45473 financial book content 2

Citi-NIE Financial Literacy Hub for Teachers© Citi-NIE Financial Literacy Hub for Teachers 1

TABLE OF CONTENTS #1 Getting Started ..................................................................................... 2

#2 The Value Of Money .............................................................................. 3

#3 Financial Decision Making Styles ............................................................. 4

#4 Save Before You Spend.......................................................................... 5

#5 Be Purposeful In Saving ......................................................................... 6

#6 Spend On Your Needs First ..................................................................... 7

#7 Rethink Your Wants ............................................................................... 8

#8 Budgeting ............................................................................................ 9

#9 Count The Cost Of A Decision ............................................................... 15

#10 Watch The Small Stuff ....................................................................... 16

#11 Decide Whether To Wait ..................................................................... 17

#12 Good Deal Or Bad Deal ...................................................................... 18

#13 Think Carefully Before You Purchase .................................................... 21

#14 Keep Track Of Your Debit Card Expenses .............................................. 22

#15 Take Control Of Your Credit ................................................................ 23

#16 The Right Saving Plan ........................................................................ 24

#17 The 8th Wonder Of The World .............................................................. 26

#18 How Inflation Affects You ................................................................... 29

#19 What Is Your Net Worth ..................................................................... 30

#20 Getting Insured ................................................................................. 31

#21 Exchange Rates ................................................................................ 33

#22 Make Your Pledge .............................................................................. 35

© Citi-NIE Financial Literacy Hub for Teachers 1

TABLE OF CONTENTS #1 Getting Started ..................................................................................... 2

#2 The Value Of Money .............................................................................. 3

#3 Financial Decision Making Styles ............................................................. 4

#4 Save Before You Spend.......................................................................... 5

#5 Be Purposeful In Saving ......................................................................... 6

#6 Spend On Your Needs First ..................................................................... 7

#7 Rethink Your Wants ............................................................................... 8

#8 Budgeting ............................................................................................ 9

#9 Count The Cost Of A Decision ............................................................... 15

#10 Watch The Small Stuff ....................................................................... 16

#11 Decide Whether To Wait ..................................................................... 17

#12 Good Deal Or Bad Deal ...................................................................... 18

#13 Think Carefully Before You Purchase .................................................... 21

#14 Keep Track Of Your Debit Card Expenses .............................................. 22

#15 Take Control Of Your Credit ................................................................ 23

#16 The Right Saving Plan ........................................................................ 24

#17 The 8th Wonder Of The World .............................................................. 26

#18 How Inflation Affects You ................................................................... 29

#19 What Is Your Net Worth ..................................................................... 30

#20 Getting Insured ................................................................................. 31

#21 Exchange Rates ................................................................................ 33

#22 Make Your Pledge .............................................................................. 35

Calculate The Cost Of A Decision

Citi-NIE Financial Literacy Hub for Teachers2


CONGRATULATIONS! You are taking a big first step towards achieving financial success. How can you be financially literate? Financial literacy can be defined as having the ability to make informed judgments and decisions about money and financial services. This includes your ability to plan for the future, and the capability to respond to life events and their effects on your personal finances. So, take control of your finances! Managing your money well can help you plan for your future. When you manage your money well, you will be better prepared to pursue your dreams, and hopefully have enough money to turn them into reality. You could continue to further your studies and then start working or begin your own business. You could also travel. No matter what you do, you will need to take charge of your money to make your dreams come true.

Nevertheless, always remember that while money is important, money is not everything! It is only a means; never an end in itself.

Fundamentals

Money can buy medicine but not health. Money can buy you a house but not a home. Money can buy you companions but not friends. Money can buy you entertainment but not happiness Money can buy you food but not appetite. Money can buy you a bed but not sleep.

This workbook contains powerful ideas on financial literacy that are useful and relevant at your current stage of life. We welcome on this journey. All the best!

1 Getting Started

You are taking a big first step towards achieving financial success.

How can you be financially literate?

Financial literacy can be defined as having the ability to make informed judgments and decisions about money and financial services. This includes your ability to plan for your future, and the capability to respond to life events and their effects on your personal finances.

So, take control of your finances! Managing your money well can help you plan for your future.

When you manage your money well, you will be better prepared to pursue your dreams, and hopefully have enough money to turn them into reality. You can continue to further your studies, start working, begin your own business, or even travel. No matter what you do, you will need to take charge of your money to make your dreams come true.

Nevertheless, always remember that while money is important, money is not everything! It is only a means; never an end in itself.

Fundamentals

Money can buy medicine but not health. Money can buy you a house but not a home. Money can buy you companions but not friends.Money can buy you entertainment but not happinessMoney can buy you food but not appetite. Money can buy you a bed but not sleep.

This workbook contains powerful ideas on financial literacy that are useful and relevant at your current stage in life.

We welcome you on this journey. All the best!

Getting Started1

Citi-NIE Financial Literacy Hub for Teachers 3


Having money is important to give you freedom to achieve your life goals.

With money, you can get what you need and want. You can also use money to help others who are in need. To achieve financial success, it is important to have a right attitude towards money. It is important to acquire knowledge and skills

to manage your money well. You need to save, manage and spend your money wisely so that you have enough to share. Saving money is just the beginning. You need to learn how to grow your money. Spend on things that you need; and refrain from buying things just to show off. Remember to always take time to share with others in need and invest in your health and relationships too.

Follow these simple principles of good financial literacy using SMS as follows: Activity What does money mean to you?

________________________________________________________________

________________________________________________________________

On a scale of 1 to 10 (with 10 being the strongest), give yourself a score based on what you think your level of financial literacy is.

1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10

Would you like to learn more about regarding saving, managing and sharing money?

________________________________________________________________

________________________________________________________________

2 The Value Of Money

SaveManageShare






________________________________________________________________

________________________________________________________________


1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10


________________________________________________________________

________________________________________________________________


SaveManageShare


With money, you can get what you need and want. You can also use money to help others who are in need. However, to achieve financial success, it is important to have the right attitude towards money and be responsible.

It is important to acquire knowledge and skills to manage your money well. You need to save,

manage and spend your money wisely so that you have enough to share. Saving money is just the beginning. You need to learn how to grow your money. Spend on things that you need; and refrain from buying things just to show off. Remember to always take time to share with others who are in need and invest in your health and relationships too.

Would you like to learn more about saving, managing and sharing money?






________________________________________________________________

________________________________________________________________


1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10


________________________________________________________________

________________________________________________________________


SaveManageShare

Follow these simple principles of good financial literacy using the acronym SMS as follows:

Getting Started The Value Of Money2

Citi-NIE Financial Literacy Hub for Teachers4 © Citi-‐NIE Financial Literacy Hub for Teachers 4

How do you usually make decisions? Tick the description that best fits how you usually make decisions when purchasing.

Tick

#1: I like to be decisive and make a purchase quickly.

If so, it might be good to gather more information first before you make the purchase.

