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 you had invested your ang bao money earlier?

Doing some quick maths, someone who invests their ang bao money from 2009 would have seen its value grow to more than 2.4x — or +138.6% return, if they had invested in a MSCI All Country World Index (MSCI ACWI) tracker fund from 2009, which 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 they received S$500 in red packets every Lunar New Year from generous relatives and friends, from Jan 2009 to Jan 2025. That brings their total ang bao money collected to S$8,500 to date.
• They diligently invested this money in a fund that tracks the MSCI ACWI tracker fund since 2009. 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 left untouched, their portfolio would have about S$20,281 today.
• That works out to a +138% simple return on their investment amount.

‍Read more: Four investing myths to debunk for budding investors

‍Putting our children’s ang bao money to work

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

My oldest child is eight. 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 hong baos 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. 

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This article was originally published in February 2021. We’ve updated it in January 2025.