Investing in your own financial education for your children

I am currently reading the book, "A Random Walk Down Wall Street" by Burton G. Malkiel and I must say his writing style is relatively easy to follow and very folksy! I've just started on his book and will post a book review when I have completed it.


Investing in your financial education by reading
The reason why I am introducing this book is to emphasise the importance of reading and getting ourselves equipped with the experiences of people who have been there and done that. In order to better prepare ourselves for our investing present and future, we must learn the mistakes of the past vicariously through the recorded experiences of smart players who have survived the investment boom and bust cycles. We can try share with our children the lessons of the economic cycles as well as the need for financial knowledge and skills.

Visit a library now and start reading about investments
When I visit investment forums, there are many people who ask "noob" or newbie questions about investments. That is to be expected as there is a sucker born every minute! I was one of those suckers once too and had my share of losing money. However, if you are serious about developing a realistic roadmap towards financial freedom, you must invest in educating yourself in investments. While the best things in life tend to cost a lot, knowledge can be gained if one is willing to invest time and effort in it. Our tax dollars pay to run the public libraries located conveniently across Singapore and really there is no excuse not to make a trip down during evenings or even weekends to avail ourselves to the wealth of knowledge that resides in the libraries.

Bringing your child down to the public libraries are also a way to start them first with the life-long love for reading and over time, to teach them how to search for information themselves.

The book I am reading comes from the Central Lending Library located along Bras Basah road. You can find this and similar books scattered all over the business or investment sections of the public libraries. Simply wander around the business section, hop on to the online catalogue and search for books on investment or ask the nearest librarian staff for help, they will direct you to where true riches first exist...In your mind as ideas and thoughts supported by a strong desire to grow your financial literacy and education.

Some of the books that you can consider reading include, "The Richest Man in Babylon", "Think and Grow Rich" and "One Up on Wall Street". All of these and more are available in our public libraries.

Financial freedom is a long journey, equip yourself with the ideas of the best brains in the business by spending a couple of hours a week reading. On the train/bus, in the loo, on a lazy weekend morning or just before bed. This small investment in your own personal development will reap rich rewards as you grow in your financial quotient!

Give your children the gift of financial literacy by being equipped first yourself!

Financial Literacy for Kids!

Some of you may know that I taught in the National Library Board's kidsREAD programme that was conducted by the Chinese Development Assistance Council (CDAC) Jurong Student Services Centre in Jurong West. I taught children from low income families aged from six to eight years in reading and literacy skills and to develop in them a life-long love for reading of English books.

Our children are not grounded in financial literacy
My own journey in discovering the path towards financial freedom has led me to one startling discovery! Our children are not grounded in financial literacy!

It is indeed a scary fact that our mainstream education system does not cater to sufficiently develop in our young the capacity for financial literacy. Even as I studied and developed within Singapore's mainstream education system from primary all the way to the University, I never did encounter any lesson that taught me financial literacy. Yes, I studied all the math I needed up to "A" level mathematics "C" as well as did modules in Statistics in the University but no where did I learn about financial literacy except from the school of hard knocks.

I realised through writing this blog "Fivecentstencents" that I am able to express certain ideas about personal finance in a relatively easy-to-follow fashion and would like to develop this skill further by starting another blog called "KidsRich"! Don't worry, this new blog is not about selling "koyok" or "snake-oil" about making children millionnaires by the age of eighteen! It is more about exploring different ways we can teach our children financial literacy in simple exercises and articles that touch on the why, what, who, when and hows of allowing our children to become more financially literate in this globalised world where one needs to not only be equipped with the 3Rs of Reading, wRiting, aRithmetic but also to be grounded in sound financial skills to be able to know the difference between an asset and a liability and to inculcate in the young the spirit of saving.

The power of compound interest
The power of compound interest is possibly one of the most powerful forces in the financial universe. By leveraging on a sound understanding of compound interest, we can give our children a legacy of financial skills and competencies that will allow them to make their own informed financial decisions when they come to the age of majority and when they ultimately have to take responsibility for their financial decisions both good and bad and have the wisdom to discern between what saving, spending and living within their means affects their lives.