#2: I am easily attracted by promotions, and tend to make impulse purchases at a sale.

If so, it might be good to pause and ask yourself whether you really need that item.

#3: I like to make safe choices by sticking to familiar past decisions.

If so, it might be good to try different ways of doing things.

#4: I like to consider all factors very carefully before buying a gift for someone?

This is good, but waiting too long or thinking through too much might result in frustrations or missed opportunities.

Activity How do you usually decide whether to buy something?

How do you think you can save, manage and share your money better?

3 Financial Decision Making Styles

How do you usually make decisions? Tick the description that best fits how you usually make decisions when purchasing something.

#4: I like to consider all factors very carefully before buying a gift for someone.


Financial Decision Making Styles3

Citi-NIE Financial Literacy Hub for Teachers© Citi-‐NIE Financial Literacy Hub for Teachers 4

How do you usually make decisions? Tick the description that best fits how you usually make decisions when purchasing.

Tick

#1: I like to be decisive and make a purchase quickly.

If so, it might be good to gather more information first before you make the purchase.

#2: I am easily attracted by promotions, and tend to make impulse purchases at a sale.

If so, it might be good to pause and ask yourself whether you really need that item.

#3: I like to make safe choices by sticking to familiar past decisions.

If so, it might be good to try different ways of doing things.

#4: I like to consider all factors very carefully before buying a gift for someone?


Activity How do you usually decide whether to buy something?

How do you think you can save, manage and share your money better?

3 Financial Decision Making Styles

5© Citi-NIE Financial Literacy Hub for Teachers 5

Develop a habit of saving.

Why do you save?

We save to buy our needs and wants. We also save, in case, there are emergency expenses.

When should you save?

Take a look at the following equations. Both are equal mathematically, but which is better in terms of practising good financial management?

(i) Income – Expenses = Savings

If you spend first, you might not have any money left over to save! The dangers of overspending are very high.

(ii) Income – Savings = Expenses This is better. Set aside a compulsory savings amount before you start spending. Only spend within your budget so that you don’t get into debt.

Remember to pay yourself first! Save first before spending. Set aside a predetermined sum of money every time you receive your pocket money or any other form of income before spending. If you treat your savings amount as a fixed expense that you must pay out first, you will be more likely to save regularly.

Activity Complete the table below for a list of your possible needs, wants and emergency expenses.

Needs Wants Emergency expenses

4 Save Before You Spend

Needs Wants Emergency expenses

Develop a habit of saving.

Why do you save?

We save to buy what we need and what we want.We also save in case there are emergency expenses.

When should you save?

Take a look at the following equations. Both are equal mathematically, but which is better in terms of practising good financial management?

(i) Income – Expenses = Savings If you spend first, you might not have any money left over to save! The dangers of overspending are very high.

(ii) Income – Savings = Expenses This is better. Set aside a compulsory savings amount before you start

spending. Only spend within your budget so that you don’t get into debt.

Remember to pay yourself first! Save first before spending. Set aside a predetermined sum of money every time you receive your pocket money or any other form of income before spending. If you treat your savings amount as a fixed expense that you must pay out first, you will be more likely to save regularly.

Financial Decision Making Styles Save Before You Spend4

Citi-NIE Financial Literacy Hub for Teachers6© Citi-‐NIE Financial Literacy Hub for Teachers 6

How should you save?

Try this. Separate your savings money into different parts for different goals. One part is for your long term goal like education and for emergencies. Another part can be “fun money” for holidays, gifts, charity or for short term goal like saving up for a laptop. But always remember to set aside for your FUND before having your fun. You may label 3 envelopes or coin jars for saving according to the different goals.

Here are some other tips:

1. Set a limit for your fun money.

2. Don’t spend what you don’t have.

3. Avoid emotional spending.

4. Share the fun with others.

5. Use your money to help others.

Activity 1. How much allowance do you get per

month? $______________________

2. How much of this money will you save up for your “fund”, and how much will you use for “fun”? FUND: $__________(A) Short term goal: $__________ (B) FUN: $__________(C)

3. Now, consider one of the items you have listed under your ‘Wants’. How long will it take you to save up enough money to buy that item in your wish-list?

A)Education B)Laptop C)Fun

5 Be Purposeful In Saving

How should you save?

Try this. Divide your savings money into different parts for different goals.

One part is for your long-term goals like education, and for emergencies. Another part can be “fun money” for holidays, gifts, charity or for short term goals like saving up for a laptop.

But always remember to set aside for your FUND before having your fun.You may label 3 envelopes or coin jars for saving according to the different goals.

Here are some other tips:

1. Set a limit for your fun money.2. Don’t spend what you don’t have. 3. Avoid emotional spending.4. Share the fun with others. 5. Use your money to help others.

Activity

1. How big an allowance do you get per month? $______________________

2. How much of this money will you save up for your “fund”, and how much will you use for “fun”?

FUND: $__________(A) Short term goal: $__________ (B)FUN: $__________(C)

3. Now, consider one of the items you have listed under your ‘Wants’. How long will it take you to save up enough money to buy that item in your wish list?

Be Purposeful In Saving5

Citi-NIE Financial Literacy Hub for Teachers 7© Citi-NIE Financial Literacy Hub for Teachers 7

Needs and wants can be unlimited.

But because resources, such as money, are limited, we cannot have everything. We must therefore choose some things over others. Since needs are things that you cannot do without, spend on your needs first. Needs and wants change depending on many influencing factors, such as time, place, purpose, and people. What you need now may be different from what you need in the future, and also different from what other people may need. Learn to live within your means. Remember these tips to help you:

1) Spend on your needs first, save on your wants. 2) Prioritise your needs and wants. 3) Resist peer pressure. 4) Spend for the long term.

Activity Return to your list of needs and wants on page 5. Now rank them in order of priority.

Needs Wants Most important

Least important Compare your list with a friend. How do you differ from each other?

6 Spend On Your Needs First

Needs Emergency expensesMost important

Least important

Compare your list with a friend’s. How do you differ from each other?

Be Purposeful In Saving Spend On Your Needs First6

Citi-NIE Financial Literacy Hub for Teachers8© Citi-NIE Financial Literacy Hub for Teachers 8

Do you really want that? Will you still want it tomorrow? Will you still want it next week? Sometimes purchases are bought on impulse. These might result in regret or waste later. Can the item be used more than once? For example, going for an expensive dinner will only keep you full for half a day, but you will be able to keep and read a book you have bought for a long time. Plus, you might even be able to recover some of the money spent if you resell the book later. Better yet, check if you can borrow that book from the library! As another example, will you be wearing that expensive dress many times, or just once for your school prom night? If you are only going to wear it once, are you able to rent or borrow one instead? Activity Think of an item which you have bought but have not used it before. Discuss this experience with your group members and point out which of these items you could have done without.

7 Rethink Your Wants

Do you really want that?

Will you still want it tomorrow?

