As the season of giving approaches and we try to move from “more stuff” to “savings account” gifts for our kids, I went searching for a cool bank we could make without breaking the bank. And I found it in our beijingkids archives! Enjoy this Maker’s Corner from 2013 that can start your kids on the road to understanding how to save their kuai.

One of the tools for teaching children to save money is to give them a piggy bank to stash their pennies. Today’s kids might wonder what a piggy bank is, or why it’s called what it’s called. After all, how many pink pig-shaped saving banks are in stores these days?

Rather than expect kids to want to display and treasure a fat pink piggy bank bought from the store, Keystone Academy’s Visual Arts teacher has combined recycling and her son’s interests to create a spaceship savings bank!

Ten-year-old Gabriel demonstrates the craft for us with few materials for a simple decoration, but there is room to either simplify or complicate this craft. Use a thicker colored paper instead of tissue paper and draw the windows or use glitter pens and stickers to make a space shuttle so colorful saving money can’t possibly be overlooked!

Estimated time: 60 minutes’
Suitable for: 7+

Materials:
1. Empty plastic water bottle
2. Colored paper
3. Tissue paper
4. Scissors
5. Permanent marker
6. White glue
7. Glue stick
8. Craft glue
9. Plate
10. Brushes
11. Circular objects in different sizes

Prepare the body of the shuttle.
1. Cut a hole in the plastic bottle.
2. Paint white glue on the water bottle with a brush.
3. Cover the plastic bottle with tissue paper.
4. Brush over the paper. Leave it to dry.
Prepare the shuttle trappings.
5. Trace a big circle on colored paper, cut the circle out, and fold it in half to then make a cone.
6. Trace and cut three bigger and three smaller circles with different colored paper.
7. Create fins out of colored paper by first folding the paper two times. Then, draw the shape of the fin and cut two out at once.
8. Fold the straight edge of fins to create a place to put glue.

Prepare the shuttle for launch.
9. Glue the cone on the cap with craft glue.
10. Glue three fins on the shuttle.

11. Glue two circles together to create windows. Attach the windows to the body of the shuttle with glue.
12. Decorate the rocket with permanent makers by drawing ladders, nails, symbols, or signs.

This article originally appeared in the September 2016 Issue of beijingkids magazine. Click here for your free online copy. 

KEEP READING: Gratitude Journal 2020: “We Won’t Take for Granted Our Health”

Photos: Dave’s Studio

I recently wrote about raising kids with allowances. I outlined a number of benefits of doing so, with one of the most important ones being to help kids foster the right kind of attitude to and relationship with money. Giving an allowance can help you raise grounded kids who are financially savvy, and wise savers and spenders, with a real sense of accountability.

There are many ways to gift your child with an allowance. When they’re young, it’s usually pennies and small notes in a piggy bank; as they get older they may receive a weekly or monthly allowance paid in cash. However with most kids now using their smartphones for just about everything and anything, there’s an easier way to pay your kids allowance and a more efficient way for them to keep tabs on their spending. Enter WeChat Wallet.

It doesn’t take long once you move to China to realize that WeChat is your lifeline. It’s a social networking platform that is more than just about connecting you with your friends. You can build a business, network, pay bills, coordinate events and activities, catch up on local news, read articles, make a hotel or restaurant booking, buy tickets – the list is endless, and now you can use WeChat to pay your kids!

Parents can now gift a ‘Relative Card’ using WeChat. You can set one up for mom, dad, and child, and you can create up to two WeChat Wallet cards for kids. Follow the instructions below to set up a monthly allowance card for your kids. Don’t forget to remind them that spending digital money is very easy; before you know it, it’s gone! When giving a monthly stipend to your kids, you may want to encourage them to save some, spend some, and give some (to a charity of their choice). These purposeful acts show them that there’s a particular formula to how one should handle money.

• Click on “Me” on your WeChat homepage
• Click on “WeChat Pay”
• Click on “Wallet”
• Select “Relative Cards” from the menu
• Click on “Gift a Relative Card”
• Click on the “Child” card option
• Search for the name of your kid and select
• Input the limit you would like set for your child’s monthly allowance, and send.

This is a great and easy solution for switching up the way you pay your kids their allowances or to start gifting your kids pocket money.

Photos: Pixabay

When it comes to family money matters, the kids should arguably be a part of purposeful discussions that help them to foster the right kind of attitude and relationship with money. In addition to talking openly about money, parents may wish to support this process by offering their kids an allowance. All parents want to raise modest, patient, and grounded kids who can develop into financially savvy and wise savers and spenders, but how should we approach the issue of offering our kids money?

