Plugging the gaps in your financial knowledge

Learning about money management and becoming financially literate was hardly part of the education curriculum for many adults here in the past, and that lack of knowledge can be costly. There are now a multitude of ways for adults to catch up and improve their financial literacy, though, so that they can ensure a better future for themselves and their families. 

THE KNOWLEDGE GAP AND THE INTERNET

The challenge for many adults is that financial literacy was not typically taught in schools until recently, so they entered the workforce with little knowledge about how to manage their finances.   

One result is that not enough people are planning for their long-term future. A third of working Singapore adults are not planning for their retirement, according to a survey by research agency Nielsen last year, with 40 per cent of them saying they lacked an understanding of what to do and another 25 per cent not knowing when to start planning. 

Women may be even worse off. Although 67 per cent of men surveyed in Singapore in the 2015 Standard & Poor’s (S&P) Global Financial Literacy Survey were financially literate, only 52 per cent of women hit the threshold for financial literacy among the largest gaps among the 140 countries in the survey. Similar to the Nielsen survey, S&P found that overall 41 per cent of adults in Singapore are not financially literate.  

And while it might seem that more-educated individuals would be more financially literate than the less-educated, business services firm Temasek Management Services (TMS) said “evidence shows that highly educated consumers with high incomes can be just as ignorant about financial issues as less educated, lower income consumers.”

The impact can be huge. While data here is limited, CardTrack in the United States found that a lack of financial knowledge costs individuals an average of US$9,724 (S$13,453) in areas including bank fees, interest and investment losses during their lifetime. More importantly, it also means that they may not save enough or invest well enough to pay for their children’s education or for their own retirement. 

BASIC FINANCIAL SKILLS YOU NEED

To overcome the challenges, adults need to make sure they have fundamental financial skills. 

That financial literacy, TMS observed, includes the knowledge necessary to make financially responsible decisions about issues such as balancing a budget, buying a home, funding children’s education and ensuring sufficient income at retirement. As the insurance company Northwestern Mutual noted, “Understanding key financial concepts (like saving and budgeting) can be the difference between having a dream and making it come to life.”

To become financially literate, adults need to gain knowledge in at least four areas:

• Managing money: Tracking how much money you have, reading a bank statement and separating wants from needs.

• Budgeting: Learning how to plan and maintain a budget so you can manage your finances and have enough money for daily expenses and longer-term goals. 

• Saving and investing: Knowing how to save money, set aside enough for an emergency, and then invest the funds for education, retirement or other needs

• Credit management: Borrowing responsibly, avoiding unnecessary debt, and managing loans well to avoid excessive costs.    

Building skills in each of these areas, or more, can help to ensure that you have the funds required to meet your needs. 

HOW TO LEARN ABOUT MONEY

Fortunately, there is an increasing array of resources available to gain financial literacy and then, if you like, to build in-depth financial knowledge on more specialised topics.  

One is the Institute for Financial Literacy a collaboration between national financial education programme MoneySENSE and Singapore Polytechnic that offers free financial education programmes at libraries and online that cover basic money management, financial planning and investment knowledge.  

Another is the Financial Education microsite that was recently launched by the Wealth Management Institute, in partnership with Nanyang Technological University, Securities Investors Association Singapore and Deloitte Singapore, which is designed to help individuals improve their financial literacy and understanding of personal finances.  

Singaporeans can also use SkillsFuture credits to take courses such as Financial Planning for Retirement, which looks at assessing personal needs and lifespan budgeting, and Managing Your Personal Finances, which teaches a process for financial planning.  

Individuals who want more detailed financial knowledge can head to the Singapore Exchange website to watch more than 20 videos on investing, for instance, or to private sites such as TradeHero Academy to learn about buying shares.  

There are also a variety of international resources available online. The Practical Money Skills website has information about creating a budget and saving to build your long-term wealth, for instance, and MintGrad from Northwestern Mutual similarly has advice about becoming financially fit.  

There are also a variety of courses available through online learning sites. Personal Finance Management Skills for Young Adults at Udemy offers insights on money matters that young adults encounter in daily life, for instance, while Personal Finance at edX focuses on helping people manage their money more effectively by learning practical solutions to investment, credit, insurance and retirement questions.

TAKE CHARGE, ACT NOW

Amidst busy lives and family activities, it’s easy to put off learning to another day. For everyone from new graduates to retired adults, however, gaining financial literacy and building financial skills is easier than you might think and can provide tremendous benefits now as well as far into the future.