Singapore sees drop in financial literacy: MasterCard survey

SINGAPORE — Consumers here are finding it harder to keep up with their bills, budget effectively and manage unsecured loans, leading the Republic to record the largest decline in financial literacy in the Asia-Pacific region, according to a survey.

The latest MasterCard Financial Literacy Index, released today (April 27), saw Singapore dropping from second to sixth place. The Republic scored 68 points out of 100, a drop of four points from the previous survey conducted in 2013.

The decline was the largest recorded among the 16 Asia-Pacific markets surveyed in the study, said MasterCard today. Taiwan came in first with 73 points, followed by New Zealand at 71 and Hong Kong, 70.

Countries which saw a drop in their scores were New Zealand, by three points, while Australia and Japan each fell by two points.

The survey, conducted between July and August last year, involved over 8,000 respondents, aged 18 to 64, in 16 economies in the region.

A total of 500 respondents took part in the Singapore survey.

According to MasterCard, the decline in financial literacy among consumers in Singapore was largely due to a lack of understanding in basic money management — a component in the survey which examines respondents’ skills when it comes to budgeting, savings and responsibility of credit usage.

Respondents here scored particularly low in the areas of managing unsecured loans and saving for big purchases. This component, which has the heaviest weightage of 50 per cent in the entire survey, saw a drop of about six points from the 2013 survey.

The remaining components include financial planning, which assesses respondents’ knowledge about financial products, and investment, which evaluates their basic understanding of investment risks, among other things.

Responding to the findings, MasterCard Singapore group head and general manager Deborah Heng said one way to improve financial literacy is to start financial education from young. “A practical understanding of how to manage money, including saving and borrowing, should be provided by parents and taught at school,” she said.

The goal is to eventually develop financial know-how so that people can effectively manage money matters, such as household cash-flows and loans, Ms Heng added.

To help students become more financially savvy, MasterCard has been working with Junior Achievement, an organisation which teaches students about workforce readiness, entrepreneurship and financial literacy through hands-on programmes, for more than three years now.

Credit counsellors TODAY spoke to, however, felt that there is a limit to how much education can help improve the situation since there are other factors influencing one’s financial management. “Just because you have the knowledge, it doesn’t mean you won’t get into trouble,” said Credit Counselling Singapore (CCS) general manager Tan Huey Min.

For example, there are people who are prepared to take loans in pursuit of their material wants, such as branded bags or gadgets. Some of these people only consider the minimum sum they have to pay for their credit card bills at the end of the month, ignoring the total amount they have spent, Ms Tan said.

Counsellor Deborah Queck, from Blessed Grace Social Services, noted that people with loan problems are usually those who fail to give enough thought on repaying the borrowed sum, since they are more concerned with getting the money first.

And with credit cards offering them easy and fast plastic money, these people do not understand the gravity of the issue until they are unable to repay even the minimum sum owed, said Ms Queck, who has been helping those with money issues for the past seven years.