Collecting these little red packets of joy – or sometimes disappointment – takes a certain level of skill and finesse.
You have to possess a thick skin to offer Chinese New Year greetings to people whose names you can barely recall, or to charm them with wildly exaggerated promises of financial windfalls.
Only when your sincere wishes win them over will they hand over the ultimate prize: the hongbao.
This is why it’s important to know where to park your hard-earned hongbao money, or any kind of spare cash.
I’m planning to be risk-averse and save up my hongbao money or convert it into precious metals like gold, which is valued for its stability. At the age of 27, with big-ticket purchases like my first apartment on the horizon, every dollar will count.
But to each his own, and with unique and ever-changing financial priorities, young investors should identify what works best for them.
Ms Lorna Tan, head of financial planning at DBS Bank, notes that whether young adults choose to save or invest their hongbao money depends largely on their short-term financial needs.
She says that for young people who are still studying or serving national service, hongbao money, which is seasonal in nature as it is given out only during Chinese New Year or birthdays, can come in handy as an extra tool to help bolster savings.
It can also be used for short-term targets like saving for a holiday.
“For those who have started working, the amount received from hongbao is usually a small supplement to their annual salary, rather than a significant portion of their income. This means you have flexibility in how you choose to use it,” Ms Tan says.
Mr Timothy Ho, co-founder and managing editor of personal finance website Dollars and Sense, points out that hongbao are essentially “gifts”.
“Since hongbao money is money you didn’t actively work to earn, apart from visiting your relatives to collect it, it’s an excellent opportunity to think about investing and growing your savings... It’s a bit like your parents giving you tokens to play at the arcade, an invitation to explore and try new things,” he says.
“Even if you’re not naturally inclined to invest, using your hongbao money as a starting point for your investment journey is a great idea, and you will gain some basic experience in investing.”
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Mr Ho also notes that while it is important for young people to cultivate a habit of saving, they can also benefit from investing in riskier assets, as any investment losses encountered could serve as valuable learning experiences.
“Losing a small amount at a young age can be a valuable experience: It teaches you how to manage your emotions and stay grounded when facing losses... This perspective helps counter the misconception that investing is always a straightforward journey of making constant gains,” he says.
“That said, I would caution against making ‘investments’ in a speculative manner. Even if you make a profit from such speculative ventures, you might take away the wrong lesson – believing that generating returns is easy if you’re willing to take risks.”
Investing in 2025 will likely create challenges even for the most seasoned investors, let alone young ones, due to the geopolitical and macroeconomic climate.
Expected interest rate cuts could make higher-yielding, riskier assets like equities and cryptocurrencies more appealing, but a cloud of uncertainty still looms over the markets, given that US President-elect Donald Trump’s upcoming second term is expected to have an impact on trade flows and inflation.
So how should young investors navigate the markets with their hongbao money?
Timing the market is an extremely difficult feat that even institutional or highly skilled professionals often fail to achieve.
Young investors should consider taking a slow and steady approach to portfolio growth, as “time is on the side of those who can wait”, says DBS’ Ms Tan.
“The global economy historically sees longer periods of growth than recession, and stock markets see longer bull phases, or uptrends, than bear phases, or downtrends,” she adds.
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Mr Aaron Chwee, head of wealth advisory at OCBC Bank, says that while short-term market volatility and headwinds are expected, a pullback in asset prices could offer young people a promising opportunity to invest, particularly with a long-term perspective.
“Dollar-cost averaging is the ideal strategy to manage market fluctuations,” he says.
But Mr Chwee also noted that young people need to establish solid financial foundations before investing, such as building an emergency fund or clearing high-interest debts.
For those with life-changing purchases on the horizon, hongbao money can also be parked alongside monthly income in more stable assets such as unit trusts or a balanced portfolio of equities and bonds.
“Say you intend to get married soon, or buy a house, and will need a pool of funds to pay for expenses... You can start to build up these funds by setting aside your hongbao money as well as an amount from your monthly income as a form of regular savings and put it to work,” Mr Chwee says.
“If you are looking to buy a home or marry in three years, your investment time horizon is not very long. You may not want to take too much risk if you are investing to accumulate funds for a large purchase.”
Hongbao money may feel like a small financial windfall, but I see it as a hard-earned reward – won through relentless flattery and greetings.
So, when you’re handed a hongbao this Chinese New Year, consider using it to kick-start a savings habit, dip a toe in the markets, or inch closer to a life-changing purchase.
Timothy Goh is a business journalist at The Straits Times. He covers private equity, with a focus on start-ups and venture capital.
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