The title of this article contains two big words rarely seen in the lives of primary, secondary or even junior college and even some tertiary students. This is extremely surprising given the importance and impact of financial literacy on an individual’s life. Financial literacy is the ability to make informed money management decision.
The Importance of Financial Literacy
People with low financial literacy suffer from the lack of knowledge in almost every stage in their lives. They tend to borrow more, accumulate less wealth and pay more for financial products. They experience difficulty with debt as they are unsure of the terms of their mortgages and loans and are less likely to invest. The cost of this financial ignorance is high, from making late charges to their credit card fees to overspending their credit limit. Whereas, those with higher levels of financial literacy start planning for their retirement early on by saving and investing, accumulating wealth for their later years.
While this may look like an individual problem, in a broader perspective, financial literacy is also important for a country as a whole. In addition, the lack of financial literacy is not only the problem of the developing world- consumers in developed countries also fall short of grasping basic financial principals to navigate the financial landscape. All one needs to do is to look at the 2008 financial crisis saga to see the impact of how the lack of understanding can affect not only the country’s economy but also the world’s economy.
The impact of 2008 financial crisis
The 2007-2008 financial crisis has been cited by economists as the worst financial crisis since the Great Depression in the 1930s. It threatened the collapse of large financial institutions, which was prevented from the bailouts of banks of national governments. Nonetheless, stock prices worldwide dropped drastically and many around the world were left unemployed and their savings, gone. Even though it initially began in the United States, the vast amount of interconnectivity between countries affected almost every other country in the world.
Much has been said about the importance and impact of financial literacy. However, gaining the knowledge and developing the skills to become financially literate is a lifelong process that best begins at an early age and sadly, financial literacy is not emphasised in Singapore’s education system (as well as many other countries). Most students do not have much exposure to financial knowledge until they hit tertiary education -not a good sign as this means that only around 50% of all Singaporeans are financially literate, a shocking statistic for a country that has established themselves as a financial hub. In fact, in the 2015 MasterCard’s Financial Literacy Index, Singapore has fallen to sixth place for financial literacy, recording the largest decline out of 16 Asia Pacific markets.
Luckily, not all hope is lost. The Singapore government has been aware of this problem and have since had a campaign, MoneySENSE to better equip Singaporeans with financial knowledge and skills through 3 tiers of initiatives- basic money management, financial planning and investment know-how.
1. For Schools
MoneySENSE to help schools to educate their students financially with a fund. This fund will help to defray some costs in providing vendor-run financial literacy programs for their students, if these programs have met MoneySENSE’s criteria. For more information, you can visit this webpage.
2. For Adults
If you are an adult, you can also attend MoneySENSE talks, that collaborates with Singapore Polytechnic Institute for Financial Literacy. The talks build on the 3 tiers of financial literacy MoneySENSE hopes to bring about to Singaporeans. The Institute offers free workshops and talks that will allow you to make better informed financial decisions for you and your loved ones. You can check out this website for more information.