It’s nearing the end of the year. Are you planning to book or have you already booked a vacation with your family?
As the free and easy mode of travel gains popularity among young families, the currency exchange rate between Singapore and the country you’re travelling to becomes more important in vacation planning. This is because unlike group package tourists who pay for food, admission tickets, transportation and accommodation upfront to the tour agency, free-and-easy travellers purchase most of these things at the holiday destination itself.
For a family of four on a week-long vacation, this builds up to a sizable sum! Instead of getting stressed up monitoring the currency exchange rate and rushing down to the money-changer, why not employ the dollar-cost averaging approach?
Here’s how the dollar-cost averaging approach works.
- Work out the total amount of foreign currency that you need to spend during the vacation
- Divide this amount into equal number of parts. The number of parts will depend on the length of time you have before the vacation. For example, if it is 6 months away from your holiday, divide the amount into 6 equal parts.
- Every month, go to the money-changer at a time of your convenience to exchange for one part of the foreign currency required.
- If you feel up to it, you can even increase the frequency of exchange to once a week instead of once a month. So, instead of 6 monthly trips to the money-changer, it becomes 24 weekly trips.
Although the dollar-cost averaging approach does not guarantee you the best exchange rate, it protects you from the unpredictable fluctuations of currency exchange rates. Consider getting your little ones involved at this stage of vacation planning. Besides applying their mathematical operational skills in a real-life task, they also get exposed to the useful concept of dollar-cost averaging, which goes a long way in laying their foundation in financial literacy.
The following lesson is extracted from a Joyous Learning (Mad Maths) lesson on ‘Numbers to 100,000’, where students got to discover and learn the concept of dollar-cost averaging through a fun activity.
Have you ever observed your parents monitoring the currency exchange rate between Singapore and another country while planning for a holiday? Well, your parents were probably hoping to get the highest amount of the foreign currency for every Singapore dollar they pay the money-changer.
Today, you will have a go at something similar! Here are rules of the game:
- You are preparing for a trip to Joyous Land.
- Check that your “Travel Pouch” has 10 SGD 1 and 5 currency exchange order slips.
- Your aim is to exchange your SGD 10 for the highest amount of Joys (J), the currency of Joyous Land.
- Last month, the best exchange rate was 9000 J for SGD 1 and the worst exchange rate was 8000 J for SGD 1.
- During this lesson, your teacher will make 5 separate surprise announcements of the latest currency exchange rate.
- After each announcement, you decide whether you want to perform a currency exchange. If you do, on the currency exchange order slips, write down the amount of Singapore dollars you wish to exchange and the amount of J you should be getting in return. Show your working clearly.
- Hand your order form to your teacher.
- If you make a mistake in your calculation, the difference in Joys will be forfeited.
- At the end of the 5 rounds of currency exchange, the person with the highest amount of J wins the game!
At the end of the class, the teacher will get students to share what they have discovered through this activity and share some of the strategies they used. More importantly, the teacher will use this opportunity to explicitly impart the concept of dollar-cost averaging to students, a tool used by professional money managers.
If you’d like to read more of such articles, click the share button below so we know you liked this!