One of the most contentious issues around the giving of pocket money to children is not only the amount that is given on a weekly or monthly basis, but whether or not this transaction should be one that’s earned. Should our kids work for their allowances? Cleaning the car, taking out the trash, cleaning their room, and washing the dishes are just some of the most common sets of chores traditionally asked of children in an effort for them to be taught financial responsibility and the value of money.

No one wants to raise a child with a sense of self-entitlement, and having your kids earn their pocket money may seemingly be the best way in which to support the cultivation of a good work ethic and a meaningful understanding of money matters. However some parents would argue, as I do, that chores are foremost an integral part of family life, and household tasks should not be seen as a transactional tool whereby kids can trade in responsibilities for compensation. Household chores should be considered core elements of a child’s contribution to the home and family.

The Zupko family have adopted this philosophy and garnered their inspiration from the manifesto laid out in author and financial columnist Ron Leiber’s The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money. This practical guide book for families is intended to provide a detailed blueprint for parents tackling family money matters related to: the Tooth Fairy, allowances, chores, charity, saving, birthdays, holidays, cell phones, and other issues that are directly related to finance. Parents are encouraged to teach and demonstrate healthy money management by having their kids take their allowance and allocate it evenly between save, spend, and share. “We let them decorate a bucket with a label for themselves so they really felt like a part of the process,” said Julia Zupko, mother of 11-year-old, Natalia and 9-year-old Josephine.

The Zupko Family

Helping our kids to differentiate between tasks we must all learn to contribute towards in a family, and the healthy management of money and expenditure, means that our kids will receive a more well-rounded philosophy and approach when it comes to domestic labor and how to spend and budget, “We are now starting to use a spreadsheet instead of physical buckets here in China because physical money is less relevant, where, in addition to using it as a credit/debit/balance system, we are also considering adding in a monthly APR so their money grows just like a real savings account and further, keeping track of the amount they would have had, had they not spent it,” says Zupko. She went on to say that there are no rules attached what her daughters can spend their allowances on, however perspective and advice is offered to support wise decisions.

The Lim family have a slightly different approach, which seems to embrace a more flexible process of offering ad hoc allowances to their 6-year-old boy, Zac, “We give pocket money irregularly, on demand and in reward”, said father of Zac, Michael Lim, “There is no set limit, if he likes the look of coins more than notes, we give him that.” When asked about how Zac’s allowance is earned I found it interesting that the Lim family’s allowance philosophy is not so much based on chores as such, but rather the triumphs and accomplishments of their little boy, “Zac receives an allowance by achieving goals and milestones, i.e. learning new vocabulary, listening to what we say, and picking up after himself when playing.”

For Lim, an allowance is a reward, so in that regard it is earned and therefore is a gesture that aims to attach meaning to the monetary gift. “We are promoting positive behaviors by rewarding them with food and toys, plus money in his piggy bank”, he said.

Although these two families are using a slightly different approach to the issue of raising kids with an allowance, the end game couldn’t have more synergy. These families are also dealing with family money matters with kids of different ages and therefore the nature of their methods will reflect the emotional, mental, and physical characteristics of their children. The Zupkos are teaching their kids fiscal responsibility, where, as is appropriate for Zac’s age, the Lims’ focus is on reinforcing the practice of positive behaviors related to fostering a good work and learning ethic.

The philosophy concerning allowances for kids may also adapt and change with time, and be built upon the unique attributes and makeup of each family. Both the Zupkos and the Lims are trying to support and encourage their kids to harness a greater sense of responsibility and a healthy attitude towards money, its worth, finiteness, and of course all the wonderful results of wealth-building.

What are often not discussed among parents and families however are the systematic elements of high and low-income households, which are directly connected to inequalities and segregation in education and housing. Some families have no choice but to raise children who will ultimately have to financially fend for themselves, and go without until they can. What lessons can be taught to these kids about money? How can parents of higher-income households balance the giving of an allowance with ensuring that their approach does not nature an attitude of entitlement?

The charity element that the Zupkos have implemented ensures that their kids are thinking about others and their needs; this could perhaps be a tool that can be used to combat the raising of prima donnas and an attitude that fails to acknowledge the importance of giving and empathy for those who do not have the same privileges. In regard to families who can’t offer physical money, lessons, praise, emotional support, and the giving of your time and energy can also be used to teach kids responsibility, accountability, and respect.

Every family is different, and we all have to do what works for our household when it comes to money matters. Below are a few reasons why giving kids an allowance can have a positive effect. However there are a plethora of other ways to teach kids about money – chocolate pennies, piggy banks and matching toy coins, trade-offs with selected items, and activity-based transactions can also be used to talk money and cultivate the right behaviors and attitudes towards giving, receiving, and the value of time and finance.

