In Standard & Poor’s recent Global Financial Literacy Survey, it was found that a lot less women in Singapore know their way around personal finance than men.
67 per cent of men surveyed hit the threshold for being financially literate while only 52 per cent of women did so. This difference is one of the largest in the world.
While women make up the majority of university graduates, they still fall behind in financial literacy in 128 out of 143 countries. The participants were given a 5-question test over financial concepts: numeracy, risk diversification, inflation and compound interest.
The survey, done over 140 countries with 150,000 respondents, is one of the most extensive surveys done on financial literacy in history.
It also showed that Singapore has the most number of financially literate adults in Asia, at 59 per cent. Only 1 in 3 people in Asia could correctly answer the majority of questions–a number that is lower than the global average.
“We might have the highest number of financially literate people in Asia, but that’s still not enough. Basic concepts like compounding interest and percentages should be understood by all,” said Rohith Murthy, Managing Director of personal finance comparison website SingSaver.com.sg.
“Everyone should take an interest in controlling their own finances. The first step is to be aware of your expenses and where your money goes, then creating financial goals for yourself. Don’t sign up for financial products without fully understanding how it works,” he added. “Through education, Singaporeans can become more confident about making financial decisions.”
Insurance is a safeguard against unfortunate and unforeseen events. It is a strategic way to manage various risks. Insurance companies offer individuals or policyholders protection from potential losses in exchange of payments called premiums.
Aside from guaranteed coverage, what are the honest reasons why people buy insurance? On the flip side, what are the insurance company’s objectives as they offer their services?
OBJECTIVES OF INDIVIDUALS
As you age and progress along the stages of life, you become more and more aware of how necessary insurance is. A number of factors may lead to this realization such as seeing your elderly parents and starting your own family. While you know that you are supported by your CPF account as well as your Medishield Life, you can realize that it may not be comprehensive enough to meet your lifetime needs. This can serve as your wake up call to evaluate your present financial situation and plan for your future and that of your loved ones.
The exact reasons why people buy insurance is unique and highly subjective. However, here are some of them:
a. Worried about critical illness – consider health insurance.
b. Worried about permanent disability – consider life or term insurance.
c. Concerns about the loss of belongings – consider general insurance.
d. Concerns about death (as a breadwinner)- consider life or term insurance.
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OBJECTIVES OF INSURANCE COMPANIES
Nowadays, insurance companies offer a wide array of insurance products and policies that cover areas from property, health, and travel. Insurance companies must satisfy certain objectives to effectively function and meet their clients needs. Before purchasing one, know some of their objectives:
a. Pooling Money
By collecting premiums from a number of individuals or businesses, the insurance companies are able to pool their money together. They then pay out for the relatively few claims filed each annum. Keep in mind that majority of the policyholders do not file claims over the same period.
b. Financial Competence
Another objective is to ensure the policyholders that they are financially stable. Once one or more policyholders report that they were not duly compensated, society’s confidence in the system may be gone.
c. Influencing Behavior
One of the most important aims of insurance companies is to reward and promote responsible behavior. For instance, individuals with lower records of vehicular mishaps are more likely to be quoted with a lower car insurance premium than those with unsafe driving records. Rewarding safe driving practices can increase the likelihood of such desirable behavior.
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With the wealth you possess right now, do you barely get by or do you live lavishly?
Realize your financial situation by actually calculating your net worth. It is pretty straightforward! Simply add up the value of your assets and deduct the value of your liabilities.
Assets include savings, investments, CPF balances, insurance, properties, cars, or anything you own with monetary value. While liabilities include loans, mortgages, credit card debt, or all the money you still owe.
To save you time and effort, here is a tool to help you calculate and benchmark your personal net worth: salary.sg/2007/calculate-net-worth-and-benchmark-it. Remember to measure your net worth every six months to a year as recommended by financial experts. Doing too often may lead to unnecessary stress and panic.
Interestingly, one might end up with a negative net worth due to taking on a number of loans and poor money management skills. Do not let this happen to you!
Consider these 5 Surefire Ways To Boost Your Net Worth:
1. BE A DEBT NINJA
Slice debts out of your life as soon as possible. You probably heard this tip before. But, it goes without saying that aiming to clear off the high-interest debts (e.g., outstanding credit card balance) will help you pay lower interests in the long run.
Minimize the negative effects of debt while increasing your wealth by taking part in the debt diet, as popularized by Oprah Winfrey.
2. SPEND LESS
Nobody, including me, likes to hear that they are spending too much. I know how delicious a cup of Starbucks caramel frappuccino is or how satisfying it is to get the latest IPhone but these things will catch up on your wallet. The small and big expenses can add up as fast as Kopitiam queues lengthen during lunch time.