Start them young towards financial freedom
Those of you who are parents or uncles and aunts or who come into contact with children. Consider how you are imparting them the skills of financial literacy even as you develop your own financial quotient and understand more about your choices in savings, spending and investing.

We all need to start somewhere, why not start them young on the path towards financial freedom?

Be well and prosper.

Stingy boy!

When I was a child, I was a very stingy child. Stingy in that I would generally save my pocket money and drink tap water and usually didn't buy drinks if I was going out around the neighbourhood cycling. Stingy in not buying a lot of snacks and knick-knacks for myself.

How did I get this thriftiness within me? Was it born inside of me or was it something I learnt along the way as I was growing up?

Modelling after my father
Parents exert one of the most powerful influences on their children consciously or unconsciously. In today's era of active parenting, most parents will do a lot for their children, teaching them to survive in our competitive academic environment, fighting to get their children into the best schools, the best enrichment programmes, the best of everything that they can get their hands on.

When I was growing up, my parents were slightly more hands-off as there were three of us siblings as I was the youngest of the lot. Hence, so long as I kept up my grades and was doing okay in school, they didn't hassle me much and allowed me time to play and be a child. ;-)

However, one thing that did rub off was my father's thriftiness. My father is in some respects the quintessential asian father. Generally, he didn't talk much and performed the role of the disciplinarian in the house as we were afraid to make our father angry but we were not so worried about our mother. However, he was pretty thrifty in not spending a lot of money on clothes and cars and stuff.

Banana Split vs. Single Scoop
I remember once my parents took the whole family to an ice-cream place, where my dad said we could order anything. So my sister and brother ordered big sundaes and banana-splits while I just ordered a scoop of raspberry ripple ice cream. When I saw my siblings having such big ice creams, sibling rivalry took over and I threw a tantrum! My father was a bit miffed and scolded me for throwing the tantrum. I was upset because I knew my father is a thrifty person so in my 7 year old brain then, I thought it would be good if I ordered the most modest ice cream on the menu, and didn't appreciate the fact that he was prepared to treat the whole family that day. However, my experience modelling after my father taught me to take the thrifty choice because it appeared to be the one that he would take.

It is your destiny
This approach to life has stuck with me even as I prepare to embark into the next phase of life, to start my own family. :-) I am still generally thrifty and don't have to think too much. Most decisions are made in terms of cost-effectiveness but I have tempered my stinginess with making choices based on value rather than the cheapest you can get.

I still hardly buy clothes for myself except for the occasional visit to Robinsons for the annual great Singapore Sale and before the Lunar New Year. My most expensive watch that I bought for myself cost all of $109 for a good quality Seiko and generally, my current wallet has been with me for the past 3-4 years. :-)

Some of you might think I live a pathetic life being so stingy with myself but I choose to see it as life choice. To me, it doesn't matter if my watch is a Philip Patek, Tag-Hauer or Casio. So long as it tells time and fits the dressing style, I will wear it. My current watch is a Hamiliton Khaki that was given to me by Mindef for completion of my 10 years reservist. It looks decent and is a small refund of my tax dollars so I am not complaining. :-)

We are moist robots
I read about this term, "moist robots" in Scott Adams (cartoonist of Dilbert) blog and agree that to a certain extent, we have been programmed to behave in certain ways unconsciously because of our parents. For me, my father's imprint has been strong even though he didn't formally lecture me about saving money and being thrifty. I could observe his behaviour as I grew up and picked up on some of those habits as I matured into an adult.

What type of programming have you received in your life? Consider the people who impacted you when you were growing up. Does you behaviour now reflect their conscious or subconscious influence on the way you approach money and finances?

Enjoy your weekend and as always, be well and prosper!

Like father like son, like mother like daughter

How many of us realise that our financial habits are a reflection of our parents' own habits?

Follow daddy and mommy, okie?
Our parents are arguably one of the most influential people in shaping our behaviour towards money. Some of your parents may adopt a frugal and prudent approach towards money. Some of your parents may adopt a let's get the lifestyle we want based on instalments, deferred payment or credit. Whatever is our parents' attitude towards savings, spending and investment somehow trickles down towards our very own ways that we manage our own finances.

