Raising money-smart children

Saving for kids

The Sunday Times highlights four programmes to help parents raise financially secure children. Besides teaching children how to save, parents can also consider regular investment saving plans that require amounts as little as $100 per month, through unit trust platforms.


The CDA - a special savings account - is a no-brainer for parents of newborn babies.

Under the CDA, the Government matches deposits dollar for dollar up to a cap, depending on the birth order of the child.

You can open a CDA with DBS, OCBC or United Overseas Bank (UOB). Standard Chartered Bank will cease managing the CDAs by December 2018.

The banks pay up to 2 per cent a year in interest, so it makes sense to top up balances.

You will have up to 12 years to save in your child's CDA and the Government will match your savings in the account within two weeks. You can use the CDA funds for educational and healthcare expenses at Baby Bonus-approved institutions, which include selected childcare centres, kindergartens, hospitals and clinics.


Introduced last year in three schools, the POSB Smart Buddy programme aims to teach your child early on how to regularly monitor his expenses and savings.

The initiative uses portable and wearable devices, such as a watch or a student card, that are modified so students can use them to make contactless payments at school. The programme also comes with a mobile app that tracks their expenses and savings in real time, and allows parents to preset daily allowances for students.

Thanks to the positive feedback it has garnered, DBS says that it looks forward to rolling the programme out to more schools as part of the POSB National School Savings Campaign. To find out more about the programme, visit www.posb.com.sg/smartbuddy


Parents can jointly open a Monthly Savings Account (MSA) with their child to encourage him or her to save regularly.

If your child deposits more than $50 in the MSA every month without making a withdrawal, he will earn a higher interest of 0.4 per cent a year. If your child has a CDA with OCBC, he can earn an additional interest of 0.4 per cent, or 0.8 per cent a year (compared with 0.05 per cent for regular savings accounts) in total.

There is no minimum initial deposit required or minimum balance to maintain, so your child can deposit and withdraw as needed. Parents can track their kids' savings with e-statements, which also contain illustrations on financial concepts, such as computing interest, to help parents teach their children about savings.

OCBC says there are priority queues for kids on Sundays at "Sunday at OCBC" branches. This allows your child to queue on his own, to understand what saving money is and the concept of a bank.

There is also a Mighty Savers Game app to encourage children to be early adopters of good money management habits.

The game teaches wise spending, differentiating needs and wants, sound investment, saving more with compounded interest and giving to others. The mobile app is available for free at the Apple App Store and Google Play Store, and on the bank's website.


For older children, this account offers the usual perks of a savings account (ATM card, Internet and phone banking), along with life insurance coverage for one parent.

When the child turns 16, the UOB Junior Savers Account can then be converted into a regular statement-based savings account. Parents can contribute to this account regularly and use it as an illustration of how to enjoy the benefits of compound interest.

SEE INVEST: Red-packet way to rear $ smart children

Game of Monopoly offers learning moments

Finance executive Celine Low, 41, believes that allowing her two sons, Cedric, nine, and Clement, seven, to keep their hongbao money is a great opportunity to teach them proper money management.

"It is up to them to decide how much to save, spend and give as donations to church. We encourage them to set aside percentages for each category. Last year after Chinese New Year, Cedric was enticed by a popular toy (kendama) at the bookstore. He definitely spent more of his hongbao money than we expected him to!" Ms Low said.

Since they were about three years old, her sons have had joint accounts with her husband at OCBC Bank. The idea was to instil savings discipline in her boys.

Before her sons started primary school, they were given $2 a week in coins to put into their piggy banks at home. Every two or three months, they would take these coins to the bank to deposit into their savings accounts. This way, the children got to see their bank savings grow over time.

A year ago, the family of four started playing the board game Monopoly, using it as a means to teach money management.

As part of the game, the boys learnt to ask for money when their game tokens passed Go and how to calculate if they could afford the property their tokens had landed on. If another player's token landed on what they owned, they had to figure out how much rent to collect.