Will you still want it next week?

Sometimes purchases are made on impulse. This might result in regret or waste later.

Can the item be used more than once?

For example, going for an expensive dinner will only keep you full for half a day, but you will be able to keep and read a book you have bought for a long time. Plus, you might even be able to recover some of the money spent if you resell the book later. Better yet, check if you can borrow that book from the library!

Another example, will you be wearing this expensive dress many times, or just once for your school prom night? If you are only going to wear it once, are you able to rent or borrow one instead?

Rethink Your Wants7


A budget is a plan to help you track how much money you have coming in and going out, so that you can manage your money wisely.

Income is money you receive/earn.

This can be obtained through many ways, such as your allowance, salary from a job, interest from savings, and return on investment.

Expenses are things you spend money on.

Some expenses are fixed, such as your monthly mobile phone plan, tuition fees, transportation, and rent. Since you must incur these costs, make sure you pay them first. Meanwhile, some other expenses are variable, such as how much you spend on food, entertainment, and clothes.

Why should you make budgeting a habit?

Resources are limited.Needs and wants, on the other hand, are unlimited.

We cannot have everything we desire as a result, we must choose some things and give up on others. Since needs are things which you cannot do without, spend first on your needs before spending on your wants. Exercising discipline in sticking to your budget is a good habit.

Needs are necessities that are required for living.Examples include food, water and shelter.

Wants are things that are unnecessary but desired.Examples include video games, designer shoes, bags and clothes.

Values guide our choices and actions. These are fundamental beliefs or practices about what is desirable, worthwhile, and important to an individual. Your family, friends, teachers, religion, media, law etc, can influence the values that guide your daily actions. These actions may have an impact on your financial situation, sometimes for many years to come. If you value financial security, you should save part of your allowance and refrain from unnecessary spending.

Rethink Your Wants Budgeting8


© Citi-‐NIE Financial Literacy Hub for Teachers 10

situation, sometimes for many years to come. If you value financial security, you save part of your allowance and refrain from spending unnecessarily. You may also want to think about needs, wants and values using a cupcake as an analogy:

Therefore, a Budget can be a very powerful tool that can help you avoid buying things that you do not need. While it might seem a bit tedious at first, once it becomes a part of your routine, you will be surprised at how much financial freedom you can have because of a good budget. Take charge!

Icing and decorations represent wants - the extra items that make our lives interesting and enjoyable.

The cake part of a cupcake represents our needs. They must be present and addressed before considering any icing or decorations (wants).

When making spending decisions, consider if your needs are met before spending on any of your wants. What you determine to be a need versus a want will depend on your personal values, just like your preference for different types of cupcakes.


situation, sometimes for many years to come. If you value financial security, you save part of your allowance and refrain from spending unnecessarily. You may also want to think about needs, wants and values using a cupcake as an analogy:

Therefore, a Budget can be a very powerful tool that can help you avoid buying things that you do not need. While it might seem a bit tedious at first, once it becomes a part of your routine, you will be surprised at how much financial freedom you can have because of a good budget. Take charge!

Icing and decorations represent wants - the extra items that make our lives interesting and enjoyable.

The cake part of a cupcake represents our needs. They must be present and addressed before considering any icing or decorations (wants).

When making spending decisions, consider if your needs are met before spending on any of your wants. What you determine to be a need versus a want will depend on your personal values, just like your preference for different types of cupcakes.

While it might seem a bit tedious at first, once it becomes part of your routine, you will be surprised at how much financial freedom you can have because of a good budget. Take charge of saving and spending!

Citi-NIE Financial Literacy Hub for Teachers 11© Citi-‐NIE Financial Literacy Hub for Teachers 11

Activity Sophia’s Financial Makeover!

Profile of Sophia

Sophia’s Record of Expenses

Income Jan 20x4 Feb 20x4 Mar 20x4 Take home pay $3500 $3500 $3500

Expenses Jan 20x4 Feb 20x4 Mar 20x4 Clothes & accessories $1455 $1901 $1600 Dining out with friends & loved ones

$499 $512 $696

Entertainment $213 $358 $345 Transport $120 $120 $120 Gym Membership $200 $200 $200 Household bills $320 $320 $320

Total Expenses

$2807 $3411 $3281

Instructions v Sophia has a number of financial decisions to make so that her April 20x4 Income

and Expenditure Statement will provide her with greater financial security.

v She wants to seek advice from you on how to plan the budget for April 20x4 so as to maximise her finances. Remember to advise her to save first before allocating for expenses for her needs and wants.

v Read each of Sophia’s decisions carefully.

Scenario 1: Financial Decision - April 20x4, week 1

A purple branded handbag that is currently in season caught Sophia’s eyes. Cost of handbag - $3000. Sophia is envious of Lynette’s latest branded handbag. Her current bag is old and worn out


Sophia has not shown concern for her loved ones for some time due to work. This week she intends to shop for presents for them:

Watch for mother -$300 Golf club for father - $300

Leather purse for sister -$400 Dinner with boyfriend -$200

• 22 years old • Teacher • Takes home $3500 a month • Enjoys shopping • Enjoys spending time with her friends and loved ones • Has a total of $3,000 savings as at January 20x4 but hopes to increase savings



Profile of Sophia




$499 $512 $696


Total Expenses

$2807 $3411 $3281














Profile of Sophia




$499 $512 $696


Total Expenses

$2807 $3411 $3281














Profile of Sophia




$499 $512 $696


Total Expenses

$2807 $3411 $3281












Income Jan 20x4 Feb 20x4 Mar 20x4Take home pay $3500 $3500 $3500

Expenses Jan 20x4 Feb 20x4 Mar 20x4Clothes & accessories $1455 $1901 $1600Dining out with friends & loved ones $499 $512 $696

Entertainment $213 $358 $345Transport $120 $120 $120Gym Membership $200 $200 $200Household bills $320 $320 $320

Total Expenses $2807 $3411 $3281

• 22 years old• Teacher• Takes home $3500 salary a month• Enjoys shopping• Enjoys spending time with her friends and loved ones• Has a total of $3,000 savings as of January 20x4 but hopes to increase savings

Sophia has a number of financial decisions to make, so that her April 20x4 Income and Expenditure Statement will provide her with a greater financial security.

She wants to seek advice from you on how to plan the budget for April 20x4 so as to maximise her finances. Remember to advise her to save first before allocating for expenses for her needs and wants.

Read each of Sophia’s decisions carefully.

Scenario 1: Financial Decision - April 20x4, week 1A purple branded handbag that is currently in season caught Sophia’s eyes. Cost of the handbag - $3000. Sophia is envious of Lynette’s latest branded handbag. Her current bag is old and worn out

Scenario 2: Financial Decision - April 20x4, week 2Sophia has not shown concern for her loved ones for some time due to work. This week she intends to shop for presents for them: Watch for mother -$300Golf club for father - $300Leather purse for sister -$400Dinner with boyfriend -$200



Give your recommendations what Sophia can do:

Scenarios Recommendations Reasons

Scenario 1

Scenario 2

Scenario 3

Scenario 4


Sophia needs to get her laptop repaired for $300. However, she has also promised to treat 2 friends to a buffet dinner which costs $300. She plans only to spend on either decision this week.


