Macau Matters | Improving financial literacy

Richard Whitfield

Generally, I am appalled at the low levels of financial literacy of many people. Moreover, levels of financial literacy do not seem to vary too much with education level or age. I know many experienced people who take little interest in their financial situation and who put very little effort into managing their finances. Even my university students mostly have very little understanding or interest in their finances and are not building solid financial foundations for their future lives. I also regularly read about local people and visitors to Macau being duped in financial scams, many of whom are not young and naive or old and feeble minded.

It is well known that financial security has a large impact on quality of life, and most people would agree that financial literacy and financial budgeting is a key element in having a secure adult life. And good financial habits must be learned young.

Financial problems are the biggest source of stress in people’s lives. Adequate savings and investments that are compounding over time are the best way to avoid such stress, and “get rich quick” schemes are definitely not the best way forward. This means that to have long term security young people must begin investing when they are young. They must learn to live within their means and get into the habit of saving and sensibly investing part of their income so that it can accumulate over time so that they can achieve their dreams.

Every adult needs to know how to budget their income and expenditures so that they do not get into financial hot water. They also need to understand the relative costs of different kinds of borrowing (credit card versus personal loans, etc), and the strengths and weaknesses of different kinds of investments (cash in the bank, bonds, property, shares and other major kinds of investment). Further, they need to be able to distinguish between good and bad financial advice.

I believe that simply giving children money to buy whatever they want is doing them a disservice. Pocket money should be limited and should be used to teach children about the importance of financial budgeting and saving and investing. I feel that it should also be made as tangible as possible by giving children cash and having them make bank deposits, and letting them make their own investments when they get older. Credit cards and other digital forms of money can be too abstract for novices. Recognising opportunities that are too good to be true and judging the quality of financial advice are also very important skills.

The modern world is getting more and more financially complicated and sophisticated and responsibility for financial security is moving to individuals. For example, retirement pensions and the like have historically been managed by government and employers but, especially with the increasing popularity of defined contribution superannuation schemes, individuals are getting more involved in such decision-making.

Unfortunately, financial literacy in school curricula is virtually non-existent. Moreover, while universities often deal with business finance they rarely consider personal finances. After school financial literacy courses are beginning to emerge in different parts of the world, but I have not heard of any in Macau. I feel that they are definitely needed here – too many kids, and adults, have too much money and too little sense managing it.