When My Son Asked Why Banks Pay Interest, I Opened Him a Brokerage Account

As my older son gradually began to understand the concept of “money,” I started thinking seriously about one question: how should we manage “the children’s money”? This thought came from something very simple: ang pow money.

Over the years, the ang pows the children received have slowly added up. My older son now has a growing understanding of money and knows that this money belongs to him. He often talks about how much money he has. I also fully respect his ownership of it, and I have been keeping the money that belongs to him in a fixed deposit bank account. But recently, I realized that I could make better use of it—and that there was a much more meaningful opportunity hidden inside.

I don’t think this is only about helping the money earn better long-term returns. More importantly, it is a great opportunity for children to gradually build a healthy view of money, learn how to balance spending and saving, understand delayed gratification, long-term thinking, investing, and the concept of compounding.

These abilities may turn out to be more important than the amount of money in the account itself.

Saving Money for Children vs. Teaching Children Financial Literacy

At first, I thought the children’s accounts should be able to generate a sum of “seed capital” that could support them when they enter adulthood. The simplest goal would be their university education fund. So I began calculating how much my husband and I would need to invest each month, on top of their “ang pow income” in order to reach that goal. Taking higher education inflation into account, the required monthly contribution ranged from a few hundred to over a thousand dollars. Then I realized that once the amount became large enough, this was no longer just about saving money for the children. It had become a decision about overall family asset allocation.

Because when parents start contributing a large fixed amount every month into a “child’s account,” they are essentially dividing family assets in advance.

There are some downsides to this.

First, it reduces asset flexibility. It is very difficult to predict what will happen to a family over the next twenty years. There may be plans to upgrade homes, career pivots, support aging parents, deal with health issues in the family, or adjust the children’s future education paths. If a large amount of money is isolated too early in children’s accounts, it may actually weaken the flexibility of the family’s overall asset allocation.

Second, there is the issue of psychological ownership. If a child grows up assuming:

Then that money may end up weakening their real understanding of effort, responsibility, and risk.

An education fund does not necessarily need an “independent account.” For a family investing over the long term, future university expenses for the children are already part of the family’s future cash flow planning. It is more like a large capital outflow at a specific point in the future, rather than something that must be placed in a completely separate funding pool from the time the children are young.

I had an important shift in thinking: an “investment account for children” actually contains two completely different goals.

• One is long-term family wealth accumulation. This includes retirement, FIRE, property, future education expenses for the children, and the family’s overall sense of financial security. This part should naturally remain within the parents’ own investment system.
• The other is the child’s own “learning-oriented investment account.” Its core purpose is not to maximize returns, but to build a sense of ownership, create a connection with money, and understand investing and compounding.

Once I separated these two ideas, everything suddenly became much clearer.

They Are Actually Two Different Things

What I need to do now is:

1. Continue implementing my current family investment strategy. This already includes planning for the children’s future education expenses as a capital outflow when the time comes. The family’s original investment portfolio will continue to serve as the real long-term wealth engine. It will not be fragmented just because I want to “save money for the children.” It will still follow a simple strategy of regular index investing and balanced stock-bond allocation.

2. Set up a separate investment account for each child. Their ang pow money, birthday gifts, leftover pocket money, and occasional matching contributions from us as parents can all go into these accounts.

In Singapore, whenever people talk about “saving money for children,” the conversation quickly turns to savings insurance plans, endowment plans, and various savings-type insurance products. But after thinking it through carefully, I realized that these products do not really match what I am looking for. My real goal is: low cost, high transparency, high liquidity, and long-term investing.

More importantly, I want the process itself to be educational. I don’t just want my children to “receive a sum of money” when they grow up. I hope they can gradually understand:

• the different uses of money
• why banks pay interest — a question my older son has been asking me a lot recently
• how money flows, and what financial markets are
• why markets rise and fall
• what compounding means
• and even have the chance to make mistakes — such as overspending or making poor investment decisions

Why I Chose a Brokerage Account Instead of a Robo Advisor

At first, I considered using a robo advisor directly for the children because it is simple to operate and easy to automate. But later, I realized that for the purpose of “helping children learn about investing,” a brokerage account is actually more suitable.

With a robo advisor, what the child may understand is: “I own units in a portfolio on a platform.”

But with a simple index ETF, it is much easier for them to understand: “I own a tiny piece of many companies around the world.” This is a very intuitive idea. In the future, I can naturally explain to them that we own a small part of supermarkets, technology companies, banks, factories, and all kinds of businesses around the world.

When they are old enough to understand the concept of stock investing, they can also invest in individual stocks. Although stock picking is not necessary in my own investment philosophy, as a form of financial education, I think there is some value in letting them participate personally, understand business logic, experience market fluctuations, and compare the difference between active and passive investing.

I do not want these accounts to eventually become some kind of “education fund”, “start-up fund”, or “housing fund”. Helping children understand money and saving money for children so that they can have a slightly easier starting point in the future can be two separate things. Perhaps what truly matters about these children’s accounts is not the returns at all. The returns may even be the least important part of the whole exercise.

What matters more is allowing the children to gradually understand that money is not only for consumption. It also represents ownership, choices, patience, and future freedom.

Perhaps one day, when the market falls sharply and the account turns from green to red, that will become one of the most real financial literacy lessons of their lives.

Practical Setup

In the end, what I actually did was use IBKR directly.

IBKR allows the same person to create multiple accounts, and these accounts can be linked under the same login for unified management. My current setup is as follows:

The investment allocation is also kept consistent. At the moment, I use a simple index ETF.

IBKR does not offer true custodial accounts for minors in Singapore, so the legal ownership of these accounts still belongs to the parents for now.

IBKR’s interface is relatively complex, but I do not need to use it frequently. I only occasionally add to a single ETF position — currently VWRA. When the time is right, the basic features it provides, such as performance charts and ETF information, should be enough for me to use as a foundation for sharing financial knowledge with the children.