What should I do with my children’s angpao?

As the Chinese New Year season draws to a close, this is a question I often get asked. Here is how the conversation typically goes: Well, what do you want to do with it? I don’t know, set it aside, what can I do with it?

Now, let’s unpack that.

1. The initial question (what should I do?) implies there is an objectively right thing to do. There isn’t (well, not really; more on this later). What is right here is what is right for you.
2. The next question (what can I do?) implies you know or at least have a sense that there are options within ”setting it aside”.
3. My response – which, unfortunately to the asker, is a non-answer question – is how we can begin answering the question: What do you want to do with it?

What do you want to do?

This is the key. Everything else follows from the answer to this question.

Most importantly, the right answer here is what is right for you. Your answer could be: I’m keeping it to pay for expenses. After all, raising a child in Singapore is so expensive. Go ahead and do that. Managing your money is a topic for another article, so you can skip to the end for now if you wish.

Your answer could also be: I want to keep it aside to help them save and then I can give it to them when they are older. Now, this seemingly simple answer is more nuanced and worth exploring further. So then, what can you do?

What can I do?

This is what most people actually want to know when they ask the initial question. Essentially, where do I set it aside? When reading through this question, remember your answer to the previous question. Here goes.

Put in a bank account.

Well, which bank account? Ideally, the account should be under your child's name, or at least tagged to your child. Unfortunately, your child might be too young to open one. Fortunately, there are some bank accounts which are readily available for you! When you enrol your child in the Baby Bonus scheme, two accounts are opened for your child: Child Development Account (CDA) and Child Savings Account (CSA) . Both these accounts are joint accounts with a trustee (usually one of the parents). Depositing to the CDA is a good option if you have not hit the top-up matching limit – it effectively doubles your cash! During a child's early years, CDA can be used to pay for childcare expenses. If you have reached the top-up matching limit, then depositing in a regular account such as the CSA might be a better option for its liquidity, since CDA can only be used at approved institutions.

As CSA typically only attracts a base interest of 0.05% p.a., you might want to consider choosing a high-yield joint account. As of February 2025, Standard Chartered First$aver joint account offers 2% p.a. for the first $50,000. Alternatively, accounts with OCBC allow you to set up "saving goals" to tag funds to your child, and there are high-yield accounts available. Remember, the primary intent is to set aside and tag these funds for your child – you are but a steward. Joint accounts are simple and makes it easy to hand the funds over to your child as they grow up.

However, chasing a savings account with the highest interest rate while tagging the funds to the child is no easy feat. Instead, if you want the money to grow, read on.

Put in an investment portfolio.

Same question, which investment product? Let's go back to the first principle: what do you want to achieve? For me, I want it to have these features:

1. Funds tagged to child
2. Top up with no minimum and no schedule
3. Easy to manage
4. Suitable risk-to-return level

The first point is the primary intent. The second point is important since angpao and other cash gift to your child is sporadic in amount and timing. The third point is good to have to allow long-term accumulation and compounding. Both the second and third points allow me to consistently deposit cash gifts to the portfolio.

The last point is harder. Once again, remember that you are but a steward of this money, so adjust your risk levels accordingly.

Fortunately, time is on our side. Depending on your child's age, you might have more than 10 years runway before you hand over the funds to them. Suppose you have 10-20 years horizon, then you might be fine to take on some risk for higher potential returns, by selecting portfolio with a higher equity mix for higher potential growth.

Otherwise, cash management portfolio works well too! To put it simply, the cash management funds manage the "chasing high interest rate savings" on your behalf.

For example, local robo-investor platforms offer the four features above. Note they are not joint accounts, but you can segregate funds for each child.

• EndowUs
  • Portfolio naming to tag funds to your child
  • Portfolio adjustments as your child grows
  • Options: Flagship, Cash Smart
• Syfe
  • Portfolio tagging to your child
  • Options: Core, Cash+ Flexi

I will not dwell too much on this topic; there are many other investment-focused articles available on this.

What should I do?

I guess I will answer the original question after all.

Regardless of what you choose do to, be a good steward of the resources you have been entrusted with. I am not going to say: use the angpao money to teach your children a lesson about money – there are too many articles you can read about that already. Not everything is a lesson, but every day is an opportunity to nurture a healthy relationship with God, self, neighbours, and all other material things – including money. That, is what you should do.

Summary

What you should do with your children's angpao is to be a good steward of these resources and also exemplify what it means to be one. This can include, but not limited to, setting aside the money for them in a savings account, or an investment portfolio on their behalf, and nurturing a healthy relationship with money.

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