SINGAPORE — In today’s financial landscape, there is a need for millennials to be more responsible for their finances. The increased life expectancy and rising cost of living pinned against the backdrop of tumultuous geopolitical events, and an accelerated climate crisis have created uncertainty in the future of the markets.
As such, financial literacy has definitely been a forefront topic in recent years. One needs to have the knowledge and confidence to make informed financial decisions. This includes knowing how to manage one’s money responsibly while planning and investing for the future.
This is part of a series where Yahoo Finance Singapore will focus on different aspects of millennials and their finances. In this sixth part, we discuss why financial literacy is important for millennials.
Not taught in school
Despite how important money is in our lives, the basics of finance aren’t usually taught to us in a school setting. That is why many of the financial experts that Yahoo Finance Singapore spoke to all agreed that youths need to do more to be financially literate.
This includes reading articles on how to better manage one’s finances and budgeting tips, as well as chatting with various professionals for advice. The key is for youths to get a combination of knowledge and access to financial products to drive their own financial success.
Additionally, for those looking to trade on an investment platform, being financially literate empowers them to make smart trading decisions and grow independently in their journeys.
“It is important for the younger generations to have the knowledge that can help them avoid poor financial decisions and more importantly, build a solid foundation for financial success,” shared Salim Dhanani, CEO and co-founder BigPay, a financial mobile app.
This is especially important in today’s financial landscape where youths of today are in a drastically different situation from that of their parents and grandparents.
Having the future in mind
As such, it is important to always have the future in mind. Even if one is not into building wealth, there are external life risks beyond one’s control that can rob one’s income. For example, inflation can erode one’s purchasing power and an unfortunate accident might drain out one’s savings quickly.
This means that millennials need a financial plan to support their life goals. In order to do that, they have to be financially literate enough to come up with a plan that is fit-for-purpose. This is especially so given our scarce resources in Singapore.
There are also many firms and advisers who are incentivised or pressured to push certain products out to its consumers. Millennials thus need to discern when it is okay to not do more than necessary. Financial experts advised that it is totally possible that a non-product solution like expense management or a national scheme like CPF might already suffice.
“Money is like fire – it can either be a good servant if you know how to handle it, a terrible master if it gets out of hand, and a danger if you leave it unattended,” advised Chuin Ting Weber, chief executive officer of MoneyOwl, a bionic financial advisor.
“Being financially literate therefore helps you understand your needs and gaps, gives you the clarity and framework to critically assess what is recommended to you, and enables you to optimise your scarce resources to implement the most fit-for-purpose solutions to meet your life goals,” she added.
For fresh graduate Reuben Tay, 25, investing in cryptocurrency is his way of planning for his future. Despite the high risk gamble, Tay believes that the payoff would be worth it as long as you know what you’re doing.
“Whenever I invest, I always go in with your eyes open and double check the fine print to make sure that I’m not falling for a scam or fake promises of high returns,” shared Tay.
Similarly, Gregory Van, CEO of Endowus, a Singapore-based financial technology company, advised that understanding risks is a big part of financial literacy.
“Unfortunately, not all millennials truly understand the risk of investing in riskier products such as cryptocurrency. Regulatory oversight and risk disclosures are still catching up in this fast moving space,” cautioned Van.
“Youths have to assume a greater personal responsibility with how they want to be managing their wealth and that can only be possible with greater financial literacy,” he added.
For instance, 23-year old Lilian Tan, has been investing under OCBC’s Blue Chip Investment Plan (BCIP) for the last two years. Under this scheme, investors can buy shares in bulk of S$100 every month depending on how much they feel like buying.
“I decided to invest in something ‘small-scale’ because I think it is important not to take huge risks when I’m younger with a smaller financial base. I also want to be able to have some cash at hand in case of any emergencies,” said Tan, a science undergraduate from the National University of Singapore (NUS).
Echoing a similar tune, Gavin Chia, managing director of Futu Singapore, an online brokerage platform, said: “Being fed with a constant stream of financial literacy resources that are both current and digestible is important for youths to execute long-term financial planning for retirement, savings for healthcare and medical treatments, and having extra cash for rainy days.”