This is why you must take down your expenses everyday for at least a week and realize your spending habits. By knowing so, eliminate or reduce the areas which are unnecessary. This act of cutting expenses can have a substantial impact to your net worth!
3. INVEST MORE
It only makes sense that making your money work for you can improve your wealth. If you have spare cash lying around your savings account (experiencing small interest growth), consider investing in index funds, unit trusts, bonds, or RIETs (Real Estate Investment Trust).
*Friendly Reminder: If you do not have enough knowledge or did not consult a financial adviser, please refrain from committing to any type of investment first.
4. GET A RAISE
Another way to increase your wealth is by increasing your income. If you have been in the organization for a period of time and feel that you had done some good, there is no harm in asking for a reasonable pay raise.
Do not open a discussion with your boss unless you are fully prepared. Consider these six things to help you prepare.
5. SEEK PROFESSIONAL HELP
One of the most underrated and overlooked step to growing one’s net worth is seeking professional help. Many people are ashamed of their current financial state and get sucked in their negative tracks. Fear not my friend as experienced professionals are able to guide you in budgeting and planning as well as provide you with the latest information on how to grow your assets.
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There may be no secret formula to permanently increasing your wealth but every time you decrease your debt and boost your assets, your net worth certainly spikes up!
Insurance is a binding contract or policy in which an individual receives reimbursement or financial protection against losses. It provides coverage or security against a myriad of unwanted or unforeseen events such as death of the spouse, permanent disability, critical illness, and damaged car.
First, you must determine the situation you are in then and decide what type of insurance is appropriate for you. The policies and the insurance jargons can be confusing to a novice. To help you, here are some things you should consider before purchasing an insurance policy in Singapore:
1. PRICES
When purchasing for an insurance policy in Singapore, look for the best-priced deal that is suitable for you because prices can vary from one company to the next. Furthermore, the policies these companies offer are different. So, beyond the price, it is important to consider other factors as well.
2. TYPES
There are three main types of insurance sold in Singapore namely: Life Insurance, Health Insurance, and General Insurance. It is important to make sure you know what you want and you know what the insurance policies entails.
a. Life Insurance
This policy protects you and your dependants by giving the sum assured under certain circumstances such as being permanently disabled or critically ill. The agreed amount of money is intended to help you and your dependants meet your financial needs.
b. Health Insurance
This policy covers accidents, illnesses, and disabilities that affects your health. To help you and your family deal with the expenses, different health insurance policies are available in the market.
c. General Insurance
This policy secures you against a wide range of events such as damage to your home or loss of your belongings. Upon the occurrence of the event, the insurance company will pay you with an agreed amount to cover a portion or all of your loss.
3. TERMS
As a newbie, you are exposed to different insurance terms that can sometimes be confusing. This is why you must read through a comprehensive glossary of terms such as this list compiled by A.M. Best Company. This is the sample:
a. Annuity- a type of insurance policy that pays out fixed income payments at regular timings for one’s retirement.
b. Premium- price of protection for a specified period of time or a specified risk.
c. Whole Life Insurance- a type of life insurance serves a lifetime of protection. The policy will pay out the total sum insured plus any additional that you have accumulated before you passed away or become permanently disabled.
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What happens next if your ridiculously expensive car needs an engine replacement? If you are like countless people in the world, you will opt for using your credit card or taking loans. This will only build piles of debt.
Instead, you must commit to building an emergency fund to use during the “rainy days”. Financial professionals recommend to save money that can cover at least 6 months’ worth of your living expenses.
2. SAVING MORE FOR RETIREMENT
If you envision a life of comfort after you leave the working scene, you will not regret your decision to maximize your contributions to your CPF account or to your retirement plan.
Remember that the amount of money you need to save depends on what type of lifestyle you want to achieve during your retirement. You will need more savings if you plan to purchase a rest house, travel the world, keep your cable TV subscription, and other luxuries. Building your retirement plan while young can bring huge advantages to your financial future because of the power of compound interest. So start boosting your retirement savings as soon as possible!
3. EVALUATING THE RISKS BEFORE INVESTING
Before you lose some or all of your savings, it is important to understand the risks of the investments. Investment hazards include credit, liquidity, market, concentration, inflation, and devaluation risks. Taking a higher risk can potentially give you higher returns. But you have consult a financial adviser first.
As you make informed choices for your wealth, you will appreciate the day that you evaluated the risks before investing.
4. AVOIDING DEBTS
The debt that you accumulate in your 20s (e.g., student or car loans) can haunt you for the rest of your life. So before you take one more responsibilities such as getting married, starting a family, and buying a flat…you must avoid and eliminate your debts first.
Start by paying off the debts with high interest such as quickly as circumstance permits. Then, avoid accumulating debt by purchasing items that you can actually afford.
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