Thursday, March 12, 2015

Financial Education Can Make a Difference in Our Lives

There have been calls to improve financial literacy by different groups of people and government agencies are also stepping up efforts to promote financial literacy in our society. There are benefits for the society as a whole when people knows how to make wise financial decisions. Before we go into how financial education can make a difference in our lives, let's take a look at what problems will there be if we are not financially educated.

Money has caused a lot of problems in this world. Because of poor financial decisions, families break up, children suffered, old people could not afford to retire and lives were even lost in the process. With financial education all these could change. All of us could have better lives for our future.

What exactly is financial education?

When we talk about financial education, what comes to your mind? Is it money? Is it saving? Is it retirement planning? Most of us will have a general idea of what financial education is but let me list out what exactly financial education is.

Financial education consists of:
  1. Budgeting
  2. Managing debt
  3. Making good financial decisions
  4. Understanding financial products
  5. Understandinh the Value of money
  6. Managing risks
  7. Understanding the important role money plays in our lives
The list goes on.....

Financial education is what we need for our whole adult life. Without the necessary education on financial planning, students become worried that they may not be able to afford a house in the future. Young adults have problems understanding how much debts they can take. Adults don't realise the need for retirement planning. 

Where to get financial education for yourself?

Financial education is not just about investing. Many young people will jump right into learning how to invest which is directly opposite of what we should do at the start. Instead, we should focus on the basics of financial planning. But, you may ask, where do I start in my own financial education?

Where to start in financial education?

Since most of us do not learn financial education in schools, the only way is to learn it ourselves. The way to start is to look at the stage of life we are at now. Let's start with financial education for students.

Financial Education Stage 1 - Student (Age 16 and below)

Financial education should start as early as possible. When kids are young, they can already start learning on the value of money. Savings habits are built from young. Needs and wants can be taught to kids to let them learn the benefits of delayed gratification. 

Financial Education Stage 2 - Student (Tertiary - JC, Poly, ITE and University)

When students get to the tertiary level of their studies, they start to be curious about money as they know that they will have to plan for their careers path and start working soon. This is an important stage to learn about planning for marriage, planning for the purchase of a house and understanding the risks involved in investments.  

Financial Education Stage 3 - Young Adults (Age 35 and below)

When we start working, suddenly we are exposed to more money than we have ever seen during our student life. When we're young, we will have the thought that if we grow up, we can buy the things we want with the money we earn ourselves. This is exactly what many people will do. When they get their first pay check, they are excited to spend it on the things they have always wanted to buy but can't afford as a student. 

It is not wrong to spend but we must manage our money well so we won't get into financial problems in the future. From the day we start working, we should have financial plans for our future. Whether its saving up for retirement or saving up for marriage and a house, all these will need conscious planning on our part. 

Financial Education Stage 4 - Adults 

As adults, retirement planning should be the focus. As we grow older reaching retirement age, we should start to lower our risks in investments and go for more stable and secure retirement plans. The CPF is a secured retirement plan where it can earn us a stable 4%-5% interest in our Special Account (SA). At the age of 55, we would be able to get back a lump sum less the amount required to be locked in for monthly payouts at age 65. We could even plan it such a way that we can receive monthly payouts ranging from $1200-$1900. It could go up to $2000 plus in monthly payouts in the future. This is the CPF life scheme and the payouts starts at age 65 till death.

How financial education can make a difference in our lives?

If we go through the above 4 stages of financial education, we would more or less be assured of a secured financial future.

Stage 1 - We adopt good savings habits and understand the benefits of delayed gratification.

Stage 2 - We learn that planning for a marriage and buying a house is not that difficult if we plan early. We do not lose money unnecessary through investments as we understand the risks involved.

Stage 3 - We have savings goals when we start working and do not get into trouble with debts. Buying a house and planning for marriage is easy as we already know what to do. Retirement planning starts early.

Stage 4 - We know we can retire by what age if we want to. Our financial future is already secured. We do not have to worry about not having enough money for our old age.

Which stage of financial education are you in now? Are you prepared for the different stages of your life? Get yourself financially educated today to have a more secure financial future!

Enjoyed my articles? 
or follow me on my Facebook page and get notified about new posts.

Related Posts:
1. How To Create Your Own Financial Plan Before You Start Investing?
2. The Two Approaches to Making Money


  1. For those in their 40s and 50s, many are not lack of financial education in fact they have too much and become less actionable.

    They are finding difficult to decide what to do. Our inner self is so hard to be educated.

    1. Hmm, is it because they did not dare to step out? I'm not at that age so i don't really know.

    2. Go to any investment or market outlook events and seminars, you will see these events are packed with people who are young, middle and retirees, men and women. All have.

      Go to any library.

      Business Times are well read by same group of people.

      You can hardly find the latest copies The Edge magazine to borrow. You have to be lucky to borrow them.

    3. It looks like they got financial education from the wrong places. Financial education is not just about investing,

  2. "Instead, we should focus on the basics of financial planning." Oh very well said, I couldn't agree more. I spent the earlier years of my learning about investment without even knowing the basics. Getting educated on the future planning really cleared things up for me.

    1. Hi Mark Yenter,

      I'm glad it worked out for you. :)