Personal Finance

Where To Put Your Kids’ CNY Angbao Money

Calvin Lo

Happy Chinese New Year of the Dragon! Whenever CNY comes around, some of my wealth transfers over to my kids via angbao. If your kids are below the age of 16 like mine, they aren’t allowed to open their own bank accounts. As for a broker account, they need to be 18. So as parents to minors, where can we put their CNY angbao money?

Typically, my kids’ daily expenses are taken care of already in our budget so their angbao money shouldn’t need to be used for their necessities. Nowadays, kids seem to get a lot more than what I used to get. For my kids, each have a couple hundred bucks. That’s not a big amount but not small either.

Simply letting it sit in bank savings accounts now is not too bad, with interest rates being high. However, since this money might not be needed for a very long time (probably until 16 to 18 when they can take it over responsibly), it might make sense to invest it instead. Personally, I would opt to invest as much of that angbao money as possible.

Savings Account or Fixed Deposits

If you opt not to invest and keep in cash for shorter term use, there are many good options now. The problem for me is keeping the money segregated from our other accounts. I’m not a fan of relying in excel spreadsheets and would prefer separate accounts. If you’re alright intermixing the money, then you have a lot more options.

DBS/POSB (and other banks I think) make it easy now to open additional bank accounts, so I have one for each of my 2 kids. However, they only attract very low interest and should only be used as temporary holding accounts.

One option I like at the moment is GXS Bank (JV between Singtel and Grab). GXS Bank allows you to open separate Savings Pockets easily and pays 2.68% p.a. interest. You can simply create a Savings pocket and name it after your child.

Another option is to just open a separate FD tranche. However, this option is only possible if angbao money is substantial since most banks require minimum placement of $1K or more.

See my Fixed Income Tracker for the latest savings accounts, cash management, fixed deposits, and government bonds options.

Brokers

If you’re looking to invest that angbao money, there are 2 main considerations when choosing a broker: fees and market access. For long term (>10 years) investments, I would tend towards minimising fees rather than maximising profits.

Investing in individual stocks or REITs might be attractive but subject a lot to your individual skill. At least for my kids’ funds, I would want them to be insulated from my skill or lack thereof as much as possible. I view my role as a facilitator, not a fund manager.

Naturally, I would gravitate towards index funds. Some possible options I like are FSMOne, Endowus, and Syfe. FSMOne allows you to open separate beneficiary accounts for your kids. Endowus and Syfe allows you to open separate goals, which you can designate for your kids.

FSMOne has a Regular Savings Plan (RSP) function which allows you to invest regularly (up to 4 times per month) into a variety of ETFs. Currently, they are running a promotional 0% processing fee for RSP so this option is very cost-effective.

Only problem is that you may need to break up your lump sum angbao money into a few tranches. For lump sum investment, the fees are different depending on the market you’re trading in. You can find FSMOne pricing here. The advantage of FSMOne is that they don’t charge any ongoing platform fees, unlike robo-advisors.

Talking about robot-advisors, both Endowus and Syfe are great options IMO. They both offer a variety of portfolios catering to different risk appetites (aggressive, moderate, conservative, etc). Both have different methodologies and allocations in their respective strategies, but the main difference between the two is that Syfe uses ETFs whereas Endowus uses mutual funds. Recently, Endowus has been shifting to mutual funds with lower fees, but generally ETFs are known to be lower cost.

Robo-advisors generally don’t charge transaction fees, but they charge ongoing management/platform fees, which can be pretty substantial. These are over and above the fund-level fees charged by the ETFs or mutual funds. At the lowest tiers, Syfe charges 0.65% p.a. and Endowus charges 0.60% p.a. That may not sound like much but over the long term these ongoing costs can eat up quite a bit of your returns.

If you’re interested to sign up, you can use my referral codes/links for Syfe and Endowus below:

What I’m Doing

I haven’t actually decided yet, but will update here again when I do. I’m leaning towards upping FSMOne RSP for the next few months to spread out the angbao money, since I already have beneficiary accounts for my kids there.

Opening more accounts (or goals) in Syfe or Endowus just increases my complexity which is not preferable. I try to keep my finances as simple as I can. However, I do think that robo-advisors are a good option for these smaller amounts since they only charge ongoing management fees.

Whatever it is, I hope you don’t get analysis paralysis and just get started with any option, which is likely to serve your kids better than letting the angbao money rot in the bank.

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Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

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