Gym membership fee of $200 is due for payment at the end of the month. A gorgeous chiffon dress ($200) that is perfect for her best friend’s party a few months later in November caught her eyes. Sophia also remembered that she promised to help pay $200 for her mother’s leisure trip to Hong Kong. She does not plan to spend more than $200, since it is the end of the month and she does not have much money left.

Scenarios REcoMMENDATIoNS REASoNS

Scenario 1

Scenario 2

Scenario 3

Scenario 4



BUDGETING WORKSHEET for Week __ : to

Activity Plan Your Own Budget!

Income Budget Actual Variance

Total income

Amount set aside for saving

Amount available for expenses

Expenses Budget Actual Variance

Total expenses

Income Budget Actual Variance

Total income

Amount set aside for saving



Total expenses

BuDgETINg WoRkSHEET for WEEk ___ : to



Total expenses

Citi-NIE Financial Literacy Hub for Teachers14 © Citi-NIE Financial Literacy Hub for Teachers 14

Instructions to use the budgeting template:

At the start of each week, enter in the ‘Budget’ column the amount that you expect to receive for your income, and the amount you set aside as savings. Then allocate carefully for your expenses. At the end of each week, enter the actual amounts you received, saved and spent in the ‘Actual’ column. If an expense is paid for by your parents or someone else, record the amount under both income and expenses. You do this because it is also money you receive and spend; even though you do not get to see it, e.g. school fees and clothing that your parents buy for you. At the end of the week, subtract the ‘Actual’ column from the ‘Budget’ column to calculate the ‘Variance’. This will be either a surplus (+) or shortage (-) in each category.

Sticking to the Budget

The most difficult part of any budget is the ability to see it through. Now that you have drawn up your own budget to keep your spending in check, examine it at the end of each month to see how well you have managed to successfully stick to it. If you have, well done! If not, re-examine your budget; is it unrealistic or can you be more disciplined about your spending?

Take a look at your household spending. Is your family spending within your household budget?


Instructions to use the budgeting template:

At the start of each week, enter in the ‘Budget’ column the amount that you expect to receive for your income, and the amount you set aside as savings. Then allocate carefully for your expenses. At the end of each week, enter the actual amounts you received, saved and spent in the ‘Actual’ column. If an expense is paid for by your parents or someone else, record the amount under both income and expenses. You do this because it is also money you receive and spend; even though you do not get to see it, e.g. school fees and clothing that your parents buy for you. At the end of the week, subtract the ‘Actual’ column from the ‘Budget’ column to calculate the ‘Variance’. This will be either a surplus (+) or shortage (-) in each category.


The most difficult part of any budget is the ability to see it through. Now that you have drawn up your own budget to keep your spending in check, examine it at the end of each month to see how well you have managed to successfully stick to it. If you have, well done! If not, re-examine your budget; is it unrealistic or can you be more disciplined about your spending?

Take a look at your household spending. Is your family spending within your household budget?


The most difficult part of any budget is the ability to see it through. Now that you have drawn up your own budget to keep your spending in check, examine it at the end of each month to see how well you have managed to successfully stick to it. If you have, well done! If not, re-examine your budget; is it unrealistic or can you be more disciplined in your spending?


When we decide on a choice, we have also decided not to choose the other options. For example, when we buy something, we will not be able to use that money for another purpose. Regardless of what you chose to do, you could have done something else. The opportunity cost is the next best alternative you are giving up when making a decision.

Our choices are based on our expected value of the decision. Since value is subjective, everyone values things differently and makes different decisions. Good decision making requires comparing the benefits and costs of different choices to decide on the best option. The choice is yours.

Activity Consider the following situation. Discuss the benefits and costs of choosing one decision over the other.

Flying on a budget airline, or taking a coach to Malaysia. How much can you save if you take the coach instead of the plane? Is the savings worth it for the increase in travelling time?

9

Count The Cost Of A Decision

When we make a choice, we have also decided not to choose the other options. For example, when we buy something, we will not be able to use that money for another purpose.

Regardless of what you chose to do, you could have done something else. The opportunity cost is the next best alternative you are giving up when making a decision.

Our choices are based on our expected value of the decision. Since value is subjective, everyone values things differently and makes different decisions.

Good decision making requires comparing the benefits and costs of different choices to decide on the best option.

The choice is yours.

Activity

Consider the following situation. Discuss the benefits and costs of choosing one decision over the other.

Flying on a budget airline, or taking a coach to Malaysia.

How much can you save if you take the coach instead of the plane? Is the savings worth it for the increase in travel time? What otherfactors will you have to consider?

Calculate The Cost Of A Decision9


Can you cut down on your expenses? For example, instead of buying drinks, how about bringing along your water bottle? How about packing lunch to school? Do you really know where your money is going to? Stop those spending leaks! Try keeping track of everything you spend for a week. You might be surprised to find out where your money is going, and what you can reduce. Activity Reflect on non-essential things you frequently buy. Do you buy a can of soft drink every day? Or do you buy Starbucks latte on a weekly basis? Name a non-essential item you buy: ___________________________ How much does it cost? ______________ How frequently do you buy this? (Tick an option)

I spend _________________ a year on this. I could

have bought a _____________________ with

the money.

Every Day (x365) Every School Day (x260) Every Few Days (x150) Every Week (x52) Every Month (x12)

10 Watch The Small Stuff

(big-ticket item)

Do you really know where your money is going to?

Stop those spending leaks! Try keeping track of everything you spend for a week. You might be surprised to find out where your money is going, and which you can reduce.

Activity

Reflect on non-essential things you frequently buy. Do you buy a can of soft drink every day? Or do you buy latte on a weekly basis?





the money.



(big-ticket item)





the money.



(big-ticket item)

Watch The Small Stuff10


Would you prefer to pay $50 for a new arrival T-shirt, or wait until the Great Singapore Sale for a discount? Practising delayed gratification means waiting before getting something that you want. To buy, or not to buy? Will you buy the latest mobile phone now when it is just released and the price is high, or will you wait for a few months until the price drops? Will you wait to re-contract your phone plan and buy the phone as part of the package at a much lower price?

If you choose to wait for a better deal, you are practising delayed gratification and you will be able to save money by paying less for the same item later.

Will you use your credit card to buy the mobile phone if you do not have enough money, or will you only buy it once you have saved enough?

If you choose to wait, you are practising delayed gratification and you will have successfully avoided falling into a debt trap!

Activity List 5 things that you are thinking of buying. How can you practise delayed gratification in the purchase of any of them?

