Last Updated on 6, July 2016
By now everybody would have read about a survey done by Mastercard showing that Singapore’s financial literacy has the largest drop in ranking from 2nd of the previous survey to 6th place across Asia Pacific.
I decided to look into the raw data to find the reasons why.
Mastercard's survey was conducted in 16 countries in Asia between July and August 2014. A total of 8,087 respondents aged 18-64 participated in the survey. In Singapore, 500 respondents participated.
The survey attempted to measure the financial literacy of its respondents based on the following components:
- Basic Money Management:
- Budgeting ability
- Keeping up with bills
- Saving for big purchases
- Tracking expenditure
- Unsecured loans
- Financial Planning:
- FP is not only for the rich
- Starting early with FP
- Save regularly
- Emergency savings
- Insurance is important
- Retirement funds needed
- Financial statements understanding
- Financial products suitability
- Investment monitoring
- Concept of diversification
- Concept of inflation
Source: Singapore Posts Largest Decline in Financial Literacy across Asia Pacific: MasterCard
I downloaded the raw data from the news press release to further analyse the data. Here was what I found about what were the components which Singapore did terribly in its financial literacy by recomputing the data:
- Singapore ranked 13/16 for their budgeting ability
- Ranked 10/16 for tracking expenditure
- Ranked 9/16 for insurance is important
- Ranked 11/16 for retirement funds needed
- Ranked 10/15 for financial statements understanding
- Ranked 12/15 for financial products suitability
- Ranked 12/15 for investment monitoring.
I am personally not surprised by the ranking exercise.
This survey unveils to us that many Singaporeans are actually ‘illiterate’ when come to financial planning concepts. An illiterate person needs help. They cannot do something which they do not understand. But help is only available if they want to be helped. For me, helping people involves three steps:
The first help that is needed is education. Education can come from reading and attending courses. Unfortunately, many self-help books are written in western’s context which is normally difficult to adapt into Asia’s context. Courses on financial planning are almost non-existence except for investment related courses. Perhaps the best education has to come from parents.
Crucial to improving financial literacy is encouraging education at an early age. A practical understanding of how to manage money, including saving and borrowing, should be provided by parents and taught at school. The goal is to eventually develop financial know-how so that people can effectively manage money matters such as household cash-flows and loans. - Deborah Heng, group head and general manager, MasterCard Singapore.
The second step in helping those who are financially illiterate is to execute and implement actionable plans. This could involves tracking daily expenditures using Mobile apps, identification of suitable and purchasing of retirement products, etc.
The third step is to monitor the plan at regular intervals. In Singapore, it was ranked 12 out of 15 for investment monitoring. This shows most people either does not understand the importance of monitoring or they do not have the time to monitor. Besides investment monitoring, it is also important to monitor the overall financial plan so as to ensure what was done in the second step continues to be relevant. The last thing anyone wants is to regularly pay for something which is no longer relevant.
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Plunge in financial illiteracy augurs wells for the insurance industry because this industry depends heavily on the ignorance and cluelessness of the customers ..The fact that insurance is sold and NOT bought testifies to it. Also of course the recent case of a former agent suing his former insurer for not giving him a good performance report is another proof that customer ignorance is blissful to the industry..
This industry thrives and the agents make a good living out of the ignorance.
This industry is a get rich quick industry. Don’t be a fool to think that the stakeholders of this industry, the insurers and agents, are worried and concerned about your life risks and your interest at heart. The truth is they are interested in their own financial future and profits for the company. Like the saying ” why teach you , the customers , to be smart”, that they become smarter than the agents so that they can buy direct NOW without paying the commission. It is shooting in the foot, right?
Well, if you are a customer looking for insurance please buy directly from the insurers.
Check the portal first, http://www.compareFirst.sg, before buying. Don’t let your agents cheat you and make you beleive that without him or her, it is not easy to claim if it arises. If your agent tells you this , run as fast to report to MAS about them…It is unethical, right?
Remember, not only http://www.compareFirst.sg is giving affordable insurance without paying the commission , there are 2 other advisory companies giving HUGE discount, as much as 50%discount on ANY insurance products, (whole life, endowments, ILPs etc). Check out with your friends or google to find out which are the companies. It is better to be ‘discount’ savvy than financially savvy, isn’t it? Good luck…and you need plenty of it if you are using an insurance agent to help you plan your personal finance, it is more likely they are planning theirs and you are their cash cows.