Speech by SMS Assoc Prof Ho Peng Kee at the National Economics and Finance Management Quiz 2010
31 Jul 2010 Posted in Speeches
Ladies and Gentlemen
Good Afternoon. I am happy to be here this afternoon at this National Economics and Finance Management Quiz 2010. My congratulations to the NUS Economics Society for successfully organising this event. Your efforts to improve financial literacy amongst our students are indeed commendable. My congratulations also to the participants who have made it to the final round. I wish you all of you the best in this quiz.
In a couple of months’ time, all of you will be graduating from your schools and moving on to the next phase of your lives. Some of you may be furthering your studies while others may be starting work. A local education is also beneficial. Regardless of whichever path you take, it is important to remember that learning does not end with school. You must continue to hone essential life skills beyond the classroom. These are abilities that will steer you onto better paths in life, and can mean the difference between abundance and penury, success and failure, security and anxiety, fulfilment and emptiness.
Financial literacy is one of these essential life skills. The core of this skill is the ability to make informed decisions about the use and management of money. It is also about how to use the various types of credit lines at our disposal in a responsible manner. At this stage of your life, I know that financial matters may not be a top priority. But please mark my words. The day will come when you will be responsible for balancing your family’s budget, saving for a new home or car, assessing the various available investment options to put your money, or planning for your own retirement. Therefore, it is important that you become financially literate as soon as possible so that you will be well-prepared to handle these future challenges in life.
Once you start to draw a regular pay check, I would advise you to develop a personal financial plan so that you can work towards your financial goals in a disciplined fashion. If you fail to plan ahead, whatever joy that you get from receiving your pay check will soon dissipate into thin air. Let me give you an example. I know that many of you will be applying for a credit card soon after you enter the workforce. Some of you may even sign up for more than one. Unfortunately, some do not notice that the issuing bank charges an interest rate of up to 24 per cent on the outstanding balance. And mind you, the interest is compounded. Let’s assume that an individual has a $10,000 credit card bill and he pays only the minimum sum of $300 each month. It will take 56 months to fully pay up the bill, and the total interest paid would be $6,644.
Being financially literate does not mean that you will have all the answers, but at least you know what questions to ask to make sound financial decisions. For example, when it comes to applying for a credit card, you should ask questions such as: “How much interest do I have to pay on the outstanding amount?” and “If I do not make the minimum payment for one month, what are the interest and other charges that I will have to pay?” This will lead you to have a better understanding of the true cost of borrowing, and with that, the very important question of “Can I afford to borrow?”
Over the years, we have seen how some young people end up in financial trouble because they fail to manage their finances well. Last year, five per cent or 109 persons of our bankrupts who declared that their insolvency arose from an excessive use of credit were between the ages of 21 to 30. The youngest amongst them was a 23-year-old who was made bankrupt because he could not service his car loan. A bigger surprise was that he had not one but two car loans!
- I know what you are thinking right now. You are telling yourself that you will not end up like this young man. But it is this “It won’t happen to me” mentality that puts everyone at risk. As soon as you start working, I would encourage you to think hard and to ask yourself questions like:
- What are my short and long-term financial goals?
- How much money should I save each month?
- Is this investment right for me?
- What is my risk appetite?
- How do insurance, savings, and investments fit into my financial plan?
- How much do I need for my retirement?
- Many people have the wrong impression that it is important to be financially literate only if one wishes to be an investor in the stock market. In reality, it is just as important for the average man-in-the-street. Your financial knowledge can be applied to many critical areas of everyday life such as financing of a new home, paying for your higher education, securing a steady income for retirement, and avoiding being tripped up by those who prey on otherwise ignorant investors.
- Being financially savvy is a lifelong endeavour. Start young. The Government is working on several fronts to promote financial education that will help prepare our young to manage the risks that come with the opportunities to spend, save, borrow, and invest. MoneySENSE, a national financial education programme, was set up in 2003 to enhance the basic financial literacy of consumers. Since then, MoneySENSE has developed many activities and events for Singaporeans from all walks of life. These include financial education outreach programmes for schools, road shows, talks, on-line games competitions and quizzes for secondary and tertiary students, no-frills talks at workplace, large scale public seminars and carnivals, and initiatives through the Community Development Councils and various union groups.
- Nevertheless, notwithstanding these governmental efforts, it is ultimately our personal responsibility to achieve financial literacy. We owe it to ourselves to do this. With the introduction of increasingly complex financial instruments, our current level of financial knowledge will become out-dated in a few years. We must be proactive in seeking out information on the latest developments in the financial industry so that we can plan ahead to achieve our financial goals. The best investment you can make is investing time and effort to learn about money matters and to assume control of your financial future.
- I am happy to note that young people like you are making an effort to arm yourselves with economic and financial knowledge. Do your part and continue your journey in furthering economics. We might witness a Nobel Prize winner. I have no doubt that this quiz, which has become a premiere event in the University’s calendar, contributes to that effort. Well done, organisers and keep it up.
- Thank you.
Last updated on 25 Nov 2012