1) _____________________________

2) _____________________________

3) _____________________________

4) _____________________________

5) _____________________________

11 Decide Whether To Wait Would you prefer to pay $50 for a new arrival T-shirt, or wait until the Great Singapore Sale for discount?

Practising delayed gratification means waiting before getting something that you want.

To buy or not to buy?

Will you buy the latest mobile phone now when it has just been released and the price is high, or will you wait for a few months until the price drops? Will you wait to re-contract your phone plan and buy the phone as part of the package at a much lower price?

If you choose to wait for a better deal, you are practising delayed gratification and you will be able to save money by paying less for the same item later.

Will you use your credit card to buy the mobile phone if you do not have enough money, or will you only buy it once you have saved enough?

If you choose to wait, you are practising delayed gratification and you would have successfully avoided falling into a debt trap!

No. Items Delayed gratification strategies

1

2

3

4

5

Watch The Small Stuff Decide Whether To Wait11


Keep a look out for good deals and discounts, especially student discounts.

Going to the movies costs less on certain days and times.Some food and beverage outlets provide discounted rates for students.If you buy books and stationery, don’t forget to use a discount card.Some banks also have special privileges for students – ask to find out!

Besides student discounts, look out for other discounts or sales promotions.

Buying a shirt when it is on a sale is cheaper than having to pay the full price. Buying a laptop at a computer fair might not only be cheaper, but it may come with free gifts, too!

Shop around and compare prices and different options before making a decision.

How do you know if it is a bad deal?

Our financial decisions often depend on many psychological factors. Advertising is a form of marketing communication that is used to en-courage or persuade people to continue or take action. Therefore, companies often pay a large sum of money on advertisements to drive people’s behavior so that they will buy their products and services.

By understanding some of the advertising techniques used by companies, you will be able to understand what is communicated in advertisements.

Below is a list of commonly used advertising techniques.

celebrity Endorsement: When famous people, such as movie stars, are hired to pitch a product.

glittering generalities: Advertisements that over-promise benefits after the purchase of a product or service.


Keep a look out for good deals and discounts, especially student discounts. Going to the movies cost less on certain days and times. Some food and beverage outlets provide discounted rates for students. If you buy books and stationery, don’t forget to use a discount card. Some banks also have special privileges for students – ask to find out! Besides student discounts, look out for other discounts or sales. Buying a tee-shirt when it’s on a sale is cheaper than having to pay the full price. Buying a laptop at a computer fair might not only be cheaper, but it may come with free gifts too! Shop around and compare prices and different options before making a decision. How do you know if it is a bad deal? Our financial decisions often depend on many psychological factors. Advertising is a form of communication for marketing that is used to encourage or persuade people to continue or take some new action. Therefore, companies often pay a large sum of money on advertisements to drive people’s behavior so that they will buy their products and services. By understanding some of the advertising techniques used by companies, you will be able to understand what is communicated in advertisements. Below is a list of commonly used advertising techniques. Celebrity Endorsement: Where famous people, such as movie stars, are hired to pitch a product.

Glittering Generalities: Advertisements that overpromise benefits after the purchase of product or service.

12 Good Deal or Bad Deal?

Good Deal or Bad Deal?12



Facts and Figures: Advertisements that describe facts, figures, statistics and other data source. Snob Appeal: Advertisements that suggest the use of the product makes the customer part of an elite group with a luxurious and glamorous life style. Bandwagon: Advertisements that make use of a group mentality to try to convince individual consumers that a product is worth purchasing. Beware of advertisements that are misleading and even deceptive! Some examples include: “Bait and Switch”: Advertisements entice consumers into the store with bargains that are too good to be true. Once consumers are in the store, they are told the item is unavailable and are shown a similar, but more expensive, item. It is illegal in Singapore. Supermarket specials: Advertisement of products that are not in stock or that are not readily available to consumers at the advertised price. Out-of-context quotations: Comments by a noted person or passages from a story taken out of context to imply an endorsement of a product or service. Health fraud: Advertisements that promise overnight medical cures and treatments. “Get rich quick” schemes: Advertisement that offers an opportunity to earn a lot of money in a short amount of time with very little effort.

95% of the pets had tried it! What are you waiting for?

Facts and Figures: Advertisements that describe facts, figures, statistics and other data sources.

“Bait and Switch”: Advertisements entice consumers with bargains that are too good to be true. Once consumers are in the store, they are told the item is unavailable and are shown a similar, but more expensive, item. It is illegal in Singapore.


Facts and Figures: Advertisements that describe facts, figures, statistics and other data source. Snob Appeal: Advertisements that suggest the use of the product makes the customer part of an elite group with a luxurious and glamorous life style. Bandwagon: Advertisements that make use of a group mentality to try to convince individual consumers that a product is worth purchasing. Beware of advertisements that are misleading and even deceptive! Some examples include: “Bait and Switch”: Advertisements entice consumers into the store with bargains that are too good to be true. Once consumers are in the store, they are told the item is unavailable and are shown a similar, but more expensive, item. It is illegal in Singapore. Supermarket specials: Advertisement of products that are not in stock or that are not readily available to consumers at the advertised price. Out-of-context quotations: Comments by a noted person or passages from a story taken out of context to imply an endorsement of a product or service. Health fraud: Advertisements that promise overnight medical cures and treatments. “Get rich quick” schemes: Advertisement that offers an opportunity to earn a lot of money in a short amount of time with very little effort.

95% of the pets had tried it! What are you waiting for?

out-of-context quotations: Comments by a well known celebrity or excerpts passages from a story taken out of context to imply an endorsement of a product or service.

Good Deal or Bad Deal?



The next time you watch an advertisement, figure out which technique the company is using to sell their latest product. It will help you to be more informed and less tempted by the advertisement. It also helps if you research on a product before you buy it. Inform yourself! If you know of someone who owns the product, ask them for an opinion or simply look up reviews on the Internet. Activity Understand the fine print and implications behind a discount or sale.

What does “up to” 70% off really mean?

That second piece of clothing might be 50% off, but do you really need two?

Next time you see an advertisement, figure out the technique used to sell their latest product. It will help you to be more informed and less tempted by the advertisement. It also helps if you research on the product before you buy it. Be informed! If you know of someone who owns the product, ask them for an opinion or simply look up reviews on the Internet.



Apply the same rules in making purchases as when you are crossing a busy road:

1) STOP. Don’t just rush into the decision.

2) WAIT. Compare prices and options. Think if you really need it.

3) GO, only when you are certain. Delay your

purchase if you are not. Money spending tip: Make your purchases with cash. This can help you stick to your budget and avoid impulse purchases. Decide ahead of time how much you want to spend, and only bring along that amount in cash when you go shopping. Use your credit and debit cards only when you’ve carefully planned for a purchase.

Activity Using the traffic light metaphor, categorise your wants using the table below.

Items Action Reflection

RED LIGHT Stop

Don’t buy it.

AMBER LIGHT

Wait Practise delayed

gratification or comparison

shopping

GREEN LIGHT

Go OK, go ahead and

buy it!