Ms Low said: "They also learnt to negotiate with my husband and I to sell properties to them, so as to obtain a complete set of properties (in the same colour) and collect more rent."

She recalled that Clement is usually adamant about owning the most expensive properties (Mayfair and Park Lane). And when one of the other players buys it, he would offer the player a high premium for it.

"Once, he went bankrupt as his cash on hand, plus the mortgage value of his properties, were not enough to fund the premium that he had placed on Mayfair.

"That was a good teaching moment - to look for value in other areas that may not be so obvious, for example, train stations," she said.

Another teaching opportunity is to consciously involve the children in the family's weekly grocery purchases. The children learn that one avocado priced at $2 is worth one day's recess money, while a piece of meat at $5 is 21/2 days' worth of recess money.

Since last month, Ms Low has been giving Cedric $10 a week for recess, instead of $2 a day.

"This allows him the flexibility of managing his own spending for the week. Clement still gets $2 a day. I will change it to $10 a week when he is more used to the primary school routine," she said.

Lorna Tan

Telling the difference between wants and needs

Mr Francis Tan and his wife Chaw Yen Fern with their children, Claudia, five, and Brian, three. Mr Tan believes that it is important to teach children the concept of opportunity cost. ST PHOTO: ONG WEE JIN

The financial journey for Claudia Tan, five, and her brother Brian, three, began when their parents set up savings accounts for both of them - on top of their Child Development Accounts - when they were born.

Their dad, UOB economist Francis Tan, 40, says that by doing so, it saves him and his wife, clinical psychologist Chaw Yen Fern, 38, the trouble of going to the bank again when the kids are older.

Not only does he use the accounts to park the children's hongbao money, he also channels a portion of his annual bonus there.

As his children are still young, Mr Tan has not started taking them to the bank to watch the physical transaction of depositing the cash. Instead, he deposits the amount into his children's accounts via online banking.


The 10-90 rule is where 10 per cent of red packet money is spent on a treat and 90 per cent is saved or invested. By adopting this approach, parents have the opportunity to teach their children how to save and invest for the long term.

MR FRANCIS TAN, on the money rule he will teach his daughter when she turns six.

He also recycles the new notes that he collects from their hongbao for the following year's red packets. Mr Tan says that discussing what to do with a child's hongbao money is the perfect opportunity for parents to teach their children the importance of saving from a young age.

"However, it's important that children first know the difference between needs and wants. Needs are things they truly cannot live without, such as food or a house to live in. Wants are things we would like to have but without them, we would be fine. These include the latest smartphone, toy or designer clothes," he says.

For instance, he tries to reason with Claudia that she does not need to buy everything in the toy store as she already has toys at home.

He also believes that it is important to teach children the concept of opportunity cost.

"I'll allow her to make the decision on whether she prefers to visit the zoo or indoor playground Cool De Sac at Suntec City, and ask her to articulate her reasons," he says.

He believes the decision-making process will go a long way in moulding her thoughts on opportunity cost and in the future, it will be easier to teach her about money management.

Mr Tan says he plans to teach Claudia the 10-90 rule next year when she turns six.

"The 10-90 rule is where 10 per cent of red packet money is spent on a treat and 90 per cent is saved or invested. By adopting this approach, parents have the opportunity to teach their children how to save and invest for the long term," he adds.

As his children grow older, Mr Tan plans to also teach them how to manage their finances by transferring their monthly allowances into their savings accounts.

He recommends making saving fun by giving children incentives to save, such as matching their savings dollar for dollar.

"By teaching children how to save up to buy something for themselves, they will learn how to set aside a portion of their pocket money and appreciate that the accumulation of savings takes time," he advises.

"Encourage them to save up for a toy instead of buying it for them."

Lorna Tan

A version of this article appeared in the print edition of The Sunday Times on February 05, 2017, with the headline 'Saving for kids'. Print Edition | Subscribe