Personal Finance Part 20 – The Curious Case of Financial Literacy in Singapore

Perhaps I’ve been harping too much on this issue in my monthly portfolio ramblings, but it just occurred to me that Singaporeans (the youth in particular) are either becoming more and more ignorant of financial matters, or that it has been the case all this time but no one bothered to bring it up to the forefront for discussion. After all, financial literacy can be considered a critical life skill which most young adults (and I dare say even teenagers) should grasp as early as possible, in order to cement their views on spending and saving and to inculcate positive values within them regarding money management. Yet, it seems that many schools are not teaching such topics to students, and many parents also neglect to talk to their children about proper money management. This has resulted in many Singaporeans not even grasping basic financial concepts such as interest rates, investments, savings and rates of return.

Our local newspaper has been highlighting the effects of the lack of financial literacy for quite some time now, and the evidence stems from the fact that such a large group of people have been conned into scams such as Oilpods and Sunshine Empire. It may sound amazing that people out there can promise returns of 10% to 20% per month, but it strikes me as even more amazing that there are people who can actually believe such tall tales! Another phenomenon which has been making its rounds recently are the myriad “investment” seminars out there which can purportedly teach you how to generate unlimited and consistent passive income and to make huge percentage profits using just a small capital base. Simple common sense and logic should tell one that if such schemes were really true, then the operators would have resorted to using it themselves to get filthy rich, instead of “altruistically” wanting to share it with the general public for a “low fee”. Sadly, common sense is becoming less and less common these days.

But what is the cause of this seemingly pervasive lack of financial literacy and common sense? For one, schools are ill equipped to discuss and teach this topic as they claim that each individual is different and so will need to be taught differently on how to handle money in their own way. While this is true, I argue that there are many general principles out there which are applicable to every man on the street, regardless of his social status or wealth level. Simple concepts include the effects of interest rates, paying yourself first and compounding of one’s money; and these can be effectively introduced in schools at primary level to inculcate the right values and practices in children. As they progress on to secondary and tertiary education, more emphasis can be placed on broadening their understanding of financial concepts such as investments, equities, bonds and fixed deposits, to name a few. In other words, the Government should take a pro-active stance to introduce this curriculum into the mainstream so as to dispel the cloud of ignorance currently hanging over every child. It is not enough to just have initiatives such as MoneySense or IM$avvy, as these are targeted mainly at adults who may already have ingrained ideas which are difficult to alter.

Another area which needs to be worked on (and is admittedly tougher) is that of the family unit. Families are somehow reticent when it comes to discussing financial matters in detail, and most parents do not wish for their children to know their true financial situation. This could stem from a conservative belief that if a child knew how much their parents were worth, they would, at best, become lazy and corpulent (knowing that their future would be paid for); or at worst, start plotting to siphon off the family’s fortunes to be used for his own selfish reasons. Hence, talking about family finances and the proper handling of money is somewhat of a taboo subject in Singapore, and remains so even as the Government and society tries to open people up to being more financially savvy. It is therefore not surprising that those families which discuss money matters with their children at a young age and educate them on the importance of the value of money usually result in offspring which are not just savvy about money, but who are also aware of the importance of saving and investing instead of going on a bling-filled binge.

By chance, I have come across blogs written by late teenagers and young adults ranging in age from about 18 to 24. Most of them smack of materialism and peer pressure and talk a lot about material possessions and being “hip and trendy”. It is a sad facet of our society if these young adults grow up to be spoilt brats who cannot manage money, and who may end up with huge debts as their ideas on money are flawed. I am not exaggerating when I opine that this may turn out to be a major social problem two to three decades down the road, as such a cavalier attitude towards money may result in dysfunctional families and broken homes as many struggle to save for retirement.

What can be done for financial literacy? All is not bleak, as there are many instances where help is rendered for those who wish to know more. As previously mentioned, there are schemes such as IM$avvy and MoneySense by MAS which provide a wealth of information on financial matters. SIAS also regularly organizes free seminars to educate the general public on money matters and investments, and these are truly helpful and informative. New families should also be aware of financial matters and educate the next generation accordingly, and there are numerous websites which offer practical suggestions on how to slowly introduce the topic of personal finance for young kids.

Perhaps the battle for financial literacy may still be won, but it would take considerable effort on the part of educators, the Government and the individual. Still, this is a key life skill and therefore, it is best that it not be compromised or else the consequences would be devastating.