My own parents
My own parents gave me one of the greatest gifts without realising what they did: the gift of frugality. Both of them grew up in very modest backgrounds where the father was the sole breadwinner while the mother was a home-maker. In the case of my mother, her childhood was even more harsh as her mother (my maternal grandmother) passed away when she was young and she had to take on the household chores of cleaning, cooking and washing when she was all of twelve years old. This instilled in her a fierce determination and discipline to make a better life for herself by working hard for the same employer for 30+ years and retiring.

My father who was originally from Malaysia, came to Singapore to build a better life and also worked hard with the same employer for almost 40 years before retiring. Both of them saved and scrimped for our family to have a better life and we did thanks to their sacrifice and love.

Thrifty habits
I remember when I was young, my mother would say she doesn't like to eat this or that when the dishes for the family meal was not sufficient as she had cooked just about right for our family dinner. She would willingly go a bit hungrier so that I could eat more instead of cooking another dish that would use up water, gas and meat/veggies. My parents both kept very frugal habits, for most of their lives, they lived without a car and our family homes were always well within the affordable limits of their combined salaries.

Now that I am all grown up with a family of my own, their frugality has filtered down to me. Relatively speaking while my lifestyle habits would be considered lavish by their standards e.g. a cup of coffeebean coffee on occasion while they would do with the simple kopitiam kopi-O for their caffeine fix.

Enduring good financial habits
I have adopted many of their frugal habits such as not spending beyond my means. Always saving a portion of my income and a more conservative approach to investments in my early years through fixed deposits and savings. This had allowed me to protect my investment capital although it did not fetch me spectacular returns early on in my career. The dividends from this approach paid off when I bought my own home as I could afford to invest more of my savings into home equity rather than borrow 80% from the bank. As a result, I am very lowly geared and am overall in a positive networth position after working for a decade plus.

In addition, I eschew consumer debt and pay off my credit card bills in full at the end of the credit terms. I reward myself with little luxuries in life when I make realised gains from my time deposits or stock market capital gains. I typically allow myself to spend 10% of the gains and lock in the rest for other investments such as treasury bills and equities.

A living legacy
My parents also taught me never to keep up with the Lims, Alis and Rajahs in our community as that was the quickest way to financial difficulties. While now I am better educated and well-versed in finance and investments than they ever were, my parents (especially my mother's) wisdom in money is a living legacy I will carry on with me and pass it on to my future generation. What they have given me is immeasurable and I am thankful for their wisdom, patience and love.

What is your own legacy?
What is the legacy that your own parents are leaving you in terms of your attitude towards money. As you examine your own approach and behaviour in managing your own finances, do you realise you are doing the right things which they did or are you repeating the mistakes that they did. We can all learn from the past and begin to take control of our financial destinies because it is not cast in stone.

My approach to ultimate financial freedom has been to:

1) Live within my means
2) Save and invest
3) Grow my means
4) Repeat 1

It can be achieved, one realistic step at a time.

Be well and prosper.

Does Singapore educate its young enough about personal finance?

There are literally hundreds (and perhaps thousands) of questions to personal finance on some of the forums that I monitor and it reveals the abysmal lack of foundations built for our future generations when it comes to financial literacy. I too was ignorant about personal finance until I started working and I learnt some painful lessons the hard way, through losing some of my hard earned savings through investments in unit trusts that I didn't really understand.

Common financial questions

Some of the common questions posed by forummers are simple ones that can be answered by googling or searching for the right websites.

Take for example, this common question:

Q: "Where can I find the best interest rates for savings and fixed deposits"?
A: You can visit Singapore Fixed Deposits or check out the money section under Hardwarezone forums

Another similar question about loans:

Q: "Where can I find the best loan rates?"
A: You need to shop around different banks as loan packages can be customised to the requirements on the customers. You can also visit Dollardex or banks websites for some indicative rates.

Others who have just started working begin to think about their insurance needs. While there are a plethora of independent financial advisors, financial planners representing the big life insurers etc. There appears to be a relative lack of resources in our mainstream schools, polytechnics and universities to teach our young about personal finance. How can we be truly building up a nation of knowledge workers who know where to search for information if we do not equip them with the foundational financial literacy skills to chose between the bewildering range of financial products both suitable and unsuitable for them?

