Where should you place your children ANG PAU Money

During CNY, kids get to enjoy the best moments because they able to have fun and gathering with their friends, enjoy variety of CNY delicacies and get lots of ｡✷  🎀  𝒜𝓃𝑔 𝒫𝒶𝓊  🎀  ✷｡. 

I remember when I was young and available, i used to get extremely excited during CNY. One of the reason because I can get Ang Pau’s. Whenever I get an Ang Pau, I will run to find my mom to help kept it for me and later bank in into my bank saving account. Every year my mom will let me have a look at my saving passbook to see how much my saving grows. As a kid, I felt excited to see the money grows every year. 

I’m glad that my mom taught me the ‘ᴀʀᴛ ᴏꜰ ꜱᴀᴠɪɴɢ’ but she neglected the ᴘᴏᴡᴇʀ ᴏꜰ ɪɴꜰʟᴀᴛɪᴏɴ, ɪɴᴛᴇʀᴇꜱᴛ ᴀɴᴅ ᴄᴏᴍᴘᴏᴜɴᴅɪɴɢ ʀᴇᴛᴜʀɴ. I believe is not her fault because every parents do always give the best they can to their child. Is just that those days, most of us have less opportunities to explore any other methods to grow our money. Putting in the bank is what most of our parents do. 

Now let us examine 3 families who invest into different platform and see what’s their return. 

Let’s say 3 kids namely Susan, Bob and Annie. They get RM1,000 ‘ang pau’ money every year starting from age 1 till age 25. Susan’s parents placed the money into normal saving account. Bob’s parents decided to deposit it into fixed deposit account and Annie’s parents decided to take more risk by investing into unit trust. The interest rate they gain from their deposit is 1.5%(normal saving account), fixed deposit (4.83%) and unit trust (8%).* 

Let’s see how much they will get when they reached age 25.

At the age of 25, Susan redeemed a total saving of RM30,949.91 which looks good for a child like Susan because she saw her money grows from a total of RM25,000 she deposited yearly. As for Bob, he was able to withdraw a total of RM51,079.11 which is 100% of what he had saved for 25 years. Seems like a better deal, right? Let’s look at Annie’s account. For a compounding return of 8% per year, Annie’s account grows to RM84,722.89 in value which is more than 200% of what she saved. Looks like Annie’s parent make the best deal out of the 2 kids. 

So, my dear parents, which parents are you now? Are you Susan’s parents, Bob’s parents or Annie’s parents? 

Can you see the 𝖕𝖔𝖜𝖊𝖗 𝖔𝖋 𝖈𝖔𝖒𝖕𝖔𝖚𝖓𝖉𝖎𝖓𝖌? Just like the ᴘᴏᴡᴇʀ ᴏꜰ 72. For Susan, she need 48 years for her money to double up if she continue to place in normal saving account. For Bob, he need 15 years for his saving to double up. As for Annie, her money get 2X (double up) every 9 years (assuming the average return of 8% per year). 

Now, let’s look at the 𝖊𝖋𝖋𝖊𝖈𝖙 𝖔𝖋 𝖎𝖓𝖋𝖑𝖆𝖙𝖎𝖔𝖓 to your saving. *In Malaysia, we have an average inflation rate of 3% per year and let’s see how does the inflation eats into our purchasing power if we ignored their existence.

Based on the above table, For Susan who placed her saving into normal saving account, no doubt her account value did increase but in actual fact, her purchasing power is reducing by nearly half of the principal amount. For Bob, the total amount he accumulate didn’t seem to increase in actual fact. As for Annie, she can cheer up a bit because her account grew in value and purchasing power too. 

Imagine we got to life till age 100 (due to advancement in medical technology). This 100 years divided into 4 stages. Each stages consists of 25 episodes. If we ignored the effect of inflation and missed out the 1st stage of compounding effect, our child is losing out the 1st stage of the race. They gonna start the 2nd stage with a higher amount of saving in order to catch up. Very often, when the kids enter 2nd stage of life, which is just start working, most of them tend to sᴘᴇɴᴅ 𝟷sᴛ ᴀɴᴅ sᴀᴠᴇ ʟᴀᴛᴇʀ. They start to bring in commitments such as mortgages, own kids education fees, living expenses and so on. These make it harder for them to save. Probably at the end of 2nd stage, they start to realise their saving is not enough to support for later stage of life. If they were to start at stage 3 of life (age 50 onwards), saving per month have to be even more to enable them to reach a comfortable retirement. 

