Financial Knowledge

I had a little chat with my both of my sisters a few days ago concerning financial matters. From my understanding, my elder sister was convinced into parting her CPF money into unit trust by her insurance agent. Her insurance agent asserted that it will be a good idea to buy into unit trust to make her money roll to save up on her HDB apartment. Yup, her money literally rolls away. Her unit trust value eroded up to $3-4k of a size of about $30k. That is already more than 10% unrealized lost. Sometimes I wonder how fund managers can underperform so poorly. It is really ironic and unfair that these fund managers still receive commissions for “growing” customer’s funds. My simple advice I gave to my sister was to not invest in something you don’t know. At least it is much better to leave your money in the CPF account where you can get an annual risk free interest rate of 2.5%. It pays not to be financially literate I guess.

My second sister is now in a little dilemma. She wants to start investing, but do not know where to start because she has little knowledge about investment. She is cash rich, but she doesn’t make use of her excess cash to perform some compounding effect. As a saying goes, “Don’t work for money, let money work for you” - (Robert Kiyosaki). I advised my 2^nd sister numerous times to set up an investment account, but she always claims that she is too busy. My belief is that time is a choice, it is only how much time you willing to set aside. I hope that she will see my good intentions in the near future and slowly start up researching on her own. The longer she procrastinates, the longer she misses out on an opportunity to grow her wealth. But of cause, investment is not a 100% full proof money making strategy. There are always winners and losers in the market, except winners are usually the one that mitigate their downside risk by doing their own due diligence. So, my greatest advice for her is to delve into lots of research first before entering the market.

Charity always begins at home. I hope to be able to help both my sisters. I can probably start off by having a general informative financial talk with them. Perhaps, one day I will be given a chance to manage their given sum of money. As of now, I still think I am not experience enough to handle such great big responsibility given the fact that I am only less than 2 years old in the market. I can only assist them by giving them simple advice and provide them with any forms of media read-ups. I been giving my 2^nd sister interesting read ups from blogs or links that I found, and I really do hope she find some motivation and inspiration to start up investing. Her motivation always seems to die down after awhile :(

Henceforth, I believe that financial knowledge is one of the most important skill and a key to unlocking potential wealth. I deduce that our education needed to do a little alteration. One subject which is not taught and imparted to youth is financial knowledge. We may be advocated on the importance of saving but financial knowledge is a whole different league. Don’t talk about investments product yet; once we step into the real world, we have to consider the fact that we are going to settle lots of financial issues (Insurance, housing, loans, CPF etc.) Are we actually adequately equipped with such knowledge and well prepared? Most people will believe only the mouth salivating (“good guy”) agents. The naive one will fall for it and probably get the worse end of the deal. Why isn’t our education system preparing us for all of these? Our education system should educate youth/young adults on the importance of financial planning and provide pertinent knowledge on financial matters. At least there should be some informative sessions and general talks to provide understanding on the basics of all these. CPF for instance, is a part and parcel of a Singaporean; it is growing up with you. Knowing nuts about it is embarrassing and puts you at disadvantage. I pray that our education system can review and look in this; for a better and more financially educated Singapore.

Cheers!