 

Are we leaving our young to the financial wolves?

Is it because we want to feed them to the ravenous financial planning industry, the fund management industry, the financial service sector that will sell and sell and sell them the financial products they think they need?

When I started this blog to share what I knew about treasury bills, I am amazed that virtually everyone I talk to in the physical world (including financial planners themselves!) are not aware about how they work and how retail consumers can invest in them either direct with the primary dealers or through poems. This scares me as it shows how a low cost and safe instrument that yields at fixed deposit rates for low minimum sums of SGD 1,000 is given so low publicity while financial institutions hawk credit linked notes and other derivative products to the unsuspecting investing public while relying on fine print and brandishing the famous latin phrase "caveat emptor" (let the buyer beware!).

I do not think this is a satisfactory state of affairs. Do you think that we should continue to allow our youth to find their ways into debt, not learn about personal finance until they unwittingly get into trouble with banks, financial institutions, credit bureaus and be declared bankrupts until we are satisfied?

Let me know your views by leaving a comment! I'd love to hear what you have to say be it as a consumer, a professional in the financial planning world or staffer in a bank, financial institution or even the regulator!

Be well and prosper!

How to apply and get your baby bonus

In order for your children to receive the gift of financial freedom, you as the parents of your beautiful child must first take advantage of all the various windfalls, bonuses and gifts that the Government is giving to your child.

Singapore is experiencing a shortage of births as our society moves from third world to first world in all economic growth, immigration growth and ever rising costs of living.

Your child when born will face a tough, competitive and challenging world. Make no mistake about that. But you can better prepare yourself and your child financially to take on Singapore Inc by availing yourself to the BABY BONUS SCHEME.

How much is the Baby Bonus?

The Ministry of Community, Youth and Sports administers this scheme which essentially is a cash grant for your first child, and a cash gift plus matching grant for your second to fourth children.

This scheme is available to the first to fourth child born after 1 August 2004.

Cash Gift

You as the parents will receive Singapore Dollars $3,000 for the first and second child paid over 4 instalments of $750 each. For the 3rd and 4th child, you will receive cash gift $6,000 over 4 instalments of $1,500 each. The table below shows the cash gift schedule for 1st to 4th child.

Child Development Account

For your second child onwards, the Government provides a matching contribution of up to $6,000 for your second child and up to $12,000 for your third and fourth children. This is done by contributions to your child's Children Development Account (CDA). Please note that there is NO CDA for the first child.

You may use the CDA for the following purposes as specificed in the Baby Bonus website:

"1) Fees at Approved Institutions which have registered with MCYS under the Baby Bonus Scheme:

- Child care centres;
- Kindergartens and special education schools registered with the Ministry of Education (MOE);
- Early intervention programmes registered with the National Council Social Service (NCSS); and
- Healthcare institutions licensed under the Private Hospitals and Medical Clinics (PHMC) Act.

2) MediShield or Medisave-approved private integrated plans. "

The matching by the Government also takes place up to 31 December in the year your child turns 6 years of age.

Should your child not have unused balance in his or her CDA account, the Government says that,

"this will be transferred to his or her Post-Secondary Education Account (PSEA) in the year your child turns 7 years of age. You may continue to contribute to the PSEA until your child turns 18 years of age and receive the Government's matching contributions subject to the combined CDA/PSEA matching contribution cap of up to $6,000 for the second child and up to $12,000 each for the third and fourth child. The funds in the PSEA can be used to pay fees for post-secondary education in Singapore for your child and his or her siblings. The PSEA is under the purview of the Ministry of Education (MOE). More information on MOE can be found at MOE's website at http://www.moe.gov.sg/"

That means you can do the matching up to age 18 for your child.

You will receive the forms and instructions at the hospital where your child was delivered or you can read the FAQs given in the Baby Bonus website.

 

Do your sums before having a baby!

Singapore's high costs of living mean that having a baby shouldn't be decided purely on the amount available for baby bonus! You should consider the lifetime costs over 20 years as a minimum. In addition, having a baby requires enormous support mechanisms available from parents, parents-in-laws, domestic helpers etc besides the parents. It is not easy to bring up a child in Singapore.

A child is a gift. Cherish your gift. ;-)