Financial literacy is a very important topic for young people in Singapore. At some point in their lives, they will have to handle finances, whether it is personal finances or business funds.
It is therefore very important that they receive some kind of training on how to manage money. Unfortunately, the current school system in Singapore does not include any topic on financial literacy in the school syllabus. This leaves a gap in the general knowledge of many young Singaporeans.
The general guidelines of the school system in Singapore are given below.
1. When your child enters pre-school
Schooling starts at the pre-school level in Singapore. If you have a child between 3 and 6 years, he or she should be enrolled as a preschooler. Many of the pre-schools in Singapore are managed by individual companies or charities. They usually charge fees and the costs vary greatly from amongst schools.
The education system in Singapore basically gives children in pre-school the foundation of English language and other creative skills subjects. At this stage, your child will be given the basic knowledge needed for the next stage, which is the transition into primary school. There is no teaching on money matters even at a very fundamental level.
Since your child will not be taught anything about finance in school, it is wise for you to teach him or her some simple principles that can be understood at that young age. The following are some ways in which a preschooler can learn financial literacy.
You could have a clear jar where your preschooler saves coins. The increase in the savings will be clearly seen by your child as more coins are placed in the jar. This will instill the financial concept of discipline and saving in your child.
When the child wants a toy or chocolate, you could encourage him or her to withdraw the amount from the savings in the jar. This will teach him or her the principle of spending only what is available.
2. Primary school
After graduating from the pre-school, children in Singapore will enter a primary school. Children in Singapore are expected to join primary school at the age of 7 years and will spend six years there. This stage of schooling compulsory in Singapore. If you choose to homeschool your child or enroll him or her in an institution that is not under the management of the Ministry, then you will need to get special permission from the Ministry before you pursue any of these options.
The primary school system in Singapore basically has 6 grades. The first 4 grades are to build the foundation of your child at primary school level. The next 2 grades are a preparation for the transition to secondary school. The main subjects taught in primary are English, a local mother tongue, Mathematics and Science. Apart from these, your child is free to choose some subjects that may be his or her areas of strength. There will also be physical education lessons to ensure that children get enough exercise.
Again, there is no subject on financial literacy taught at primary school level in Singapore. Therefore, as a parent, you could teach your child the following financial principles that will be helpful to him or her at this level.
- The importance of costs
At primary school level, your child will be able to understand the costs of different items. For example, if he or she requests to get a video game, you could emphasise that this would mean foregoing having a pair of new shoes. Your child will learn at a very early stage that sometimes financial sacrifices need to be made because of the cost of items.
- The importance of working for pay
You could give your child some simple house chores to do and then pay him or her a small amount for work done. Your child will learn that money needs to be earned and that there is no such thing as a free lunch in this world. He or she will also appreciate the value of the commission because it has been earned through hard work.
- The dangers of impulse buying
This is another financial principal that you can teach your child at primary level. Even as adults, many of us are guilty of impulse purchases. If he or she wants to buy something impulsively, it will be important for you to advise him or her on the importance of prioritising spending. Education them the difference between needs and wants. Teach them how to spend their money wisely and to prioritize needs first.
- The importance of giving
Children in primary school can easily be taught the principle of giving and sharing. Guide your child in choosing a charity or worthy cause where he or she can give some amount of cash on a regular basis. This is a very important financial principle and it will help your child to develop a healthy habit of generosity.
3. Secondary school
The next stage of education after primary school is secondary school level. In Singapore, children in secondary schools are usually aged between 13 and 16 years. There are more subjects being offered and the main subjects taught in primary schools will be diversified. This is the stage where elementary maths, additional maths, chemistry, physics, biology, geography, history, design and technology and music are introduced.
Out of all these listed subjects, your child will be required to choose a minimum of six subjects. Out of these six subjects, English, Elementary Maths, Chemistry, and a humanity must be chosen. Your child could choose a combination of eight or nine subjects. The subject choices are limited to sciences and humanities and there is no subject in financial literacy.
By their teen years, most of them would have more pocket money and some of them might even start working part-time. It is even more important that good financial values are being taught.
- The tracking of expenses
You can teach your teenager the importance of tracking all his or her expenses. This can be done by simply having a notebook to record everything spent. This will help your child not to overspend on unnecessary items. With technology today, there are also budgeting apps that can help users track their spendings and expenses.
- A culture of saving
You can instill in your child the culture of saving by giving guidance on how to spend his or her allowance. It is important that you limit the amount that you give to your child as an allowance so that he or she can learn the discipline of saving up to buy things.
- Guidance on how to manage an account
If your child is an older teenager, you could open up a bank account for him or her and give them guidance on how to manage it. This will help your child to learn the discipline of handling a bank account at an early age.
- Guidance on how to budget
It is vital that you teach your teenage child how to draw up a simple budget and stick to it. This is a great principle that will help your child to avoid numerous financial problems later on. Once he or she grasps the financial discipline of having a budget, the other aspects of finance will be easier to handle.
- Guidance on debt and interest
The teenage years are a good time to enlighten your child about debt and all the consequences of defaulting, plus interest rates. This will help him or her to avoid taking on excess debt later on.
Once your child has completed secondary school, he or she can pursue college or university studies as a young adult. This is an important transition into adulthood, and it will be more challenging for those Singaporeans who have never been taught financial literacy.
The following are five good reasons why young Singaporeans should be taught financial literacy.
1. Prevents overspending and encourages budget controls
When a young person is taught financial literacy, there are several things that he or she will be guided through. For example, he or she will be taught the importance of sticking to a budget, as well as the way to prioritise expenses, and the importance of self-discipline. This will help to prevent any kind of overspending and can result in the creation of an emergency fund to cater for unexpected costs. There will also be minimum cash flow problems once proper budgeting is done.
2. Build investments
Young people who have been guided through financial literacy usually make early investments in stocks and other assets, and they end up with a good amount of income in the long term. These long term benefits can come in handy during retirement when the investor is not able to generate a consistent income.
3. Prevent a financial crisis
Youth who are well informed about financial management will also be able to avoid any extreme financial crises later on. They will have the wisdom to avoid taking too much debt or living beyond their means. This will also help to prevent any cash flow problems. Many cases of financial crises are caused by poor financial planning.
4. Helps to avoid too much debt
Young people who are taught financial literacy are able to avoid accumulating too much debt. This is because they are fully aware of the consequences of defaulting and having a bad credit score. With this information, they ensure that they borrow manageable amounts that can be repaid easily.
As they grow older, they will realise that it is common for most people to take on loans for large purchases. Most people will have to take on home loans to own their own property in Singapore. Even though Singapore’s government sets strict rules on money lending such as the TDSR (total debt servicing ratio) to prevent Singaporeans from overborrowing, having financial literacy will help avoid them being knees deep in dept.
5. Will be able to teach the next generation
The young people who have grasped the principles of financial literacy will most probably teach them to the next generation. This is especially important in cases where there is a large inheritance of family assets to be handed over to the next generation. If the next generation is not trained on issues of financial management, then there is the danger of the family assets being lost due to mismanagement.
As a conclusion, financial management should be incorporated into the school system so as to ensure that the young people in Singapore start life on the right footing.