5 reasons to give kids an allowance

Teaches them how to budget

Make sure your kids are required to put a designated amount of their allowance into savings, and when spending money runs out, they will learn about healthy spending and preparing for unexpected expenses.

Helps give them a good work ethic

If you require your kids to work for their allowance, select the kind of tasks that work for you as a family and are not too connected to everyday contributions that all kids should be doing without compensation. If your kids are slightly older, you may ask that they run an errand for you, demonstrate generosity by helping out a neighbor with a chore of some sort, or learn a simple dish or snack they can prepare for the family on request.

Teaches them fiscal responsibility

Budgeting is arguably one of the most important skills we all should learn as early on as possible. It helps kids to be more responsible with their spending as they get older, and prepares them for the wider world of money management. What’s APR? How can one budget for shopping, travel, and disposable income spending? And how can one plan/save for short-term and long-term financial goals?

Helps them to understand what it takes to run a home

I had no idea how much money went into keeping my parents’ household running, and so when asking for extra pocket money never considered what expenditure was attached to keeping family life functioning. Kids need to learn how much money you spend on basic things, like food, utilities and even desirables, like toys and candy. Giving an allowance shows how far money will go, and by sharing some of the costs for things like food you can demonstrate how many allowances it would take to feed the family, so that finance is not an intangible concept.

Shows them their effort in the family is appreciated

Again, if you require your kids to earn their allowances, using the method above, you are also showing your kids how much you appreciate their contribution. Kids, particularly when in their teens, can feel like their help around the house goes unnoticed and without thanks. It’s all about balance. Yes, we should all contribute to household tasks but nonetheless, praise, thanks, and/or an allowance goes a long way in acknowledging and reinforcing the positive behaviors you would like to see more of.

Do your kids get an allowance? What’s your philosophy? Comment below!

Photos: courtesy of Julia Zupko, Michael Lim, Pixabay

Sleep
They say time is money. Well, give enough time to your body to clean, process, and restore tissue for another day of wear and tear. If you sleep with an empty stomach and bladder you will make the best of this rest, therefore eat your last meal at least 3 hours before you plan to sleep.

Eat
When measured on a cost per serving, per weight, or per nutrition basis, fruits and vegetables beat out meat and junk food. Try to buy in season, as these will be the most appropriate for the climate, richer in nutrients, and at the best price. Replace butter and hydrogenated vegetable oils with olive oil and coconut oil, using virgin oil or coconut oil for hot cooking and extra virgin olive oil for cold foods. Research shows that 2 tablespoons of olive oil per day can reduce the risk of heart disease. To increase your good cholesterol, add avocado and nuts to your diet at least twice a week.

Exercise
Exercise is one of the healthiest investments of you time and should happen at least 3-5 times a week, spaced out no more than two days apart. After two days of no exercise the muscles slow down their metabolic rhythm to a basal state (as if you had not exercised) so even if your week is very busy make sure you exercise throughout the week.

Create Your Support Network
Humans are not like trees and can grow all by ourselves. We are social beings and thrive on the interaction that the community provides for us. Make a conscious effort to meet and talk to people that are sincere and trying to be better every day, those that inspire you and make you want to be a better human being.

Do What You Like To Do
Make time for what you like to do. As your body relaxes and is happy all the organs and systems work at their best.

Visit a Doctor and Dentist When Healthy
Book appointments for your kids and yourself to make sure you are up to date on all your vaccines, that your height and weight is appropriate, and that your teeth have not developed any cavities you are unaware of.

This article originally appeared on page 18 of the September 2016 Issue of beijingkids magazine. Click here for your free online copy. To find out how you can obtain a hard copy, contact distribution@truerun.com.

Photo: thesolanaclub.com

One of the tools for teaching children to save money is to give them a piggy bank to stash their pennies. Today’s kids might wonder what a piggy bank is, or why it’s called what it’s called. After all, how many pink pig-shaped saving banks are in stores these days? We’ve seen the one with attitude from Disney’s Toy Story.

Rather than expect kids to want to display and treasure a fat pink piggy bank bought from the store, Keystone Academy’s Visual Arts teacher has combined recycling and her son, Gabriel’s, interests to create a spaceship savings bank!

Ten-year-old Gabriel demonstrates the craft for us with few materials for a simple decoration, but there is room to either simplify or complicate this craft. Use a thicker colored paper instead of tissue paper and draw the windows or use glitter pens and stickers to make a space shuttle so colorful saving money can’t possibly be overlooked!

