On Financial Literacy

Ever since the last school term ended, I have embarked on summer internship at a local firm, and used the free time in between to catch up with old friends over coffee and dinner. Be it at work or among secondary school friends, one common topic that came up would be that of financial planning - no, not that I am trying to sell "koh-yoh" as a Financial Adviser, but inevitably as we grow up eventually we would need to take over control of our own purse strings.

I have witnessed many different ways people plan their finances in my short 23 years of life, be it relatives, or friends, or colleagues at work. The first group of people are what I would term the "old school" people, for the lack of a better term. This group of people includes my parents, and one of my current colleauges at work whom I suppose is about a decade younger than my folks. They work hard all their lives, scrimping and saving by trimming whatever unnecessary spending to keep expenses under an extremely tight budget. With their savings, they do two things: (1) they place the majority in fixed deposits in their banks; and (2) they buy education or endowment policies for their children so that they may one day avoid the ill-fate that beset them whilst they were young - the lack of an opportunity to study because their parents could not afford it. To this extent they have done a fantastic job - my father drove his 4 children to a university degree as a taxi driver, with my mother a homemaker. However, much of their hopes and aspirations of a decent retirement life strongly depends on the age-old 4 成语 - “养儿防老”. Don't get me wrong - I am not against the notion of filial piety or that as a son it is my responsibility to take care of my parents when they are old. But for the many parents out there who pin their hopes on their only child or two children runs a relatively higher risk of not having someone to care for them in their twilight years.

Which brings me to the second group of people. This group of people are typically in the age range of 40 +- 5 years old, and are relatively well-to-do judging by their PMEB paycheck of between S$4,000 to S$8,000. On the surface, they appear to be the envy of many people in Singapore (given that I heard from an unknown source that the average pay of a Singaporean is S$2,500), as they stay in a 5-room to Condominium level apartment with their own car and a couple of toddlers. To ensure that their children live better than they did as a child, they shower their kids with love - and lots of things money can afford (think many toys, many games, etc.). Annual family holidays to various continents on rotation during the school holidays have become an expectation - no longer a treat. Most of their monthly income is spent on mortgage, insurance, and motor-vehicle costs. Not to mention the fortnightly dine-out at a fine restaurant for some quality family time. At the end of the month, there's maybe a odd couple of hundred dollars left to go into the savings account in the bank. Investment to this group of people is no more than buying an insurance policy that pays out a lump sum of money at age 65 to complement whatever's left from their CPF.

There's a sneaky suspicion inside of me thinking that as costs of living goes up, the second group of people may inevitably become the first group in 20 years time, especially if their individual income is less than S$10,000. But more on that later.

The third group of people are the rich and savvy. This group of people have enough money to retire probably two times round at least, and they spend on everything the second group of people spend on, but using money outside of their "retirement account". Money comes from property, or the occasional dab in forex trading, or successful long-term investments in the stock market. Usually they come from a finance background. They consistently expand the means with which

Ok the whole point of the above narrative is not because I am trying to be a Robert Kiyosaki, it's just that I have some free time to kill at 4:00pm at work in the office. Just kidding. The truth is, to everyone who is reading this post and know that you currently belong, or will belong in the second group, to snap out of it before you end up in the first group.

Frankly speaking, I have no idea whether I will end up in the second group or not. But I would like to end up in the third. And you should too. All it takes is a little bit of effort to do the following:
(1) Manage your finances. Do not overspend on unnecessary items.
(2) Learn more about investments. Read, read and read. Also learn from successful people how they managed to end up successful. And learn from the broke how and why they ended up being broke (ok try not to be too straightforward in asking this second group of people).
(3) Save and invest. Do it religiously every week with discipline and watch with enthusiasm as your portfolio and net worth grow over time.

Think of how you'll feel if you (a) have $200,000 or (b) have $2million for your retirement at age 65 knowing you'll live till 85. That should define how you intend to earn, spend, save and invest your money between now and then.

Or risk being someone elses' liability at that age. To me, that is too big a risk to bear.

Let's not sit around and pretend that we will be taken care of. Truth is, we won't be unless we take the first step ourselves now.