For most children, Chinese New Year (also known as Lunar New Year) means enjoying traditional dishes, decorating with festive red lanterns, and spending time with family and friends. But, what many also look forward to are bright red envelopes brimming with financial gifts. My 7-year-old daughter’s eyes gleam with joy when she sees those envelopes.
It may be tempting for your children to splurge their newfound fortune. This time of year is a celebration, after all. Seize the opportunity this festive season to begin teaching your children the valuable financial basics with this financial guide, no matter their age.
Have the Money Talk
Receiving gifts is exciting for any child; remember how you felt during your childhood. But, instead of simply handing out their red envelope bonus, take this opportunity to start a conversation about the value of money.
It’s important for children to begin understanding just how far their money can go – when it comes to purchasing one thing versus another. These early lessons and the reality of compromise can provide a solid foundation for understanding (and managing) finances as they get older.
Divide and Conquer
While finances can (and should) be part of ongoing conversations, extra financial gifts can be used to help children differentiate between wants and needs.
If they have a monthly allowance, demonstrate how they can incorporate extra cash into a budget to make their money go further. One strategy could be to distribute the gifts into categories, such as spending, saving and sharing. This will also help them keep track of exactly where their money is going.
Grow Your Wealth
Help your children develop confident money management skills by letting them decide what to do with their gifts. Identify options for how they can use their money. Encourage them to actively participate in the activity like opening a savings account.
A savings account can be a great starting point for kids. They can use a portion of their red envelope gifts to get an account started. Then they can consider making regular contributions from there. While developing a sense of personal ownership and responsibility, they’ll also be excited to see their money grow as it collects interest over time.
There are also banks that still give out passbook savings accounts. This is a tangible way for kids to keep track of their savings. There is something to be said about the physical act of going to a bank, which is an adventure in itself.
Invest Your Good Fortune
Chinese New Year can be a time to plan for the year ahead. It can also be a time to teach your children that same skill as it applies to money.
Teaching your kids about saving and investing will provide them with knowledge that they’ll continue to benefit from over time. Keep these lessons simple, addressing the idea of short-term versus long-term financial rewards. Depending on your child’s age, explain the basics – compound interest, inflation, etc. Help them understand why it’s important to invest early.
This Chinese New Year, use this financial guide to better prepare your children for their financial futures. Wishing you and your family a healthy, prosperous Year of the Dog!
Contributed by Jessica Wong