My friend suggested that I give financial planning talk to couples when they get married. I said that it would be too late. I have to give the financial planning talk to students before they leave school or university and start to work.
Here are the key points:
a) Save 50% of your earnings for the future. You can count your CPF as savings, so you only need to save 15%. You should repay your study loan or other borrowings early.
b) Keep your savings in liquid form, e.g. in a bank account . Do not worry about investing it yet.
c) Buy Medisheld to cover medical expenses and Personal Accident insurance to cover accidents.
When you are ready to invest the savings, choose a money market fund or exchange traded fund (ETF) where the expenses are low. Do not buy a life insurance policy yet, as it is rigid and gives a poor return (due to high expenses). Do not talk to an insurance agent (including your friend) at this time. Do not buy any structured product or investment product sold by a marketing person.
Read my book on Practical Guide on Financial Planning or join FISCA (Financial Services Consumer Association). You can think about investing later on, after you have been educated about the financial products.
Tan Kin Lian
Hi Mr Tan,
ReplyDeleteWhen I was an BUSINESS undergraduate earlier this decade, financial planning was never thought in the campus. Its strange right?
I not sure how the programme structure now but I do agree with you that we should learn while in school.
One of the reason is that students are still young and hence the compounding effect is greater. They can wait really long term in their investments.
Thank you for your contributions and book too.
Warn these students of the wolves disguised as financial consultants and to be careful of the people who give advice.
ReplyDeleteFinancial planning talks have been given to secondary schools by the MONEYsense team. It seems the talks didn't drive much cents home. Well, it entered one ear and left the other ear.
ReplyDeleteThus the schools may consider making it as an examinable subject.This will then put some sense and cents into these future consumers of financial products so that they will not be conned by
insurance salesmen masqueraded as financial consultants.These students will be in fact be better equipped than the insurance salesmen becuase waht the salesmen 'learned' from the college of insurance are tikam tikam exams whereas the students have to answer in essay format.
More importantly, the future consumers are more knowledgeable although not an expert and able to deal with unethical salesmen.
Business course curriculum should have a subject on financial planning too.
Ha! ha!.. all this talk about having young people learn about financial planning?
ReplyDeleteThe banks will send these young people invitations to apply for credit cards and loans! these are the people that drives consumption.
And it is a wonderful sensation for young people to be able to afford all the gadgets,cars,clothes,drinks and the image! wow! the image is euphoric!
If and its a big IF you ever succeed in educating the young about finance, even with 50% success, then the world economy will decline!
Walk into any shopping mall and observe the number of shops that sell things to the customer segment belonging to the 30 year old and younger.
The propensity to save is marginal
The propensity to spend is limited by their parent's earnings!
The first lesson comes when there are plans for a wedding.
ReplyDeleteThe discovery that hosting a wedding is not cheap will awaken the drunken stupor.
The second lesson is when the matrimonial home is considered.
Rent or buy? what about furnishing?
The third lesson is when there is an accident in the bedroom: pregnancy.
From here on, its a graduate diploma course covering cost of:
Education
Clothing
Extra curricular activities
Medical
There are electives in funeral, birthdays and wedding invitations,
and elderly care costs.