Speech - Opening Remarks by Mr Chee Hong Tat, Senior Minister of State, Ministry of Trade and Industry & Ministry of Education, at the Signing Ceremony between DBS Bank and the Institute of Technical Education on Wednesday, 9 January 2019, 3.30pm

Ms Low Khah Gek, CEO, ITE

Mr Jeremy Soo, Managing Director and Head Consumer Banking Group Singapore, DBS Bank

Mr Sameer Gupta, Executive Director and Head Business Analytics, Consumer Banking Group Singapore, DBS Bank

Ladies and Gentlemen Good afternoon.

It is my pleasure to join you today at the MOU signing ceremony for ITE’s and DBS’s collaboration on financial literacy for youths. I am happy to see many students in the audience as this programme is designed for you.

Financial literacy is about having the knowledge and skills to plan and manage our finances effectively. It is an important life skill that everyone should acquire. There are some misperceptions regarding financial literacy  which I would like to touch on in  my speech this afternoon.

The first is that financial literacy is only for older people, and does not apply to younger folks like our students. This is completely untrue. Just as exercise and healthy diet are important for physical health for different age groups, financial literacy is important for a person’s financial well-being at all ages.

According to the 2017 Financial Planning Attitudes Survey commissioned by the MoneySense Council, only 3 in 5 Singapore residents have started planning for future financial needs, while 1 in 5 felt that they only needed to do financial planning when they are approaching retirement. Unfortunately, this may be too late. Financial planning needs to start much earlier, which is why we have introduced a financial education module for all Year 1 polytechnic and ITE students from this year, to equip our students with the knowledge and skills from young.

The second misperception is that financial literacy is complicated and difficult to understand. Among Singapore residents who have not started financial planning, more than one quarter said they do not know where to start or how to start.

There is a need for us to work together to plug the knowledge gap through schools and tertiary institutions, and also   through continuing education & training under SkillsFuture. We need to find ways to present complex financial concepts in an easy-to-understand manner, so that more Singaporeans know how to apply these principles to improve their personal and family finances.

Let me illustrate with an example involving two friends, Andy and Billy. Andy started early and has been saving $250 a month for the last 30 years. Billy started 10 years later than Andy, but decided that he would try to catch up by saving more each month. So he put aside $400 a month for the past 20 years. Assuming their investments grow at the same rate of 4% a year, who do you think will have more savings today? The answer is Andy, who started saving earlier. Due to the power of compounding, Andy’s saving today is $174,000, higher than Billy’s saving of $148,000.

Hence, if we diligently start to plan our finances from young, it will go a long way towards putting us on a sound financial footing later in life. It can make a significant difference.

Indeed, this is how Singapore has grown our national reserves over time, by being prudent in our spending and carefully investing our savings for the future. We must thank our forefathers for their hard work and  far-sighted  planning,  setting  aside savings from the strong growth during Singapore’s earlier stage of economic development. Today, 50% of the net investment returns from our reserves goes into our annual budget every year. This component is now the largest contributor to our revenues, larger than GST, corporate tax and personal income tax. Our reserves also allowed us to have the financial resources to fund strategic infrastructure projects such as new MRT lines and a new terminal for Changi Airport.

Similar to how our forefathers have worked hard and given us a solid foundation, we now need to build on this and leave an even stronger legacy for subsequent generations of Singaporeans.

Let me conclude by reiterating that financial literacy is important at both the individual and national level. And we need to start planning from young. Small actions can add up and make a significant difference to our financial well-being over time. I am happy to see DBS and ITE working together on this important endeavour. I hope it will encourage further collaboration with other private sector organisations. And through such partnerships, we can provide interesting ways for our students to learn new skills and to be well-prepared for future challenges.

Thank you.