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Why Financial Literacy Matters

Consumers are often inundated with credit and investment opportunities and without proper knowledge, it is easy to get into financial trouble. In past generations, cash was used for virtually every purchase. Today, cash is used to a lesser extent, however, the way we shop has also changed dramatically. Online shopping has become the preferred choice for many younger consumers, increasing opportunities to use and overextend credit and to accumulate debt fast. Many of these consumers may have little understanding of finances, and how credit or investments work, as well as the potential impact this may have on their financial well-being for many years to come. In fact, the lack of financial understanding has been signalled as one of the main reasons behind savings and investing problems. In view of this, the Wealth Management Institute (WMI), a member of Temasek Management Services Group, launched the Financial Education microsite on February 22, 2017. This project is a partnership between WMI, Nanyang Technological University, Securities Investors Association Singapore and Deloitte Singapore to help individuals improve their financial literacy and understanding of personal finances and investing. The site consists of a series of videos on personal investing, which cover the basics of understanding risk and return, portfolio diversification and bonds. Financial literacy is an issue with broad implications for economic health and any improvement will have a profound impact on consumers and their ability to provide for their future.

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What Is Financial Literacy?

Financial literacy is the confluence of financial, credit and debt management and the knowledge that is necessary to make financially responsible decisions—decisions that are integral to our everyday lives. Financial literacy includes understanding of how a checking account works, what using a credit card really means, and how to avoid debt. In sum, financial literacy impacts the daily decisions an average family makes when trying to balance a budget, buy a home, fund their children’s education and ensure an income at retirement.

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Did you know...

The level of financial literacy varies according to education and income levels, but evidence shows that highly educated consumers with high incomes can be just as ignorant about financial issues as less educated, lower income consumers. Although in general, lower income individuals tend to be less financially literate. Furthermore, a study from financial services company TIAA-CREF showed that those with high financial literacy plan for retirement and in essence have double the wealth of people who do not plan for retirement.