“Staying financially healthy with MoneySense” - Opening Address by Mr Ong Ye Kung, Minister for Education and MAS' Board Member, at MoneySense's Annual Campaign Roadshow on 17 Nov 2018
1 Today we are talking about financial literacy. When you hear the words “financial literacy”, what comes to mind? The man on the street, or residents sometimes feel, “Oh, this is something I don’t need to know.” Some may feel, “This is really ‘chim’, I think this is someone else’s subject.” But it doesn’t have to be ’chim’. In fact, it is something easily understandable and it is very relevant to our lives, and it is really important for all of us to know something about financial literacy.
2 For example, a family that watches how much they spend every month on groceries, their utility bills and hand phone bills, spending on their children, eating out, and daily expenses, and makes sure that everything is affordable within their take-home pay. That is budgeting – and that is part of financial literacy. Paying according to your means – that is exercising financial literacy. An aunty on the street, who advises you against investing your life savings in Africa and China which promises to double your money in just three months because “if it is so good everyone would be investing, nobody would be buying 4D” is also demonstrating financial literacy – there is no free lunch.
3 I’ll share a tip with you today. Do you know how long it will take to double your money at an annual interest rate of say 2% per year? 5 years? 10 years? It will actually take 36 years. How about at an annual interest rate of 4%? That would take you about 18 years. So this is the “rule of 72”. Divide 72 by the annual interest rate, and that is the number of years to double your money – and this is a useful thing to know. Simple to understand and an important aspect of financial literacy because it shows us that if you can save early, after a number of years, you can actually double your money. And we will all need to save because there will come a day when we need to use our savings and that will happen to all of us. That is retirement. One day when we are not working, we will need to draw on our savings. Every one of us would need to go through that, and that is why each and every one of us needs a national lifesavings plan called the CPF.
4 CPF pays 2.5% per annum on your Ordinary Account and 4% per annum on your Special Account. So applying the “rule of 72”, this is a good way to save up for retirement. So for every $10,000 you put into the account, in 18 years, the money doubles to $20,000. In another 18 years, it doubles again to $40,000. So the earlier we save, the bigger the returns when we retire. That is why the national savings plan, CPF, helps us all save for our retirement. So this is called the power of compound interest.
5 It can work in your favour and it can work against you when you are the one paying the interest. This is how some people fall into the ‘debt-trap’. And as an MP on the ground, I come across such residents from time to time. They borrow and couldn’t pay, and every month, every year they are struggling just to pay the interest. So here’s another piece of tip for you. When you receive your credit card bill, there is always a minimum sum you must pay. That is not the recommended sum to pay. If you only pay the minimum sum every month, it takes you a long time to pay off your bill. If you receive a $5,000 credit card bill, and every month you only pay the minimum sum – how long do you think you will need to pay off the bill? 15 years!
6 So the right way to think about using credit card is first, you must make sure that your income is sufficient to pay off the credit card bills quite soon, in a few months, not years. However, sometimes we do have large expenditure items such as renovations for your flat, going on a holiday, or buying that special gift, and you need to save up. One way to do that is to Pledge to Stash, and start saving up for it today. This makes your savings regular and automatic, and you will see how your stash grows month on month towards meeting your goals.
7 So I hope I have convinced you that financial literacy is useful and important, and it is easy for you to learn it. That is why we have the MoneySense programme. Over the past 15 years, MoneySense has worked with many partners to bring financial education to Singaporeans using different platforms and ways. We have set up the MoneySense Council, to bring public agencies and private sector partners together to do this better.
8 MoneySense will make money matters simple - so that you can be confident to take charge of your finances. It will provide you with the necessary guidance and tools. It will organise workshops and seminars, and put out useful tips through social media and events such as this one. Today, let me talk about two new initiatives.
9 First, we going to support the young to learn financial literacy. Our schools have already been doing a good job on this front. Our children are taught the difference between “What I need” and “What I want”, and are encouraged to develop the habit of waiting, delaying gratification. In schools I know for example, they have rooms now for children to play video games where they get to win and collect tokens, which teach them about delaying gratification. They also learn good math which is useful for financial literacy.
10 As part of a pilot project, 7,000 Polytechnic and ITE students took a financial education module this year. The students learnt how to budget and review their expenses towards their goals, and discover their personal money habits. They also learnt how compound interest can work to their benefit, just like I had shared earlier on. This helps to better prepare them to manage their own money when they move on to working life. The students found the module useful, and so we will fully roll it out for all Year 1 Polytechnic and ITE students from next year.
11 Second, we are starting a free, online Financial Health Check service. Staying healthy financially is similar to how we stay physically healthy. We always ask people to go for physical check-up from time to time to make sure we are healthy and the signs are positive, Likewise, it is also important from time to time for us to check our financial health, to make sure that we are healthy financially. So this is a fuss-free, five-minute online questionnaire, where you answer a few questions to get a quick sense of how financially “healthy” you are, and if there are areas you should look at more closely.
12 The Financial Health Check covers how you are managing your money, insurance coverage, investments, and retirement plans. At the end of check, you will get three simple steps on how to improve your financial health. So go check your financial health today, at the circular health check booth at this roadshow. It is also available on the MoneySense website.
13 Currently, most of the guides and tools on the website are in English, but we are working towards a multi-lingual website. I think that it is important to reach out to as many residents as we can. There are already handy mini-books covering basic money management concepts in Mandarin, Malay and Tamil which you can download for free from the website.
14 I hope I have convinced you on the need for financial literacy and I hope our residents will make full use of all the help available here today, and start taking steps towards a financially healthier you.