Financial literacy you should acquire in 2017
These days, financial literacy is something that nobody can afford to take for granted. It is an essential life-skill that you need to be equipped with in order to make sound and informed financial decisions.
And while many would associate financial literacy with only about basic money management such as making sure you don’t spend more than you earn, it’s actually much more than that. Financial literacy also encompasses other important issues such as financial planning for retirement or old age, managing your investments and even ensuring you have sufficient insurance coverage.
Unfortunately, financial literacy is not typically taught in schools and many of us end up coming out into the working world as young adults with little to no knowledge on how to properly manage our own finances.
As a result, more often than not, we might find ourselves mired in money-related problems before we even realize it.
There’s hope yet
Knowing full well how crucial financial literacy is, it was heartening to discover that in 2016, Singapore emerged as the country with the highest financial literacy levels in the Asia-Pacific region, according to the MasterCard Index of Financial Literacy.
The Asia Pacific region comprises Singapore, Australia, New Zealand, China, Hong Kong, Taiwan, Japan, Korea, Bangladesh, Malaysia, Philippines, Thailand, Indonesia, Vietnam, India and Myanmar.
Singapore had managed to climb up from the sixth spot in the rankings in 2015 to emerge tops in 2016, followed closely by Taiwan and New Zealand in 2nd and 3rd place respectively.
The 3 pillars
The 3 core areas that were used by MasterCard to assess the respondents’ level of financial literacy are basic money management, financial planning and investment matters.
Basic Money Management
This gauges respondents’ ability to budget, managing credit, saving up for big item purchases and tracking expenditure
This measures respondents’ awareness on topics such as realising that financial planning is not only for the rich, that retirement funds are important, that one should start financial planning from as early as possible, that we should be saving regularly, that there should be funds set aside for emergency needs and, last but not least, to recognise and appreciate that having insurance is important
This measures respondents’ knowledge on things such as being able to read and make sense of financial statements, being able to discern whether certain financial products are suitable for their needs, developing a habit of regularly monitoring their investments and understanding of the concept of diversification.
While being first in Asia Pacific is a positive sign that more people here are showing an interest in elevating their knowledge in money matters, we should not rest on our laurels as there is still plenty of room for further improvement. In order to achieve this, there are plenty of resources online that you can check out to increase your financial literacy.
Get them started young
As mentioned earlier, it appears that a large number of young adults encounter difficulties managing their finances, as many of them tend to accumulate huge amounts of debts.
The current trend of materialism results in a strong desire to own branded goods and therefore, many young adults end up spending more than they can afford.
Couple this with the lack of sufficient financial literacy, this results in a vicious scenario where they find themselves headed towards a lifetime of financial struggles and maybe even bankruptcy.
This is why it is so important that we should start educating the next generation as early as possible. Children as young as five years old are at a good age to absorb a lot of knowledge and there are plenty of ways to teach them about money.
There are also plenty of external programmes beyond the school syllabus that your child can participate in to increase their financial literacy.
For example, MoneyTree makes financial education fun and exciting for children and teens with their several workshops and training programmes for children. They have a vision to arm children with financial knowledge before reaching adulthood. Parents may even join their children for tag-team workshops! MoneyTree also has e-books for sale in their website to teach parents how to increase their children’s financial literacy at home.
They conduct programmes and workshops for children from Kindergarten to youths in JC2, educating them about work readiness, entrepreneurship and financial literacy. JA Singapore even hosts competitions that simulate a financial situation, so the students can apply their financial literacy knowledge during the competition.
For those slightly older, Citibank has also collaborated with Singapore Management University (Citi-SMU) to not only host programmes for youths to increase their financial literacy, but also organise financial literacy simulation programmes to let them put their knowledge to the test. Similar to EdgeWiz from Malaysia, they provide a social trading simulator especially to schools to help youths learn more about financial literacy.
Not just for kids
As for the older folks like us, apart from merely reading about financial related news online, in order to get a deeper understanding, we should make it a point to make time to attend some workshops to really increase our financial literacy.
These workshops are usually conducted by a subject matter expert to go into further details about the various topics related to financial matters. What’s more, if you have any questions, these experts would be able to address your queries there and then.
From the basic money management and financial planning aspects, Moneysense and Singapore Polytechnic have partnered up to initiate the Institute for Financial Literacy, or FinLit, that organises several workshops to help educate the public on topics such as managing your CPF to prepare for retirement.
As for the investment angle, several financial institutions have taken an active role to try and further elevate the level of this particular area of financial literacy; one of those is Maybank Kim Eng. They organize a whole host of seminars on topics such as an introduction to the different asset classes and learning the fundamentals of portfolio allocation.
Another company that is helping to deepen the pool of knowledge on investment and trading-related matters is IG. In order to encourage more people to take the first step into the world of trading and investments, they have devoted a whole section on their website for readers to get easy access to useful information ranging from understanding trading concepts such as leverage, to risk management and avoiding common trading pitfalls.