to 2023. That brings my total lai see money collected to S$16,500 over the years.
• My parents diligently invested this money in a fund that tracks the MSCI ACWI since 1990. To keep it simple, given that every CNY falls on different dates, let's assume that the $500 injection was made on 1 Jan of each year.
• If my parents never touched the money in the fund, I would have about S$71,819 in my investment goal today.
• That works out to a +335% simple return on my investment amount of S$16,500 over the years.

Putting our children’s lai see money to work

Fast forward to today — I now have three kids of my own.

My oldest child is six. The past CNY, she counted her money next to our bed in the morning and wrote down the total on a post-it. She handed it over with the cash and gave it to me for safekeeping.

We invest so much time, money, tears, joy, and love in our children. We should really help guide them through some of life's more uncomfortable realities, like money. 

It got me seriously thinking about how I can empower her to be better with money so she can pursue her life ambitions in her control.

When she is of age, I will teach her some foundational principles about passive money, such as:

• The power of compounding interest
• What to expect in terms of volatility to achieve higher expected returns
• The benefits of diversification and keeping costs low

But for now, as she has entrusted me with her money, I have set up an investment goal for her lai see so that her money can get to work, and these generous gifts from relatives and friends are utilised to empower a better future.

‍As we usher in the new year, make a commitment to invest in your future-you. Start early and let your wealth compound over time. Click here to get started with Endowus.

This article was originally published in February 2021. We’ve updated it in January 2023.

Sign up to stay tuned about more investment information.

<divider><divider>

Risk Warnings

Investment involves risk. Past performance is not an indicator nor a guarantee of future performance. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Rates of exchange may cause the value of investments to go up or down. 

This article is not intended to be relied upon as a forecast or research or investment advice, and should not form the basis of any investment or other decisions. The information contained herein is not intended, and should not be construed, as any legal, tax, regulatory, accounting or financial advice. If you would like investment, accounting, tax or legal advice, you should consult with your own professional advisors regarding your individual circumstances and needs.

The information in this article may not be suitable for all investors. You are responsible for any action that you take or decision that you make in reliance on any content in this article, and you agree that Endowus HK Limited (“Endowus”) is not liable under any circumstances.

No invitation or solicitation

Neither the information, nor any opinion, contained in this article constitutes a recommendation, offer or solicitation  by Endowus or its affiliates to you to buy or sell any securities, collective investment schemes or other financial instruments or services, nor shall any such security, collective investment scheme, or other financial instruments or services be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. 

This is not intended to be an invitation or offer made to the public to subscribe for any financial product or to enter into any transaction.

Accuracy of Information

Whilst Endowus has made reasonable efforts to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or errors in any such information. Endowus does not warrant or represent that the information in this article is correct, accurate or reliable. 

Opinions

Any opinion or estimate above is made on a general basis and none of Endowus, nor any of its affiliates, representatives or agents have given any consideration to nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Opinions expressed herein are subject to change without notice.  

Any forward-looking statements, prediction, projection or forecast on the economy, stock market, bond market or economic trends of the markets contained in this article are subject to market influences and contingent upon matters outside the control of Endowus and therefore may not be realised in the future. 

In presenting the information above, none of Endowus, its affiliates, directors, employees, representatives or agents have given any consideration to, nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Therefore, no representation is made as to the completeness and adequacy of the information to make an informed decision. You should carefully consider whether any investment views and products/ services are appropriate in view of your investment experience, objectives, financial resources and relevant circumstances.

This article has not been reviewed by the Securities and Futures Commission of Hong Kong.

‍

‍