A long time ago, there was a monster named Nian. Nian loved to visit a little village in China each year, and scare everybody he saw. He thought that was great fun. He liked to do this just as the new year began, to remind people that Nian was still around. Each year, after scaring all the people, could hardly wait for the new year to roll around, so that he could scare them again.
This probably would have gone on forever. But one day, just by luck, one of the villagers was wearing a red tunic. When Nian jumped out to scare him, Nian took one look at the red tunic and ran away. He startled the villager so much that the villager dropped the heavy metal bucket he had been carrying. The bucket bounced down the hill behind Nian, hitting every rock in its path. It made a horrible noise. Nian looked fearfully over his shoulder, and began running even faster.
The villager told everyone of his fabulous luck. His red tunic had scared Nian. And the noise of the bucket had sent him running away. This was good news. All year long, the villagers prepared. When Nian appeared the following year, everyone in the village ran for the red banners and the loud rattles they had made. They shook their rattles and waved their banners. And Nian ran away. The villagers never saw him again.
That's why people in China believe the color red signifies luck, and why all the children and many adults shake rattles and light firecrackers and make all kinds of noise on Chinese New Year's eve. It's to scare away evil spirits, and even Nian, just in case he's still hanging around.