Estimated time: 60 minutes’
Suitable for: 7+

Materials:
1. Empty plastic water bottle
2. Colored paper
3. Tissue paper
4. Scissors
5. Permanent marker
6. White glue
7. Glue stick
8. Craft glue
9. Plate
10. Brushes
11. Circular objects in different sizes

Prepare the body of the shuttle.
1.    Cut a hole on the plastic bottle.
2.    Paint white glue on the water bottle with a brush.
3.    Cover the plastic bottle with tissue paper.
4.    Brush over the paper. Leave it to dry.
Prepare the shuttle trappings.
5.    Trace a big circle on colored paper, cut the circle out, and fold it in half to then make a cone.
6.    Trace and cut three bigger and three smaller circles with different colored paper.
7.    Create fins out of colored paper by first folding the paper two times. Then, draw the shape of the fin and cut two out at once.
8.    Fold the straight edge of fins to create a place to put glue.

Prepare the shuttle for launch.
9.    Glue the cone on the cap with craft glue.
10.    Glue three fins on the shuttle.

11.    Glue two circles together to create windows. Attach the windows to the body of the shuttle with glue.
12.    Decorate the rocket with permanent makers by drawing ladders, nails, symbols, or signs.

This article originally appeared on page 25-26 of the September 2016 Issue of beijingkids magazine. Click here for your free online copy. To find out how you can obtain a hard copy, contact distribution@truerun.com.

Photos by Dave’s Studio

For many international families, their time in China is an opportunity to save money, or to send it back home as a nest egg for the future. However, expat life can be expensive. Beijing was this year named as “the most expensive global city to rent in” by the Global Cities Business Alliance. And those little luxuries, or comforts to alleviate homesickness, can quickly add up, leaving you with little or no spare cash.
Yet most international families are wealthy compared to ordinary Beijingers. According to the Bureau of Statistics, the average salary in the city is RMB 6,500 a month. Expat packages can be six times that or more. So it must be possible to live well in Beijing and still save money, right?

Of course. Let beijingkids show you how you can save over RMB 250,000 a year, by living more like a local. And you get the authentic Beijing experience too.

LIVING
Move to the ‘Burbs
Do you really need that hutong or Sanlitun pad? Beijing’s ever expanding subway network means that you can live in the suburbs without being cut off from all the action. Shunyi is expensive, but areas like Tongzhou and  Haidian are rapidly developing, and offer community life on a more human scale than the teeming highways of downtown.

Rent on a 2 bedroom apartment in CBD: RMB 10,000 per month
Rent on a 2 bedroom apartment in Tongzhou: RMB 3,500 per month.
Annual savings: RMB 78,000

Ditch the Ayi
OK, this is a contentious area. You may be shouting at the page that you already don’t have an ayi and can’t afford one. Or you might be yelling that you work long hours, that your ayi is a godsend, and without her you’d have no family time at all.  However, it’s worth considering whether you’re getting the right kind of help.
If all you need is a hand with the housework, a domestic cleaning service or xiaoshi gong might be better value.

Ayi, 20 hours per week, at RMB 40 per hour: RMB 800 per week
Cleaning service, 10 hours per week, at RMB 30 per hour: RMB 300 per week.
Annual saving: RMB 26,000

Get a Lodger
If you have a spare room, then a lodger can bring in much needed income. Place a small ad on theBeijinger website, and you could make a new friend. Plus, your lodger could be a cheaper babysitting option than an ayi (assuming of course you carry out appropriate background checks).

Rent on a room in Tongzhou: RMB 1,000
Annual savings: RMB 12,000

EDUCATION
Unless school fees are included in your salary package, they can be a major expense. One cheaper option is to send your children to the international section of a local school, such as Fangcaodi. Entry requirements can be opaque and may require the exercise of guanxi. Also, many teach only in Mandarin, so your kids will need to be fluent. See our article about international school scholarships on page 27.

Average fees for two children at international schools: RMB 100,000
Average fees for two children at a local school: RMB 50,000
Annual savings: RMB 50,000

TRANSPORT
Get on your Bike!
Why spend half your life sitting in jams when you could be zipping through the traffic and keeping fit at the same time? Beijing is the perfect city for cyclists: it’s flat, with an extensive network of broad bike lanes. (We will pass over the fact that the bike lanes are so wide they’re often full of cars.) Traveling by bicycle is often quicker than car, as you can bypass Beijing’s infamous congestion. And if you’re getting daily exercise, then there’s no need for that expensive gym membership either.

Car rental (with driver): RMB 5,000 per month
Gym membership: RMB 4,000 per year
Cost of a good quality second hand bike: RMB 500
Annual savings: RMB 63,500

FOOD AND DRINK
Eat Local
Food is relatively cheap in Beijing, but not if you want to keep eating like a Westerner. A small frozen pizza can cost RMB 50-70, a liter of fresh fruit juice RMB 30.  Buying imported food can almost double the cost of your weekly shop.

