But even though it's a necessity, it doesn't mean everyone needs to be an expert in it. There are different levels of involvement. Essentially, if you're not interested in financial stuff, you just need to know enough not to make big mistakes. If you're more interested in dollars and cents, then you get more involved in perhaps actively choosing your insurance or managing your funds to reap a better return.
|That's my new CASIO calculator, by the way.|
There are a few components of financial education that we should all know a little about:
1. Personal finance - credit cards, savings, needs and wants, budgeting, tax etc
2. Insurance - the difference types like whole, term, endowment, ILP, accident, H&S, disability income, annuity, mortgage and car insurance
3. Investments - bonds, stocks, retirement funds like CPF, commodities etc
As mentioned, you really don't need to know everything in detailed, because at best, these are just chapter topics. Take for example - stocks. There are huge write ups about the different methods of valuating stocks, from technical analysis to fundamental analysis. If you delve into fundamental analysis, you also need a crash course on accounts to know what is happening. Then you need to read into sector/industry analysis and many reports on the individual companies and their competitors. If you're into technical analysis, there are various time frames you need to learn, the different indicators and their respective signals and whether they are lagging or forward looking. No wonder it's so daunting for beginners to pick up. Where do you start? What do you need to know?
Imagine a person with zero working knowledge of these stuff. They will be at the mercy of someone who knows better and acts in his own self interest. You can't blame regulatory board only for making huge financial mistakes because you trust others. You must also shine the light of blame on yourself for not taking the time and effort to find out more. I made a huge mistake when I bought a huge chunk of whole life very early in my twenties. It sucked up a lot of my cash, possibly not even giving me enough coverage. But it's that very act of stupidity on my part that made me want to learn more about financial stuff. This lead to that, and soon, I began to learn more about insurance because it's really another aspect of financial education. It's a costly mistake on my part (I've since reduced the coverage of that whole life and thus reduced the premium) but in a way, my lack of knowledge made me a susceptible victim to any one who is more knowledgeable and wants to earn my money.
So when a student from the sociology department asked a panel of speakers in the first Young and Savvy seminar on Aug 22nd this year, about whether it's a "waste of yourself" to be caught up with the idea of investing just because everyone else seems to say it's important, I thought that he hit a very important question.
|The Young and Savvy series of talks is organised by The Straits Times with presenting sponsor, Frank by OCBC. Note the sponsor is a credit card by a bank.|
Just because you're not interested in something doesn't make that something less important to life. I think investing, which is but a component of financial education, is as important to life as swimming. You might not need to swim for your life everyday, but when you do, you'd better know how. It's a shame that our education system does not have a major component of financial education even though it's so important to life. Things might be a little better now though, I must admit. At least this gap is recognised and steps are taken to incorporate more of these life skills into their curriculum, albeit in the form of extra curricular seminars or workshops. It'll be great joy to tutor someone in financial education in the future, I must confess.
But learning need not be formal. Most of us learn though informal channels anyway. Educational institutions should just be a place where we learn how to learn. Engineering, the course I major in, is really a good place to learn how to learn because you learn enough about everything so that you can pick it up yourself. In my 4 years, apart from the heavy stuff in engineering itself, I've learnt a little about accounting, sociology, communication skills, microbiology, economics and computing. No small feat. If you want to find out more, you can just pick up a book, or google it and learn. I'm sure there are more formal courses online, free or otherwise, that enables you to pick enough stuff so that you won't feel so daunted learning them yourself.
So start now. Read some blogs. Read some books. Enroll into some courses and learn the skill that is so essential for modern life now and reap the benefits far into the future.