Lunar New Year: Turning Windfalls into Financial Wisdom

Whether it's children receiving red packets or adults receiving bonuses, windfalls can be used to cultivate healthy financial habits.

This occasion offers valuable lessons in budgeting, saving, and making informed financial choices.

The key principles that lay the foundation for strong financial well-being are:

• Budgeting:
  • Create a plan: Divide your money into categories like saving, spending, and sharing. You can consider adopting the 50/30/20 rule: 50% of your budget goes to needs, 30% to wants, and 20% to savings; however, tailor this framework to suit your circumstances. 
  • Set goals: Define both short-term and long-term financial targets.
  • Practice delayed gratification: Prioritise needs over impulsive spending.
• Saving:
  • Start early: Consistently set aside a portion of any windfall.
  • Consider long-term goals: Save for major purchases, emergencies, or retirement.
• Financial Education:
  • Make it a habit: Discuss money management regularly with your family, not just during special occasions.
  • Make it fun: Use engaging tools like apps and games to make learning enjoyable.

While children are filled with excitement from getting red packets and the money that comes with it, it is a fantastic opportunity to talk to them about the value of money and how to manage it responsibly. This includes:

• Explain the meaning: Emphasise the significance of red packets as symbols of good luck and respect. “The red pocket is to bring you good luck, spend the money wisely, as it’s important to save some money and save some luck. Be respectful to the elders that gave you the red pocket, and wish them good luck and good health as well.” shared Will Leang, our Distribution Manager.  
• Teach basic budgeting: Discuss how to divide their money into saving, spending, and sharing. A straightforward, simple guideline, for example “save half, spend a quarter, and share a quarter” works better for younger children.  
• Turn saving into an investment: “My kids are still quite young, so I ask them if they’d like to ‘buy’ a portion of our family home. I keep track of how much they contribute from their red pocket money and use it to offset our mortgage. Instead of paying interest to the bank, I pay my daughters the equivalent interest savings. Hopefully, this will grow into their future home deposit.” – Jeff Wu, Paraplanner
• Set long-term goals: Help children understand the difference between short-term desires (like a new toy) and long-term goals (like saving for something significant in the future). 

By embracing these principles, you can turn windfalls into valuable lessons in financial responsibility. This Lunar New Year, let’s use this opportunity to cultivate sound money management habits that will last a lifetime.