This article was first published by Budget Babe.
Aside from the food, blackjack and family reunions, my favourite part of Chinese New Year includes receiving my annual ang baos (red packets filled with money – a Chinese New Year tradition in Singapore). After all, who doesn’t like free money?!
With the wedding just around the corner, this year’s CNY visitations were particularly significant as it marked the last time I can get my ang baos. After we’re married, we’ll need to start giving out ang baos instead – so that means every CNY henceforth will be an immediate deficit in our wallets.
Seeing all the children get so much in ang bao money made me wonder – what if they had savvy parents who knew how to invest their money for them, so that they never had to fork out a single cent for future ang baos after they get married in the future? Let’s imagine this scenario plays out:
How did $12k grow to $49k? Here’s the magic:
Some say 8% for 30 years is too difficult. Let’s look at 5% then, which is the risk-free rate given by CPF right now. Doing such a move can still yield you 26.5 years worth of future ang baos to give out. If you top that up with your own cash, that sum can grow even further.
Dang, if only my parents had done this for me.
Parents, would you consider doing this for your children?
P.S. Another way to get “free” money for your ang baos is to utilise your credit cards for maximum cashback and rebates. (I use this site to compare my credit cards before applying for any.) Store the money in a separate account and use it to partially offset your ang bao expenses every year from then on!
Budget Babe is an ordinary lady striving to achieve financial freedom in Singapore before the age of 45. She writes in order to empower fellow Singaporeans on taking charge of their own lives and finances, and to eventually break free from the competitive rat race.
DollarsAndSense.sg aims to provide interesting, bite-sized and relevant financial articles.
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