But if you don’t know what to do with all those strange vegetables and spices, don’t worry. You can take a course in Chinese cooking, learn lots of new skills to impress your friends at dinner parties, and still save money!

Monthly groceries including Western food: RMB 3,500
Monthly groceries without Western food: RMB 2,000
Intensive ten day cookery course with The Hutong: RMB 4,000
Annual Savings: RMB 14,000

Shop Local
There are further savings to be made if you step away from the comfort of the supermarket and discover your local market. This is not only a money saver, but a great opportunity to practice your Chinese and mingle with real Beijingers!

Savings on monthly shop by buying fruits, vegetables, and meat at the market: RMB 500
Annual Savings: RMB 6,000

Drink Local
If you like a glass of wine for the weekend, this can quickly become a major expense. Imported wines are, frankly, overpriced, with mass-produced Chilean plonk retailing at RMB 200-300, and decent (though undistinguished) Bordeaux costing up to RMB 800. There are bin end bargains to be had at supermarkets like Jenny Lou’s, but very often the wine has been poorly transported or stored and is long past its best.
However locally produced vino is fast improving. While there is nothing to match the best of European or New World wine, you can find a decent tipple if you do a bit of research. Generally, it’s best to avoid big brand names and look for smaller vineyards, although Great Wall produces some acceptable vins de table.

Bottle of French wine: RMB 500
Bottle of comparable Chinese wine: RMB 150
Annual savings: RMB 16,800

A Tip – Don’t Tip
There is no expectation in Chinese restaurants and taxis that you pay anything other than the stated price, any more than you would tip in McDonald’s.
The savings from this are slight, and you may feel that a small expense to you makes a big difference to low paid workers. Bear in mind though that in some quarters tipping is seen as an insult, implying that the laoban doesn’t pay their workers properly.

Annual savings: RMB 500

TRAVEL
The Rail
The lure of travel is what drew many families to Beijing in the first place, but you don’t have to push the boat out to see the wonders of Asia. China’s railway system is clean, efficient, and comfortable. Bullet trains reach speeds of over 180 mph but the ride is so smooth that you’ll barely know you’re moving. A sleeper train, meanwhile, is fun for the kids, who can lie in bed and watch the country race by. And in the morning, you wake up in a new city. Just make sure to book a soft sleeper. Hard sleepers may be an adventure too far for even the most intrepid family!

Round trip for two adults and two children to Shanghai by airplane: RMB 6,800
Round trip for two adults and two children, second class to Shanghai by bullet train: RMB 2,800
Annual savings: RMB 4,000

Host City
Why pay premium prices for cramped rooms in a hotel when you can live like a local and enjoy a whole apartment? There’s a reason why Airbnb has become one of the biggest companies in the world since its founding in 2008. It’s particularly convenient for parents of young children, who don’t want to leave their kids in a room on their own, but also don’t want to be stuck with the little ones in a tiny hotel room after bedtime.

Seven nights in Shanghai:
In a hotel family room: RMB 4,650
In a two bedroom apartment: RMB 3,500
Annual savings: RMB 1,150

All Assets Put to Work
While you’re on Airbnb making those holiday plans, then sublet your apartment to short term project professionals and have your home maintain itself while you are away.

Sublet apartment during winter and summer holidays at RMB 150 – 200 per day
Annual Savings: RMB 10,500-14,000

SHOPPING
Swap till you Drop
Children grow out of clothes quickly, and there’s little sense in buying them expensive designer gear for day to day wear and play. We say, let them get scuffed and mucky – it’s what childhood is all about! International families are often far from relatives who might be a source of traditional “hand me downs,” so why not organize a clothes swap? It’s a great way for communities to come together, and to meet the neighbors. Adults too might find clothes they like!

Annual clothing budget per child: RMB 2,000-3,000
Reduced budget with clothes swaps: RMB 500
Annual savings per child: RMB 500

Drive a Hard Bargain
Haggling is another activity which doesn’t come naturally to many Westerners. We’re not suggesting that you start arguing over the bill at April Gourmet, but if you’re in the Pearl or Silk Markets, then you’d be ill-advised to pay the first price that’s mentioned.

It’s a good rule of thumb to offer 20 percent of the asking price. You will of course be greeted with incredulity, horror, mockery, and other expressions of disgust. Your next move should be to walk away. Generally, the vendor will chase after you, and proper negotiations will begin; if they don’t, then you’ll nearly always be able to find the same goods somewhere else not too far away.

The purpose of starting so low is to be able to go up sufficiently to preserve the vendor’s dignity, while still arriving at a good price for you. In the end, the determining factor should not be the vendor’s starting figure, but what you are prepared to pay. Vendors will never sell at a loss, and would rather make a small profit than lose a sale. Don’t be afraid to stick to your guns.

