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During the Spring Festival, every child must get red envelopes from parents, relatives and friends. Today, children’s lucky money is different from that of the year before. When I was young, tens of yuan was considered astronomical, but now some children’s New Year’s money has even reached the level of 10000 yuan, which was absolutely unimaginable in the past.
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Many people ask how to deal with this lucky money?
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Expert suggestion: the quartering method is to divide 10000 yuan into four portions for financial management.
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First part: save money
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Open a bank account (or an account in the name of parents) for children to save their lucky money, so that children know the importance of saving;
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The second part: let the child decide to buy the things he (she) likes
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The budget and its rationality need to be considered;
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Third part: buy insurance
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You can buy education insurance or medical insurance. In short, let children know the importance of insurance from childhood;
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Part 4: Investing
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Within the acceptable risk range, let the children develop the awareness of financial management and investment from childhood, such as how the profits, principal, etc. come from. As for investment channels, you can buy fund stocks or other financial products. If the child is under 18 years old, it is recommended to implement it in the name of the parents, but the child must be involved.
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The above quartering method can be applied to almost every child. Of course, the emphasis may be different for different amounts, ages and family conditions. But no matter how much it is, it can be divided into four parts. Let children learn how to manage money, learn how to protect, and learn how to invest risk when they are young, then their New Year’s money will become more meaningful.
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If the lucky money is distributed according to the quartering method, how should the proportion be allocated? This seemingly simple management of New Year’s money actually reflects a family’s wealth outlook.
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Before discussing this issue, let’s discuss one question: What is the goal of financial management?
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The so-called financial management is to manage the existing assets and resources, and finally achieve the long-term financial goals of the family through reasonable allocation.
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Based on this goal, experts recommend the following:
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Part I: Savings Planning
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Suggestions account for 5% – 10%. This part is mainly used to let children understand the importance of saving and mobility, and is also the starting point of all family investment and financing. Because there is no principal without saving, of course, there is no way to make reasonable investment planning. Especially for younger children, it is very important to let them develop the saving habit from childhood.
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Part II: Children’s consumption planning
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This part is used to buy things for children that they like and need. The proportion varies from person to person. The smaller the child, the lower the proportion. The recommended proportion is between 5% and 10%. The main purpose is to let children have such an experience: how to meet their shopping desire through a reasonable budget without overspending.
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Part III: Insurance Planning
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This part is to let children understand that everyone is full of various risks from birth to the end of life. Before the age of 18, there are two main risks for children: first, accidents and diseases; The second is the cost of completing future studies.
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So how to avoid risks? This needs to be solved by insurance. In fact, insurance is a kind of compulsory savings, and it also has the role of leverage: only a small amount of premium is used to pry a higher amount of insurance to avoid risks.
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If you want your child to learn to invest and manage money from an early age, saving is the first step, and buying insurance is also the first step. The proportion of this part is about 10% – 70%. If the product is accident protection type, the proportion is 10-20%; If it is the education savings type, the proportion can be as high as 20% – 70%. The specific proportion depends on the actual situation of each family.
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Part IV: About Investment Planning
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The main function of this part is to let children understand that they must take corresponding risks if they want to get greater returns. Therefore, the proportion of this part depends on the age of the child. The younger the child is, the lower the proportion is. The older the child is, or the greater the family’s ability to bear risks, the higher the proportion is.
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This part, like insurance, has a leverage function. It only uses a relatively small amount of investment principal to obtain greater returns. Of course, it requires time, expertise, risk tolerance, etc.