Wednesday, May 24, 2006
Up your Financial Quotient
The financial services industry has grown more complex than ever with the introductions of more and more sophisticated products and finance transactions. Someone once told me that a financially ignorant person is like an inexperienced swimmer trying to swim in shark-infested choppy waters - sooner or later, he/she either drowns or gets eaten up or both!
Speaking at the Congress on 23 May 2006, Federal Reserve Chairman Ben Bernanke also highlighted the importance of how financial literacy is crucial to consumers' ability to make smart money choices and is also good for the overall economy.
Clearly then, financial know-how is your immunity for survivor in this very complex financial marketplace serving an endless buffet of confusing products, services and financial jargons that will kill even the biggest appetite!
Just talking about personal insurance alone, you will be bombarded by a wide array of products such as whole life, term, critical illness, disability income, personal accident, long term care, medical shield, hospitalization and surgical and others. Most people cannot even differentiate one product type from another, let alone understand the differences between the same products offered by the many different insurers!
Investments are even more mind-boggling! We have got stocks, bonds, T-bills, money-market funds, unit trusts, hedge funds, options, exchange-traded funds, property, commodities, structured deposits…and the list is growing everyday. And just within stocks, we can further classify them into small/mid/large caps, growth or value stocks. Whereas for unit trusts, there are equity, fixed income, balanced, asset allocation, global, sector, fund and funds and many others.
To make things worse, there have been so many scandals involving product mis-selling, churning, misconduct of advisers and it’s almost impossible to go to the bank without being recommended yet another flavour-of-the-month bank product. It’s like the same inexperienced swimmer swimming in shark-infested choppy waters…but now, with a broken arm that is bleeding profusely!
Products and services aside, financial literacy is also about knowing ourselves. You’ll be surprised to know that as a practicing financial adviser representative, I have over the years come across so many bright, successful and highly-driven executives who are absolutely clueless when it comes to managing their own finances. Despite their knowledge and ability to make lots of money, they have no idea how to manage the money! And one of the keys to successful financial planning is to have your money work for you instead of you working so hard for the money all your life.
The Ministry of Education, albeit being a little late, has introduced financial literacy into the school curriculum to educate young Singaporeans the importance of managing one’s finances. Also commendable are the MoneySENSE initiatives by the Monetary Authority of Singapore to raise financial awareness through publications, activities and events. As individuals, we should also take initiatives to improve our financial literacy through the reading of financial publications and having discussions with likeminded financial savvy people.
It is not an easy task having to plough through the tonnes of reading materials available both online and in hardcopy publications. For a start, you might want to check out some of the official websites (which will ensure more impartial and accurate information) such as that of the Central Provident Fund Board (http://www.cpf.gov.sg/), Monetary Authority of Singapore (http://www.mas.gov.sg/), Life Insurance Association of Singapore (http://www.lia.org.sg/) and Investment Management Association of Singapore (http://www.imas.org.sg/). With the great abundance of online financial publications (every Tom, Dick and Harry has an online article or blog!), it is very important to always verify the validity and accuracy of the information as well as to look out for potential conflicts of interests by vested parties that might skew or distort the information being presented.
There are also many personal financial planning books on the shelves that you can obtain information from although a majority has been written in non-local contexts. For Singapore-based books, I will like to recommend the following:
§ Personal Financial Planning, by Fong Wai Mun, Koh Seng Kee
§ Managing your Money, by Fong Wai Mun, Koh Seng Kee
§ Financial Services in Singapore by Tan Chwee Huat
§ Personal Finance in Singapore by Tan Chwee Huat
§ Know Your Interest: A Guide to Loans and Investment, by Tse Yiu Kuen
Lastly, it is also worthwhile to find a trusted financial adviser who can help guide you through the highly complex financial maze (filled with dangerous traps!). For some tips on how to choose a good Financial Adviser, you may want to refer to the article at http://www.imas.org.sg/imas/investoreducation/adviceandadvisers.do
Hence, before you make any costly mistakes in investments or fret over the purchase of some unsuitable financial products, do yourself a big favour by starting to learn more about personal financial planning TODAY.