Annual savings: RMB 600

Taobao to the Inevitable
If you don’t read hanzi fluently, then Taobao can be intimidating, with its flashing lights, dense text, and endless menus. Paying isn’t easy either, until you’ve set up an Alipay account (see the helpful guide “How to: Set Up Alipay as a Foreigner” on our website). Once you’re in though, you have access to a market of staggering size and cutthroat competition. No need to worry about haggling, when every price is immediately visible and vendors are vying for your business. Whatever you want, you can get it, for a bargain price and delivered to your door.

Annual savings: RMB: 1,000 or more

Filter tips
Beijing’s water is safe to drink at the point when it leaves the purification plant, but most Beijingers, both international and local, don’t trust the pipes it flows through on the way to your home. Even if you believe the water to be safe, it has a taste which many find unpleasant. Bottled water is the usual solution, but is it really any better?

As with food, there have been many water-related scandals in China in recent years. In 2007, a study found that 40 percent of bottled water was simply tap water. Where the water itself is genuine, the bottles might be a concern. Cheaply produced plastic will contaminate its contents if it gets warm. Then there’s the environmental cost of delivering water, and particularly of importing it.

The alternative is to have a water filter fitted in your home. This means you can be sure that the water your family is drinking is safe – and it saves money too!

4 x 19L bottles of water per week: RMB 100
Water filter: RMB 2,000
Annual savings: RMB 3,200

DISCLAIMER
Your Mileage May Vary
Obviously not all tips here are going to be suitable for every family. Some families may not be spending, or even earning, RMB 250,000 a year. We still hope you may find something here to inspire you.

This article originally appeared on page 42-45 of the September 2016 Issue of beijingkids magazine. Click here for your free online copy. To find out how you can obtain a hard copy, contact distribution@truerun.com.

Photo by Dave’s Studio

Most people learn more about money skills from their parents than from any other source. So, your kids will be learning about money from watching and listening to you. In the first part, we looked at tips for younger children and here are some top tips for older children.

Real World Situations
As your Child gets older, a coin jar or simple games may become less inspiring and they will likely be more stimulated by real world financial situations. Start to bring them to the bank with you and have them understand why you are going there. It is a good idea to start to talk openly about the family finances, not exact salaries, but the cost of holidays, pension savings and things of a general nature. Here are 3 top tips for older children:

1.Open a Savings Account
Going to the bank and making deposits is a great start to learning about saving. Although interest rates are low, the point is to regularly contribute to the account and save for a long-term goal. At most banks, a savings account can be opened for free for a minor. If children under 18 open an account at the bank their parents use, they may get a break on fees. However, some banks require account holders to maintain an average monthly balance or make automatic deposits to avoid fees.

2.Teach Them About Compound Interest
Saving money is a smart way to learn the algebraic lesson of compound interest. Money grows over time in a savings account, for example, and can be a good motivator to save. If you really want your children to see their money grow, have them invest in a mutual fund that should increase in value faster than a savings account. Warn them that mutual funds can drop in value, and go to your broker’s website to show them graphs of how mutual funds you own have done over the years. Remind them that their money is in a long race, not a short one.

3.Let Your Child Make Mistakes
Sometimes the best lesson comes from a poor decision, especially when your child is young and the financial loss won’t be so great.

When my colleagues son got his birthday and Christmas money last year, he rushed out and spent it without thinking. After spending most of it, he realized that he didn’t have enough to get the video game he wanted. He wished he had thought about it first before he spent it. But now, he saves up for the things he really wants and thinks before he spends.

Becoming Financially Independent
Becoming financially independent usually has two interpretations. Firstly, it is your child becoming financially independent from you as parents. Secondly, it is achieving financial independence to the point where you no longer have to work if you do not want to. The latter is an extensive subject so we will just consider the former.

If you think that the “Bank of Mum and Dad” will be closed for business once your child graduates and enters the world of work then think again. As of 2014, 59 percent of parents provide financial support to their adult children who are no longer at work. The “Chadult” generation has emerged over the last 20 years and parents on average now do not expect their children to become financially independent until the age of 38. If you want your child to become independent quicker, then follow these 3 top tips:

1.Set Specific Goals
Goals define what financial independence will look like for each of us. Goals, particularly specific goals written out with timetables, can motivate us to initiate and stick with the other keys to financial independence.

2.Invest
To build financial independence, your child will need to earn a reasonable return on their savings. A savings account alone is not enough. Invest in stocks, bonds, and other assets that involve an acceptable level of risk. Yes, there’s the risk of some loss of principal, but understand that investing is for long term goals that are at least five years away. When they are closer to reaching their goals, shift the invested funds into those lower earning but less risky savings accounts and money markets.

