For those of you who don't know, Chinese New Year or Lunar New Year was on Friday, February 12, 2021. It's the Year of the Ox, and I, myself, was born in the year of the ox so it's supposed to be an auspicious year for me. It's a big deal in my culture, and on top of all the fun we have with friends and family and amazing food we eat, children typically receive 红包. If you're like me and can't really read Chinese, they're called hóng bāo in Pinyin (Romanized pronunciation) or red envelopes in English; these red envelopes contain money which is believed to keep children safe from demons and bring good luck. Even though the tradition focuses on children, generally family members will gift each other hóng bāos to ring in the new year. Actually, just the other day, even though I am now an adult earning a full-time income, my older sister tried sending me money via Venmo for the New Year. We sent the money back and forth several times before I returned her money and blocked her on Venmo. Just Asian things~

As a kid growing up, my parents and grandparents would always gift me and my siblings hóng bāos with fresh, crisp bills of cash. Even as a kid, I would always do my best to refuse the money, but it's a little bit harder when things are in person and you can't block them. Plus, they're your elders - you have to take it. The amount of money in each hóng bāo varied, but I appreciated the thought more than the money. I was always conservative with money, and I didn't really have anything to spend it on. So instead, I thought it would be a great idea to hide my cash away in my room. Years of birthday money, Chinese New Year money, random gift money, all in cash, just sitting in my room for years.

If you know about inflation, you know why this was a mistake on my part. All this money was actually losing its value as time went on. I wasn't even earning the small amount of interest I would have gotten had I put my money in a savings account at a bank. The amount of money varied every year, but when I deposited whatever cash I had left (after using cash to pay for eating out in high school), it totaled around $4000. To make the math a little more simple, let's assume I received $400 every year or $33.33 every month for 10 years, and I invested that monthly $33.33 in a S&P 500 index fund with a low expense ratio which is expected to get 7% annual interest¹. Using a compound interest calculator, I can see that after 10 years, I would have had $5,526.03. Sure, it doesn't sound like much, but that's just a free $1,500 I missed out on.

I think it's also important to note that an S&P 500 index fund is just one of many ways I could have invested my money. It is one of the more consistent and safer ways, but there are other ways that could have potentially increased (or decreased) my returns like investing in myself and my skills, buying and holding individual stocks over the long term, trading options over the short-term, etc. Even doing something as low risk as putting that money away into an FDIC insured savings account could have increased my returns. We work so hard for our money; it doesn't make sense to just let it sit there and lose value. If you have cash lying around, consider putting it to work for you.

If you were confused about any of these terms mentioned in the post, check out the Personal Finance Guide to get a better understanding on the basics of personal finance. Happy Year of the Ox everyone!