13 Think Carefully Before You Purchase



Apply the same rules in making purchases as when you are crossing a busy road:

1) STOP. Don’t just rush into the decision.

2) WAIT. Compare prices and options. Think if you really need it.

3) GO, only when you are certain. Delay your

purchase if you are not. Money spending tip: Make your purchases with cash. This can help you stick to your budget and avoid impulse purchases. Decide ahead of time how much you want to spend, and only bring along that amount in cash when you go shopping. Use your credit and debit cards only when you’ve carefully planned for a purchase.

Activity Using the traffic light metaphor, categorise your wants using the table below.


RED LIGHT Stop

Don’t buy it.

AMBER LIGHT

Wait Practise delayed

gratification or comparison

shopping

GREEN LIGHT

Go OK, go ahead and

buy it!

13 Think Carefully Before You Purchase

Think Carefully Before You Purchase

13


A debit card allows you to make purchases without cash. Debit card quick facts:

With a debit card, your money will be deducted automatically from your bank account balance. As such, the debit card is not a loan tool. You cannot spend money that you do not have.

You can apply for a debit card from the bank when you are 16 years old. There is no minimum income requirement.

Debit cards also come with similar benefits to the credit card such as

merchant discounts.

You can use the debit card to make purchases over the internet. Money spending tip: If you have trouble controlling your spending, leave your debit card at home and use cash when going shopping at a sale! Because you cannot see how much money is actually being paid when using a debit card, it is very easy to just continue using the card without actually realising that you are chalking up a huge spending bill! If you do not keep track of your budget, you might be using up all your intended savings money without realising it. Activity What are my responsibilities in using a debit card?

Image Source: Visa

14 Keep Track Of Your Debit Card Expenses


A debit card allows you to make purchases without cash. Debit card quick facts:

With a debit card, your money will be deducted automatically from your bank account balance. As such, the debit card is not a loan tool. You cannot spend money that you do not have.

You can apply for a debit card from the bank when you are 16 years old. There is no minimum income requirement.

Debit cards also come with similar benefits to the credit card such as

merchant discounts.

You can use the debit card to make purchases over the internet. Money spending tip: If you have trouble controlling your spending, leave your debit card at home and use cash when going shopping at a sale! Because you cannot see how much money is actually being paid when using a debit card, it is very easy to just continue using the card without actually realising that you are chalking up a huge spending bill! If you do not keep track of your budget, you might be using up all your intended savings money without realising it. Activity What are my responsibilities in using a debit card?

Image Source: Visa

14 Keep Track Of Your Debit Card Expenses Keep Track Of Your

Debit Card Expenses14


Use credit cards wisely. You can apply for a credit card when you meet the requirements, such as minimum age and income. Before applying for and using a credit card, learn about the fees involved. These may include annual fees, cash advance fees, late payment fees, and interest rate charges. Here are some tips to use a credit card to your benefit.

1. Use the credit card as a payment tool only and not as a borrowing tool. i.e. only pay with the credit card what you know you can repay.

2. Take advantage of merchant discounts and cash back rebates. However, always ask yourself whether you actually need the item rather than just spending for the sake of the reward points.

3. Always pay the balance in full by the due date. If you only pay the minimum sum, you will be charged an interest on the remaining balance.

4. Keep track of your spending. Check against your budget.

Here are some tips to avoid the debt trap:

1. Borrow only what you can repay. 2. Be aware of the hidden terms and interest

charges. 3. Don’t be late on the repayment.

Important reminders!

1. Keep your credit or debit card number and pin a secret.

2. Report lost or stolen cards immediately. 3. Be aware of online scams. Some websites

might not be safe. Do not use a public computer for internet shopping as there might be tracking devices to steal your information. Use only secured payment gateway.

Activity The credit card interest rate is 24% per annum. There are also other potential fees involved in using a credit card. Find out what other charges there are, and how you can avoid them.

15 Take Control Of Your Credit

Use credit cards wisely.You can apply for a credit card when you meet the requirements, such as a minimum age and income. Before applying for and using a credit card, learn about the fees involved. These may include annual fees, cash advance fees, late payment fees, and interest rate charges.

Here are some tips to use a credit card to your benefit. 1. Use credit card as a payment tool only and not as a borrowing tool. This means that you should only pay with the credit card if you can

afford it.

2. Take advantage of merchant discounts and cash back rebates. However, always ask yourself whether you actually need the item rather than just spending for the sake of the reward points.

3. Always pay the balance in full by the due date. If you only pay the minimum sum, you will be charged an interest on the remaining balance.

4. Keep track of your spending. Check against your budget.

Here are some tips to avoid the debt trap:1. Be aware of the hidden terms and interest charges.2. Don’t be late on the repayment.3. Borrow only what you can repay.

Important reminders!1. Keep your credit or debit card number and pin a secret.2. Report lost or stolen cards immediately.3. Be aware of online scams. Some websites might not be safe. Do not use a public computer for internet shopping as there might be tracking devices to steal your information. Use only secured payment gateways.

Activity

A credit card interest rate is changed at 24% per annum. There are also other potential fees involved in using a credit card. Find out what other charges there are, and how you can avoid them.

Take Control Of Your Credit15


How much should you save? Try to keep at least 3-6 times the amount of your monthly expenses as cash in a bank savings account for emergency funds. This will of course depend on your needs and any debt. Where should you save or invest? How would you choose the best option for yourself from the different saving plans available? Here are some questions to ask yourself:

1. How much money do you have to save or invest? 2. How much time can you commit that money into the plan without

needing to use it? 3. What is your expected return on investment?

Savings Account A savings account is the first option for you. It will allow you to earn interest on your savings to make your money grow. You can also withdraw your money at any time when you need to use it. Different banks have a different minimum age for opening an individual savings account. If you are not yet eligible to have your own account, you can open a joint children’s account with your parents.

Remember to check on any fees that you need to pay, such as monthly fees or charges for ATM, bank counter service, GIRO, phone and internet banking use. There might also be a minimum account balance that you need to maintain, otherwise you will be charged a fee. Remember that the idea for saving money in the bank is to make your savings grow. These bank fees might actually reduce your money if you are not aware of them! Fixed Deposit Besides a savings account, you can also put your money in a bank fixed deposit account. Depending on the amount and duration, the fixed deposit may earn you a higher interest than savings. However, money in a fixed deposit cannot be withdrawn before the maturity date or you will lose your interest.

The Right Saving Plan 16

How much should you save?

Try to keep at least 3-6 times the amount of your monthly expenses as cash in a bank savings account for emergency funding. This will of course depend on your needs and whether you have any debts.

Where should you save or invest?

How would you choose the best option for yourself from the different saving plans available?

Here are some questions to ask yourself:1. How much money do you have to save or invest?2. For how much time can you commit that money into the plan without needing to use it?3. What is your expected return on investment?

