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Why do so many Singaporeans struggle with financial matters?

We give you a peek into the Singaporean psyche: Why we are struggling to keep up with basic financial literacy.

A recent survey conducted by MasterCard reported that Singapore came in 2nd in financial literacy ranking among a group of 16 Asia-Pacific countries. Surprised? We are sure a large group of you are, especially since most people’s knowledge do not go beyond knowing how expensive HDB flats are, grumbling about losing 20% of their salary to CPF and complaining to the customer service operators about waiving off our late payment fees for credit cards billing.

Most of us would know quite a sizeable group of friends who display traits that exemplify their lack of financial knowledge. These traits include swiping their credit cards effortlessly at clubs, or splurging their hard-earned paycheck on the latest branded goods. Or perhaps we recognise ourselves as such an individual, paying little heed to any sort of financial planning besides saving up for an end-of-year holiday.

Let us explore three reasons why many Singaporeans do not have adequate financial literacy knowledge.


1. Lack of formal education from schools

Our education system is packed with subjects stressing students, teachers and parents alike. Subjects such as geography, literature & social studies are taught alongside core subjects such as English, maths, science & mother tongue.  Supplementary topics such as art, music & home economics are also taught so as to provide a ‘holistic education’.

Financial literacy however is not given any attention in schools. That is how we end up with university graduates not knowing how the stock market functions, business students not understanding the concept of amortisation, and worse, finance students forgetting to save and have a personal financial plan or goal when they enter the workforce.

This is not to take a stab at MOE’s carefully crafted curriculum, but rather to stress the point that financial literacy matters are simply not taught within our schools. That means going beyond the walls of schools to acquire and develop these knowledge is essential, otherwise an individual risk entering adulthood with little or no knowledge on financial matters.


2. Our parents cannot pass down their knowledge

Our dad taught us tips for driving, and shared with us their experience of national service. Our mom taught us some good recipe, and shared their experience of taking care of us when we were young. All these help prepare us for adulthood.

However when it comes to financial literacy matters, there are limitations to how much our parents are able to prepare us. Yes they can impart the usual principles such as reminding us on to save up for a raining day. However there are also many things that they cannot help us in because the world is constantly evolving so quickly. Your parents’ strategy of purchasing a $40,000 HDB flat and cashing them out for retirement at $400,000 is no longer feasible. Nor are their advice on saving consistently and earning a 1% interest rate over the long run useful anymore, not with inflation hovering at about 4% annually, and interest rates at pathetic low levels.

Fact is, we live in a very different world from our parents. Our stock trading account today is packed with more information than what our parents could ever imagined during their days on the teletext. Financial instruments frequently used today such as Exchange Traded Funds (ETFs) and Contract for Differences (CFD) are investment platforms that never existed during our parent’s time.


3. We don’t trust the experts

When a financial planner approaches us on the street, we are not always receptive to them. Is it because we do not have time to listen, that we are not interested in financial planning or simply do not think they have our best interests at heart?

The main stumbling block for many people in Singapore is not being able to find someone whom they can trust for financial advice. Perhaps the horror stories of pushy sales personnel peddling financial products that do not fit their client’s needs are causing unwanted ripple effects that are outweighing the contributions that good financial advisors are providing.

Regardless of the actual reasons for avoidance, it is difficult for any individual to get an understanding of the specific products he need without first having a discussion with the ‘right’ advisor. And we stress the word ‘right’ because talking to the wrong advisor will not help either and may even be counter productive.


How to improve your knowledge

Acquiring financial literacy knowledge is a lifelong process. You can always start off by getting a book on financial literacy (though we recommend you avoid Robert Kiyosaki Rich Dad, Poor Dad) or following us on Facebook to stay in touch with our articles.

Once you have a basic understanding of your needs, you can speak to a financial advisor to find out more and at the same time discern whether you think the advisor has your best interest at heart, or whether they are just more interested to sell you products that give them the fattest commissions. If you have problems finding someone, drop us a note and we will try to assist.

 As always, we welcome any feedback or comments and wish you a good time ahead filling up your mind with financial wisdom.

Royalty-free photo from Getty Images. Used with appreciation.

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