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What Do You Do With Your Children Ang Bao Money?

>> Thursday, March 6, 2014

It is the Lunar New Year and it is Chinese custom to give red packets (or Ang Bao) with money to children during this festival.

What do parents usually do with this money collected? Most usually squirrel it away with no particular objective in mind. This often results in it being spent on rewards for the children when doing well academically in future.

A pleasant goal proposed was to use it to fund their future university education fees. This gives parents’ a focus and also Children to take some ownership of their own future. But is it even possible for the Ang Bao money to be sufficient?

Making some assumptions and working out the figures:

NUS annual fees according to their website are $7,650 for the average course of study.
Assuming an average course is 3 years = $22,950 total fees.
Assuming education inflation of 3% for 20 years = about $40,000.
Assuming a rate of return at 8% over 20 years = about $800 monthly required.
Based on my own market research, the average Ang Bao received discounting parents’ contribution is about $300.

Hence, if each parent makes up the reminder $500 by forking out $250 each, that makes the goal of achieving the education funding, provided all the assumptions pan out.

Gong Xi Fa Cai! And may everyone Ma Shang You Qian!

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