Savings Account

A savings account is the first option for you. It will allow you to earn interest on your savings to make your money grow. You can also withdraw your money at any time when you need to use it.

Different banks have different minimum ages for opening an individual savings account. If you are not yet eligible to have your own account, you can open a joint children’s account with your parents.

Remember to check on any fees that you need to pay, such as monthly fees or charges for ATM, bank counter service, GIRO, phone and Internet banking use. There might also be a minimum account balance that you need to maintain, otherwise you will be charged a fee. Remember that the idea for saving money in the bank is to make your savings grow. Bank fees might actually reduce your money if you are not aware of them!

Fixed Deposit

Besides a savings account, you can also put your money in a bank fixed deposit account. Depending on the amount and duration, the fixed deposit may earn you a higher interest than savings. However, money in a fixed deposit cannot be withdrawn before the maturity date, or you will lose your interest.

The Right Saving Plan16



Other Investment Tools: Mutual Funds, Bonds and Stocks Both the bank savings account and fixed deposits have little or no risk. However, the return on investment is low. Other investment tools, such as mutual funds, bonds and stocks, might earn you a higher return. However, these also come with a higher risk. We encourage you to find out more from a reliable expert or professional. Beware of get-rich-quick schemes and scams. Diversify Your Risks Now that you are aware of the different ways you can invest, be it in a low-risk savings account or a high-risk investment tool, you need to realise the importance of diversification. Diversification is putting your money into different investments to avoid “putting all your eggs in one basket”. This would limit your overall risk by balancing out your riskier investments with safer ones. This way, you won’t suffer a great loss even if one or two of your investments don’t do too well.

other Investment Tools: Mutual Funds, Bonds and Stocks

Both a bank savings account and fixed deposit have little or no risk. However, the return on investment is low.

Other investment tools, such as mutual funds, bonds and stocks, might earn you a higher return. However, these also come with a higher risk. We encourage you to find out more from a reliable expert or professional.

Beware of get-rich-quick schemes and scams.

Diversify Your Risks

Now that you are aware of the different ways you can invest your money, be it in a low-risk savings account or a high-risk investment tool, you need to realise the importance of diversification.

Diversification is putting your money into different investments to avoid “putting all your eggs in one basket”. This would limit your overall risk by balancing out your riskier investments with safer ones. This way, you won’t suffer a great loss even if one or two of your investments don’t do too well.


Simple interest is an interest that is calculated on a principal amount.

For example, if $100 of your invested money earns 10% per annum, you will receive $10 in interest at the end of the year.

At the end of the second year you will earn another 10% X $100 = $10.


“Compound interest is the 8thwonder of the world. He who understands it, earns it. He who doesn't, pays it.”

Simple interest is interest that is calculated on a principal amount. For example, if $100 of your invested money earns 10% per annum, you will receive $10 of interest at the end of the year. At the end of the second year you will have earn another 10% X $100 = $10.

Compound interest is interest that is calculated on both the principal and the interest earned. For example, if you have $100 now, at the end of the 1styear you will earn $10 in interest if the bank pays 10% interest per annum. The $10 is added back to the initial amount and the new total of $110 in savings will earn another 10% compound interest on the $110 at the end of the 2ndyear. At the start of the 3rd year, you have $121. At the end of 8 years, your money will become $214, which is more than double of your $100. Did you know? The Rule of 72 can give you an approximation of how long it will take your money to double. To apply the Rule of 72, you just need to divide the number 72 by the compound interest rate. For example, at a compound interest rate of 12% per year,

7212% = 𝟔𝟔 𝒚𝒚𝒚𝒚𝒚𝒚𝒚𝒚𝒚𝒚

it will take about 6 years for your money to double, if you just leave it alone and the compound interest rate is constant throughout. This is regardless of the initial amount of money that you save or invest.

17 The 8th Wonder Of The World


“Compound interest is the 8thwonder of the world. He who understands it, earns it. He who doesn't, pays it.”

Simple interest is interest that is calculated on a principal amount. For example, if $100 of your invested money earns 10% per annum, you will receive $10 of interest at the end of the year. At the end of the second year you will have earn another 10% X $100 = $10.

Compound interest is interest that is calculated on both the principal and the interest earned. For example, if you have $100 now, at the end of the 1styear you will earn $10 in interest if the bank pays 10% interest per annum. The $10 is added back to the initial amount and the new total of $110 in savings will earn another 10% compound interest on the $110 at the end of the 2ndyear. At the start of the 3rd year, you have $121. At the end of 8 years, your money will become $214, which is more than double of your $100. Did you know? The Rule of 72 can give you an approximation of how long it will take your money to double. To apply the Rule of 72, you just need to divide the number 72 by the compound interest rate. For example, at a compound interest rate of 12% per year,

7212% = 𝟔𝟔 𝒚𝒚𝒚𝒚𝒚𝒚𝒚𝒚𝒚𝒚


17 The 8th Wonder Of The World

Compound interest is an interest that is calculated on both the principal and the interest earned.

For example, if you have $100 now, at the end of the 1styear you will earn $10 in interest if the bank pays 10% interest per annum. The $10 is added back to the initial amount and the new total of $110 in savings will earn another 10% compound interest on the $110 at the end of the 2nd year. At the start of the 3rd year, you will have $121. After 8 years, your money will become $214, which is more than a double of your $100.

Did you know?

The Rule of 72 can give you an approximation of how long it will take your money to double. To apply the Rule of 72, you just need to divide the number 72 by the compound interest rate. For example, at a compound interest rate of 12% per year,


“Compound interest is the 8th wonder of the world. He who understands it, earns it.He who doesn’t, pays it.”

The 8th Wonder Of The World17


LEVEL SAVINgS

Year 1 $2 x 180 days =

Year 2

Year 3

Year 4

Total Saved

Level Balance before the year’s interest Interest Earned Balance after the

year’s interest

Year1 $360 $360 X =$36 $360 + $36 = $396

Year 2 $396+ $360 = $756 $756 X =$75.60

Year 3

Year 4

10100

10100

ActivityStart a Savings Account

Suppose there are 180 days in a school year, and you decide to save $2 from your pocket money each day, from the beginning of Sec One. You save the same amount over the next 4 years. Let’s find out what can happen to this amount saved.

Calculate the amount of savings you will have at the end of each year and record your answers in the table below:

Suppose at the start of Year One, you decide to put your “fund” money into a bank account instead of a piggy bank. Assuming you continue to deposit $360 every year for 4 years in a bank that offers an interest rate of 10% per annum, calculate how much money you will have at the end of each year.

The amount I will have in my bank at the end of Year 4 is $________________.

Now, what is the difference between this amount and the one you previously calculated without any interest? Which one is better for you?


MARY gEoRgE

Age started saving 15 years old 25 years old

Amount saved each year $1000 $1000

Number of years saved 10 10

Age stopped saving 25 years old 35 years old

Total amount saved $10,000 $10,000

Compound interest per annum 10% 10%

Compound interest earned

Total amount at 45 years old

Both save the same amount of money. But Mary earns more years of compound interest than George because she started earlier. Who has more money at 45 years old?

