Financial literacy in mainstream Singapore education system

The Straits Times Online
Oct 31, 2007
500 teachers to be trained to teach financial literacy

Finally, financial literacy makes it to the mainstream education system. While this is a good start, I am not sure about the nature and extent of this initiative and whether it goes far enough.

During my own school days in the mainstream education system, the Post Office Savings Bank (POSB) squirrel savers was the only tangible thing which I learnt about savings at a young age. My own financial literacy came about through the school of hard knocks as well as through my own parents' approach towards financial literacy.

My mother especially, despite being a non-finance trained person imparted to me indirectly the principles of thrift, frugality and savings.

Financial literacy through families
I believe the next frontier must be teaching financial literacy to parents. You can teach 101 good things in school but your child spends most of his time outside school in the presence of care givers and parents. If parents themselves do not understand financial literacy, chances are their children will consciously or subconsciously model their spending, saving and investing behaviour after their parents.

Parents and children are getting smarter
The wealth of knowledge about financial literacy available in public libraries and on the internet is growing exponentially. There is no lack of knowledge and information. However, how such information is being delivered to families will determine whether financial literacy takes root. I am not sanguine about the prospects because I feel that the vested interests of the financial industry are at odds, to some extent, with the interests of the individuals and families.

For example, Peter Lynch openly says that a low cost index fund that tracks the index e.g. S&P 500 in the long run beats most managed mutual funds or unit trusts. So from a financial literacy perspective, it is better to invest in the long term in such vehicles as compared to managed funds which even Mercer and CPF says regularly underperforms their benchmarks.

Would the fund management industry advocate this position? Buy low costs index funds because most of us can't beat the market anyway in the long run?

They would be shooting themselves in the foot and breaking their own rice-bowls. Why would they do that? Instead, they will point out the advantages of investing in unit trusts e.g. investing in markets not open to individual investors, diversification etc. which are valid. But they downplay how MOST of them CANNOT consistently beat their benchmarks over the long term. Even those who are top funds in any given 1-5 year period will find it difficult to maintain their performance CONSISTENTLY.

When they perform, they earn their management and performance fee. When they under-perform, they earn their management fee. Heads they win, tails they win.

So what can I do it as a parent?
First of all, get yourself educated about financial literacy. Visit Yahoo, Forbes, Fortune websites to learn about personal finance. Read blogs about personal finance and savings.

Secondly, walk the talk. If your lifestyle is that of hedonistic spending because you want to live life to the fullest, it will be challenging for your children to live frugally as they will model after you whether you like it or not. If you want your children to be frugal, thrifty and go for value-for-money. You may have to change your own lifestyle habits.

Thirdly, financial literacy is a journey and not a destination. I have been investing and managing my own money seriously since 2003 and will continue to do so until the day I die. I continue to read, write and explore this area of personal finance and financial freedom. Learning never stops!

So start your children on their own journey of financial literacy and be well and prosper!