Teaching Children How to Save and Invest Money

Korean children get money as a present from relatives for Lunar New Year. Left to themselves, kids can spend the money on games or clothing, but experts advise using the money to educate them about economics.

The Dong-A Ilbo interviewed three financial experts to get their opinions on educating children about economics: Kang Bang-cheon, chairman of Asset Plus Asset Management; Kim Seong-geun, chief of a Samsung Securities branch in Busan; and Cha Moon-hyeon, president of Yuri Asset Management.

Kang said he recently discussed with his youngest daughter, who is about to enter middle school, which stock to buy after watching the Hollywood blockbuster “Avatar.” When she suggested a company with 3-D film technology, he asked if the company will have competitors.

After a debate, the two agreed to invest in a cinema company that screens 3-D movies and charges double for ticket prices.

Kang said he and his daughter always talk about stock investment in normal times as well. She often watches online educational content and asks her father about shares of Mega Study, an educational content provider.

After seeing an actress in her 50s with good skin, they searched for information on a Botox company.

“When my children spend money, I always ask them to think what kind of companies make money,” Kang said. “I do that to teach them that the easiest way to become a head of such a company is to buy stock.”

For Kim Seong-geun, he has given an allowance to his two children since they were in elementary school. When they saved part of the money, he matched the saved amount to encourage them to continue saving.

His children always record what they buy in ledgers. When they bug their father to buy them games, he tells them to buy them with their saved money. His children are then usually reluctant to do so.

“Parents often take away monetary gifts their children receive from relatives on Lunar New Year’s Day, promising to return them later. But they rarely return the money and lose their children’s trust, which is not educational,” Kim said.

“It is wiser to give children a chance to experience the joy of managing their own money and saving.”

Kim offers wealth management lectures to the heads of low-income households in Busan and South Gyeongsang Province on weekends and holidays.

“When day laborers ask me why I teach them such important lessons so belatedly, I feel sorry,” he said. “If you don’t want your children to inherit poverty, you should teach them how to manage their money from an early age.”

Before his son joined the military as an officer, Cha Moon-hyeon proposed that his son deposit 500,000 won (440 U.S. dollars) each month in an installment deposit account and fund out of his monthly salary of 1.3 million won (1,100 dollars), except 300,000 won (230 dollars) in living expenses.

In return, Cha promised to give double the amount saved in 28 months as an incentive for his son.

Cha said he hoped to give his son the experience of having an installment savings account, which pays five percent interest per year, and a fund, which is a high-risk, high-return investment vehicle.

His son last month told him the fund produced a yield of 40 percent, but Cha said, “It’s not a genuine yield” and advised him to make a long-term investment targeting an annual yield of about 10 percent.

The son has since set up his own investment portfolio.

hyejin@donga.com