3.Stay Invested!
One of the big mistakes many investors make is waiting to invest until the market is really strong, and then bailing out when it sinks. In short, they buy high and sell low. Get in and stay in, and make adjustments if necessary. Avoid the temptation to dip into long term savings for short term pleasures, your child will thank you in the long run for your guidance!
 

Please note that beijingkids does not necessarily endorse the views presented in this article.

About William Frisby
William originally arrived in Beijing as a finance guy on a bicycle and will probably leave as a finance guy on a bicycle. He works for Premium Finance Group (PFG), a financial consultancy that has been established in China for over ten years. PFG offers clients no-nonsense, personalized advice and serves the whole of China from their Beijing and Shanghai offices. Services include international property, investment, insurance and financial planning. To contact William, email william.frisby@premiumfinance-group.com.

Photo: Socialmoms.com

It always surprises me how little we are educated about money and finance whilst we are at school, particularly as the need for a solid understanding of these areas is a key life skill. Only in the last 2 years has the UK introduced formal curriculum in this area to help prepare kids for the daunting world of credit cards, loans, mortgages, hire purchase agreements, pensions, and much more.

Most people learn more about money skills from their parents than from any other source. So, your kids will be learning about money from watching and listening to you. It is a good idea to encourage children to save from an early age, so here are some top tips to help them along the way. This is the first part of a two part series, the second looks at older children and finally independence in kids.

Money does not grow on trees
It is important that children have an understanding about the value of money. You can help them achieve this by giving them pocket money when they help around the house. It is also important that they understand that they may need to make choices when they spend their money. Here are 3 top tips for young children:

1.Use Different Envelopes/Jars
You may be familiar with the envelope budgeting system for your own money, but this can also work for children. On either envelopes or jars, have your child draw pictures of what he or she wants. You may also want to help your child understand that some items will take longer than others to save for.

For example, the short-term savings container might have a picture of a specific toy, while the long-term container might have a picture of a trip to Disneyland. Teach your child to set aside money for short-term and long-term goals, and have another container or envelope for spending on everyday items.

2. Match Contributions
However your children get money, from doing chores for an allowance or getting cash for their birthdays, match however much money they put aside.

You can also use physical rewards or treats instead of actual money as a saving incentive. For example, if your child doesn’t spend any money for a certain amount of time, provide a small reward or treat. You can also make the prizes better the longer your child saves. Try stickers, an extra 1/2 hour of video games, toys, or whatever motivates your child.

3.Play Games
Board games such as Monopoly and The Game of Life can teach kids how to spend and earn money, but they don’t do a good job of teaching them to be savers. Instead, try online games such as Save! a free downloadable game from Mass Mutual Financial Group that can teach them how to separate wants from needs when it comes to spending. The game leads players through a 3D fantasy world where they collect virtual money while trying to avoid impulse buys called “iWannas,” more likely known to your children as candy, soda and toys.

Please note that beijingkids does not necessarily endorse the views presented in this article.

About William Frisby
William originally arrived in Beijing as a finance guy on a bicycle and will probably leave as a finance guy on a bicycle. He works for Premium Finance Group (PFG), a financial consultancy that has been established in China for over ten years. PFG offers clients no-nonsense, personalized advice and serves the whole of China from their Beijing and Shanghai offices. Services include international property, investment, insurance and financial planning. To contact William, email william.frisby@premiumfinance-group.com.

There is no one in the world who can truthfully profess to having the perfect investment strategy. Every day we tune into financial based media such as Bloomberg and see numerous industry “professionals” completely disagree about the same topics. However, there are some people who have it more right than others and Warren Buffet is near the top of that list.

Buffet recently described how USD 40 invested in Coca Cola in 1919 would now be worth USD 11,000,000. This is obviously an incredible statistic with the added benefit of nearly one hundred years of hindsight, but what Buffet is teaching us is that patience is the key to investing. No one could have predicted the global dominance that Coca Cola would build over last century. Fewer still would have weathered the Great Depression, another World War or even the market peaks where it looked like a good time to sell. The point Buffet is making is that it is dangerous to try and time the markets and worse still to let your emotions guide investment decisions. The example shows us that with a good company you can figure out what is going to happen, not when it is going to happen.

One hundred years is a long time to achieve a return, so let’s reduce this to the past fifteen years. Here are three well known companies of the 21st century:

• Monster Energy – manufacturer of energy soft drinks
• Deckers Outdoor Corp – owner of the Ugg boot brand
• Gilead Sciences – a pharmaceutical company that has produced revolutionary drugs for HIV and Hepatitis-C

If we had invested USD 1,000 in each of these companies on January 1, 2000, our portfolio would now be worth USD 648,781. That’s a total return of over 20,000 percent and an average annual return of 36.38 percent. What’s more, this includes the 2007/8 Global Financial Crisis, the worst fall in markets since The Great Depression. It sounds pretty good, but of course, there are some obvious problems with this example.

