“Statistics from the Credit Bureau show that a larger number of younger Singaporeans are struggling to pay their credit card bills on time. Those in the 30 to 34 age group seem to be the hardest hit” (So Easy To Spend, So Hard To Pay Up, Miss Benita Aw Yeong).
That a larger number of younger Singaporeans are struggling to pay their credit card bills on time should come as little surprise. Despite a high savings rate in Singapore the Monetary Authority of Singapore (MAS) was concerned with over-borrowing in the property market last year – especially with rising housing prices and higher interest rates in the horizon – and in response to Parliament’s Estimates Committee this year the MAS revealed that one in five borrowers have repayments of between 40 and 60 per cent of their monthly income.
In other words for an individual earning $3,000 a month, after $600 of contributions to the Central Provident Fund (CPF), between $960 and $1,440 will be used to finance their debts.
Observers could point to growing disposable income, rising economic prosperity, as well as higher standards of living, but the importance of financial literacy has also been understated. In 2003 the national financial education programme MoneySENSE was launched by the MAS, and in 2007 the National Institute of Education established a Financial Literacy Hub for educators, although the effectiveness of these initiatives remains in question. During my time in secondary school and junior college financial literacy was hardly referenced to.
Financial literacy goes beyond the understanding of debt. At the National Day Rally this year after Prime Minister Lee Hsien Loong had explained the mechanisms of the CPF and the minimum sum, he remarked “I would say even not all the [Members of Parliament] are completely familiar [with the specifics of the aforementioned]”. Given the role of government agencies in our financial infrastructure – in housing, healthcare, and retirement for instance – poor comprehension, even amongst parliamentarians, is worrying. In a country with multiple financial schemes characterised by their acronyms and complicated details clarity is desired, yet financial advice is either non-existent and unreliable or expensive.
Even as a business student with some knowledge of financial concepts making sense of these policies takes time and effort. On the one hand financial education should be emphasised, and on the other financial information should be presented in more intuitive ways. At the present moment many are overwhelmed by the avalanche of details and figures.
In its defence the MAS has sought to make it easier for consumers. For example the central bank has regulated financial service providers more strictly, and is working to make insurance and financial products cheaper and more accessible. Progressively these structural improvements must be balanced by strengthened financial literacy activities across all ages, so that Singaporeans can make more informed decisions, to manage their wealth more intelligently.
A version of this article was published in My Paper.