5 alarming findings from OCBC Financial Wellness Index – More needs to be done to improve financial literacy

The OCBC Financial Wellness Index is a comprehensive study to understand Singaporeans’ financial wellness, first conducted in 2019. It comprises 10 financial wellness pillars and expanded into 24 indicators to understand Singaporeans’ state of financial health. 

For the OCBC Financial Wellness Index 2021, the study was done in August and September 2021, and it conducted an online survey of 2,051 working adults across the ages of 21 to 65 in Singapore. 

You would have seen various reports on the findings of the study. For example, how the Covid-19 pandemic and its resulting economic uncertainties spurred Singaporeans to pay more attention to financial matters, the improvement in overall index score, or the underestimation of the amount needed for retirement. 

But what caught my attention most were the below results. Clearly, more needs to be done to improve financial literacy.

Five shocking findings from the OCBC Financial Wellness Index 2021 

27% of credit card holders often pay only the minimum sum

51% with credit card debts often pay only the minimum sum

43% gambled more than they can lose

69% indicated “I am able to pay my monthly instalments on target” when it comes to the ability to pay off housing loan

81% of Singaporeans underestimated the amount needed for their ideal retirement 

Check out the visuals on our IG: @moneyplayschool

Credit card interest and charges

Of particular concern would be credit card use or misuse. 

27% of credit card holders often pay only the minimum sum, and 51% of those with credit card debts often pay only the minimum sum required, too. 

That means 3 in 10 credit card holders often pay the minimum sum, and 1 in 2 of those with credit card debts still often pay only the minimum sum!

Credit cards should not be used as a long-term credit facility!

Did you know?

If you just pay the minimum sum, a debt of $5,000 could take more than 14 years to pay off!

Assume you have a credit card bill of $5,000 with Bank X. Credit card interest is fixed at 25% per year and the minimum sum is $50 per month.

By the time the debt is fully paid off, you would have paid almost 3 times your initial debt!

With “Buy Now, Pay Later” (BNPL) gaining popularity, it could worsen the situation, highlighting the urgent need for financial literacy. 

But whether due to unforeseen circumstances because of the COVID-19 pandemic or overspending, the most important thing to do is to bravely face the issue head-on if you are struggling with these debts. 

If you need help with debt management and you are based in Singapore, approach Credit Counselling Singapore.  

Credit Counselling Singapore (CCS) is a non-profit organisation and a registered charity. As a trusted Credit Counselling Social Service Agency, it has helped over 35,000 individuals address their unsecured debt problems through education, credit counselling and facilitated debt restructuring since 2004.

Gambling and speculating

I found it worrying that 43% gambled more than they can afford to lose! What’s worse, if you take into account the 28% “Investors who excessively speculate for quick gains” – arguably gambling, too! – it is a greater cause for concern. 

The ease to invest which fintech platforms have enabled is a double-edged sword. It’s also easy to feel like you have the golden touch when things are going well. Some finfluencers – financial influencers – on TikTok or any other social media platform also make it seem easy and a “sure-win” to invest. 

But some Investing 101 remains – “Only invest what you can afford to lose.”

Rule Number 1: Don’t lose money.

Rule Number 2: Don’t forget rule number 1. 

Warren Buffett

Property and housing loan

69% indicated that “I am able to pay my monthly instalments on target” when it comes to the ability to pay off housing loan. 

Looking at it from another angle, it tells us that 3 in 10 are not able to pay their housing loan monthly instalments on target! 

Are we over-stretching ourselves when it comes to property? Should we actively look at refinancing to manage the costs? Should we do our sums better to make sure it is withing our means?

Perhaps speaking with a professional realtor, banker or mortgage specialist could help.

On a related note, if you would like to understand better investment in properties and the factors to consider when investing in physical properties, read this: Should I invest in a second property in Singapore? What are the things I need to consider?

Are Singaporeans ready for retirement?

The survey found that the proportion of Singaporeans who underestimated the amount needed for their ideal retirement is 81%. And on average, they underestimated the amount required by 31%!

While retirement planning is back on Singaporeans’ radar, it is still a neglected area. About 1 in 2 (51%) Singaporeans are not on track with their retirement plans. 

Take control of your financial wellness

Personally, a study like this OCBC Financial Wellness Index is a great reminder to improve our financial wellness continually. 

If you need more help and guidance, you should consider speaking with a licensed and competent professional adviser that you trust. 

Even as more may learn online proactively, use digital tools more readily and invest more actively, the survey also found that Millennials in their 20s who seek professional financial advice and use digital financial tools – more of them are on track in meeting their investment target.  

Most importantly, remember it’s a continuous journey, and it is never too late to start. 

Find out more about the OCBC Financial Wellness Index.

See also: The financial literacy crisis

Like what you read? Subscribe to our newsletter to get weekly updates in your inbox.