For a start it is easy to pick winners when we look backwards. In reality who could have predicted that the world would take to consuming huge quantities of caffeine laden sports drinks whilst wearing sheepskin boots. Even if we could predict the right industry, how would we then know which company in that industry to buy? There are many pharmaceutical companies that would have lost all of your investment over 15 years chasing the same dream as Gilead.

What this example really highlights is the risk that comes with picking individual stocks. Yes, the rewards can be significant, but so can the losses. In this regard it is no different to gambling your hard earned savings on the Roulette table. For this reason we do not pick individual stocks for ourselves or our clients. Instead, we use actively managed investment funds that are broadly diversified geographically and among asset classes. The key words hear are actively managed and they are often misunderstood by investors.

Our investment managers are selecting those companies they believe could be the next Coca Cola or Monster Energy. Do they always get it correct, of course not, but they are spreading that risk across hundreds of different companies. Furthermore, each of our clients portfolios will typically hold 5-10 different investment funds, this means they hold positions in hundreds and hundreds of companies. The overall effect is an enormous reduction in risk and a higher chance of consistent returns over the long-term. But, not all investment managers are created equal, as with anything there are good and bad ones.

We monitor tens of thousands of investment fund managers around the world and when judging them we use a very strict set of criteria. Two of the most important factors we consider are:

Longevity
The most important factor when judging a managers performance is to look at how long and how consistently they have delivered their returns. Looking at a track record over a short time frame tells us nothing. To demonstrate this point consider the Franklin UK Smaller Companies fund (ISIN: GB00B3VGKJ64). This fund has delivered average annual returns of 26.07 percent over the past three years putting it in the top 10 percent of all UK Small-Cap Equity funds. However, over ten years its performance is so poor it is in the bottom 10 percent of all UK Small-Cap Equity funds. Investing should never be about short-term gains so the second statistic is the important one.

Capital Preservation
Volatility erodes investment performance; an investment manager must be able to manage risk and preserve the capital that they manage. In our earlier example, Deckers Outdoor Corp provided an average annual return of 24.26 percent over ten years. But its deviation above and below this average is over 50 percent. We cannot tolerate this kind of fluctuation and we would not expect our investors to either.

There is a lot written about how investors should buy indexes instead of actively managed funds. This is an unwise investment strategy for a number of reasons. The first is that many indexes are very poorly diversified, for instance the Dow Jones contains only thirty companies. More important than their diversification, however, is their performance. To illustrate this look at the returns of two of the world’s major indexes:

• FTSE100 in the UK – 10 year average annual return 2.46%
• S&P500 in the USA – 10 year average annual return 5.65%

Now, it is important to understand, that there are many active investment managers that have performed the same, or worse, than these examples. But there is also a group of investment managers who have consistently delivered returns far above these indexes. This out performance has not occurred over the past few years, it has been consistently demonstrated for 10, 15, 20 years and often even longer.What most people miss is how important small differences in performance can be. They might say if I can get 5.65 percent in the S&P500, isn’t that enough? Again, let’s look at the numbers:

• USD 100,000 growing annually at 5.65% for 20 years would grow to USD 308,745
• USD 100,000 growing annually at 10% for 20 years would grow to USD 732,807

Average annual returns of 10 percent are attainable and they do not have to come with high risks. It is possible to achieve this return and double your gains with the right selection of investment managers. In many cases the correct selection of assets not only improves performance, it also reduces risk.

Investing should not be exciting or sexy, it should be consistent and reliable. When we plan our futures we need to be able to make reasonable assumptions about how our assets will perform. This cannot be achieved if we are constantly on the hunt for the next Ugg boot because who knows how much money we’ll lose trying to find it.

A well managed portfolio, spread across a range of high quality investment fund managers, will deliver the returns and capital preservation that you need to achieve any financial goal within a reasonable time frame.

Please note that beijingkids does not necessarily endorse the views presented in this article.

About William Frisby
William originally arrived in Beijing as a finance guy on a bicycle and will probably leave as a finance guy on a bicycle. He works for Premium Finance Group (PFG), a financial consultancy that has been established in China for over ten years. PFG offers clients no-nonsense, personalized advice and serves the whole of China from their Beijing and Shanghai offices. Services include international property, investment, insurance and financial planning. To contact William, email william.frisby@premiumfinance-group.com.

Photos: Tax Credits, Alan Cleaver (flickr)