If you do have similar concern, aren’t it be better if we iron it out now and start nurture our child the “Art of Saving” and help them build a “Flying Start” for their financial freedom?

According to Malaysia: average monthly saving 2019 | Statista, only 9% of Malaysian save more than RM2,000 per month. 35% of Malaysian save less than RM500 per month and 21% of Malaysian did not save at all. 

What are the benefits of saving you can tell your kids?

Let’s that the example of the current Covid 19 pandemic. During this pandemic, we are forced to stay inside the house which makes some of us having difficulties to earn their living, some being sacked by their employer, some forced to retire and some just passed on without a Will. Although we forced not to leave our house during pandemic, our daily expenses, recurring debts and household maintenance need to be paid. Our cash outflows start to outweigh the cash inflows and saving funds start to play their role.

So what can we harvest from saving? 

It helps to protect ourselves from financial emergency and reduce financial stress. It helps to cushion against sudden job loss or unexpected major illness. Savings also allow us to plan for big ticket purchases such as house, car, vacation or lifestyles you desire. After all, money just give everyone a PEACE OF MIND. Don’t you agree?

What I can do now is to 𝖌𝖚𝖎𝖉𝖊 𝖆𝖓𝖉 𝖊𝖉𝖚𝖈𝖆𝖙𝖊 my children the importance to grow your money at a pace faster than inflation and start early to capture the compounding effect. One of the solution is through ɪɴᴠᴇꜱᴛᴍᴇɴᴛ. If you do have some childhood finances story that you regretted when you was a child, I suggest you to 𝓼𝓱𝓪𝓻𝓮 𝓲𝓽 with your child and start to teach them the 𝓋𝒶𝓁𝓊𝑒 𝑜𝒻 𝓂𝑜𝓃𝑒𝓎. Get them involved with their own investment. Ask their opinion. Help them set up their own ꜰɪɴᴀɴᴄɪᴀʟ ɢᴏᴀʟꜱ. You may be surprise that they may come up with fresh ideas that might be useful in the investment journey. 

If you think you have no faith and no time to monitor the investment, work together with a trusted licensed financial adviser. Take advantage of their expertise and blend it together with your past experience, you will surely achieve greater wealth. 

Alright, just now I mentioned our life journey can be divided into 4 stages. If the 1st 2 stages go through well enough, we get to enjoy the life we desire as early as 3rd stage of life. The fruits we planted grows so well that we can just pluck it every month for usage while the plants keep growing and leave it to our descendants if we passed on sooner. This last stage in life is the time we get to enjoy a 🎂 ⋆ 🍓  🎀  𝒽𝒶𝓅𝓅𝓎 𝒶𝓃𝒹 𝒻𝓊𝓁𝒻𝒾𝓁𝓁𝒾𝓃𝑔 𝓁𝒾𝒻𝑒  🎀  🍓 ⋆ 🎂 we always dream of. 

I’m not sure about you but for most of the client I dealt with, they told me the same story. They always get distracted when it comes to financial goals. One of the reason is because there’s too many temptation to fullfill every month they get their paycheck and saving will be in the last queue and most of the time being kick out from the initial queue. This resulting to their financial goals back to square at the end of the year. 

That is why we need a coach to guide us along and keep reminding us on our goals. Just like most of the successful people in the world do. They have their own gurus or coach to ensure they are always on track. If you still do not have a financial coach to grow with you together, I’m here for you. My areas of expertise enable me to help you keep track with your financial goals and feed you with financial tools which suits to the financial journey you always dream of. 

Talk soon when meet! Cheers.

Inflation rates in Malaysia (worlddata.info)

Best High-Interest Savings Account In Malaysia (2022) (imoney.my)

Deposit Interest Rate in Malaysia – 2022 Data – 2023 Forecast – 1980-2021 Historical (tradingeconomics.com)