Speaking at the Congress on 23 May 2006, Federal Reserve Chairman Ben Bernanke also highlighted the importance of how financial literacy is crucial to consumers' ability to make smart money choices and is also good for the overall economy.
Clearly then, financial know-how is your immunity for survivor in this very complex financial marketplace serving an endless buffet of confusing products, services and financial jargons that will kill even the biggest appetite!
Just talking about personal insurance alone, you will be bombarded by a wide array of products such as whole life, term, critical illness, disability income, personal accident, long term care, medical shield, hospitalization and surgical and others. Most people cannot even differentiate one product type from another, let alone understand the differences between the same products offered by the many different insurers!
Investments are even more mind-boggling! We have got stocks, bonds, T-bills, money-market funds, unit trusts, hedge funds, options, exchange-traded funds, property, commodities, structured deposits…and the list is growing everyday. And just within stocks, we can further classify them into small/mid/large caps, growth or value stocks. Whereas for unit trusts, there are equity, fixed income, balanced, asset allocation, global, sector, fund and funds and many others.
To make things worse, there have been so many scandals involving product mis-selling, churning, misconduct of advisers and it’s almost impossible to go to the bank without being recommended yet another flavour-of-the-month bank product. It’s like the same inexperienced swimmer swimming in shark-infested choppy waters…but now, with a broken arm that is bleeding profusely!
Products and services aside, financial literacy is also about knowing ourselves. You’ll be surprised to know that as a practicing financial adviser representative, I have over the years come across so many bright, successful and highly-driven executives who are absolutely clueless when it comes to managing their own finances. Despite their knowledge and ability to make lots of money, they have no idea how to manage the money! And one of the keys to successful financial planning is to have your money work for you instead of you working so hard for the money all your life.
The Ministry of Education, albeit being a little late, has introduced financial literacy into the school curriculum to educate young Singaporeans the importance of managing one’s finances. Also commendable are the MoneySENSE initiatives by the Monetary Authority of Singapore to raise financial awareness through publications, activities and events. As individuals, we should also take initiatives to improve our financial literacy through the reading of financial publications and having discussions with likeminded financial savvy people.
It is not an easy task having to plough through the tonnes of reading materials available both online and in hardcopy publications. For a start, you might want to check out some of the official websites (which will ensure more impartial and accurate information) such as that of the Central Provident Fund Board (http://www.cpf.gov.sg/), Monetary Authority of Singapore (http://www.mas.gov.sg/), Life Insurance Association of Singapore (http://www.lia.org.sg/) and Investment Management Association of Singapore (http://www.imas.org.sg/). With the great abundance of online financial publications (every Tom, Dick and Harry has an online article or blog!), it is very important to always verify the validity and accuracy of the information as well as to look out for potential conflicts of interests by vested parties that might skew or distort the information being presented.
There are also many personal financial planning books on the shelves that you can obtain information from although a majority has been written in non-local contexts. For Singapore-based books, I will like to recommend the following:
§ Personal Financial Planning, by Fong Wai Mun, Koh Seng Kee
§ Managing your Money, by Fong Wai Mun, Koh Seng Kee
§ Financial Services in Singapore by Tan Chwee Huat
§ Personal Finance in Singapore by Tan Chwee Huat
§ Know Your Interest: A Guide to Loans and Investment, by Tse Yiu Kuen
Lastly, it is also worthwhile to find a trusted financial adviser who can help guide you through the highly complex financial maze (filled with dangerous traps!). For some tips on how to choose a good Financial Adviser, you may want to refer to the article at http://www.imas.org.sg/imas/investoreducation/adviceandadvisers.do
Hence, before you make any costly mistakes in investments or fret over the purchase of some unsuitable financial products, do yourself a big favour by starting to learn more about personal financial planning TODAY.