Activity

Why should you start a savings account sooner rather than later.

The secret to learning from compound interest is to start young, with as much as possible. Calculate the interest earned by the character in the following story.

Mary started saving when she was 15 years old.Every year, Mary would save a thousand dollars in the bank.Mary saved for ten years until she was 25 years old.

George only started saving when he was 25 years old.Every year, George would save a thousand dollars in the bank.George saved for another ten years until he was 35 years old.

Both George and Mary’s savings have been growing in the bank at a rate of 10% compound interest. After 10 years of saving, both George and Mary leave their money in the bank until they are 45 years old, without adding in any more money.


Inflation refers to a general rise in prices measured against a standard level of purchasing power. Inflation reduces the purchasing power of money. This means that with inflation, a dollar buys less and less over time. How will inflation affect you?

The cost of a plate of chicken rice at $3 this year will double to $6 in about 14 years if inflation of 5% per annum is causing the weakening buying power of money. If your salary is not growing at the same pace, you will have less spending power due to the rise in prices caused by inflation.

We need to plan for the future with inflation in mind. If your current cost of living is $10,000 a year, at an inflation rate of 5% per annum, in 50 years’ time when nearing your age of retirement, you will need about $114,674 a year to maintain your same lifestyle now. That is more than 11 times what you are spending now! And the cost will continue to increase every year thereafter due to inflation.

How much do you think you will be earning before you retire? When do you think you should start to save for your retirement?

Activity What is the current inflation rate in Singapore? _____________ Ask your parents. How much did a bowl of noodles cost when they were your age? ______________ How much does it cost now? ______________

18 How Inflation Affects You

Inflation refers to a general rise in prices measured against a standard level of purchasing power.

Inflation reduces the purchasing power of money. This means that with inflation, a dollar buys less and less over time.

How will inflation affect you?

The cost of a plate of chicken rice at $3 this year will double to $6 in about 14 years if inflation is 5% per annum.

If your salary is not growing at the same pace, you will have less spending power due to the rise in prices caused by inflation.

We need to plan for the future with inflation in mind.

If your current cost of living is $10,000 a year, at an inflation rate of 5% per annum, in 50 years’ time when nearing your retirement age, you will need about $114,674 a year to maintain the same lifestyle. That is more than 11 times what you are spending now! And the cost will continue to increase every year thereafter due to inflation.

How much do you think you will be earning before you retire?When do you think you should start to save for your retirement?

Activity

What is the current inflation rate in Singapore? _____________

Ask your parents. How much did a bowl of noodles cost when they were your age? ______________

How much does it cost now? ______________

How Inflation Affects You18


Assets are things you own that have positive economic value. Examples of assets include your cash in hand, money in the bank, investments, property, and anything you own that has value. Some assets are intangible, such as your time, energy and education. Liabilities are what you owe, i.e. things that have negative economic value. Examples of liabilities include the balance on a credit card or loan, money you owe others, and a housing mortgage. Assets and liabilities can be short-term or long-term. Calculating your Net Worth gives a rough representation of your financial position. You should aim to increase your assets and reduce your liabilities. Activity List down some of your assets and liabilities and calculate your net worth. Assets Liabilities

Net Worth =

Net worth = Assets – Liabilities

19

What Is Your Net Worth?

Assets Liabilities

Net Worth =

Assets are things you own that have positive economic value.

Examples of assets include your cash in hand, money in the bank, investments, property, and anything you own that has value. Some assets are intangible, such as your time, energy and education.

Liabilities are what you owe, i.e., things that have negative economic value.

Examples of liabilities include the balance on a credit card or loan, money you owe others, and a housing mortgage.

Assets and liabilities can be short-term or long-term.

Calculating your net worth gives a rough representation of your financial position. You should aim to increase your assets and reduce your liabilities.

Activity

List down some of your assets and liabilities and calculate your net worth.

What Is Your Net Worth?19

Net worth = Assets – Liabilities


Buy the right type of insurance for the right purpose.

Insurance is the pooling of risks. There are different types of insurance. Life insurance. With life insurance, the designated beneficiary will receive a sum of money upon the death of the insured person. Some policies also pay out for other events such as terminal or critical illness. Health insurance. Health insurance covers the hospitalisation and medical expenses

when you need to be warded in a hospital. Do note that most insurance premiums, i.e. the amount you need to pay yearly, will increase with age. You will also have more difficulty buying insurance once you already have a diagnosed pre-existing illness or condition.

Personal accident insurance. This is a worldwide coverage for any accidents that might occur due to your work or travels. Travel insurance. Travel insurance is usually purchased for a specific period of time, and intends to cover possible inconveniences that might occur while traveling. The coverage will vary, but will usually include overseas medical expenses, luggage loss or delays, loss of money, accidents, flight delays, hotel cancellations, and other unforeseen events covered in the policy.

Other insurance. There are other insurance plans offered for specific items. For example, you can insure valuable personal articles like jewellery, silverware and musical instruments. You can even purchase insurance plans for your computers and laptops. It is also compulsory for vehicle-owners in Singapore to insure their vehicles. Some may buy an annuity plan or a universal life policy. You must know your needs and affordability before buying insurance.

20 Getting Insured

Buy the right type of insurance for the right purpose.

Insurance is the pooling of risks. There are different types of insurance.

Life insurance. With life insurance, the designated beneficiary will receive a sum of money upon the death of the insured person. Some policies also pay out for other events, such as terminal or critical illness.

Health insurance. Health insurance covers the hospitalisation and medical expenses when you need to be warded in a hospital.

Do note that most insurance premiums, i.e., the amount you need to pay yearly, will increase with age. You will also have more difficulty buying insurance once you already have a diagnosed pre-existing illness or condition.

Personal accident insurance. This is a worldwide coverage for any accidents that might occur due to your work or travels.

Travel insurance. Travel insurance is usually purchased for a specific period of time, and intends to cover possible inconveniences that might occur while travelling. The coverage will vary, but it will usually include overseas medical expenses, luggage loss or delays, loss of money, accidents, flight delays, hotel cancellations, and other unforeseen events covered in the policy.

Other insurance. There are other insurance plans offered for specific items. For example, you can insure valuable personal articles like jewellery, silverware and musical instruments. You can even purchase insurance plans for your computers and laptops. It is also compulsory for vehicle-owners in Singapore to insure their vehicles. Some may buy an annuity plan or a universal life policy. You must know your needs and what you can afford before buying insurance.

Getting Insured20



Activity

YOU’VE GOT A NEW COMPUTER!

You need a new computer and your parents gave a total budget of $2000 to spend on it. Below are 3 options you get to choose from.

Option A Option B Option C

Ad

van

tag

es

Dis

adva

nta

ges

I decided to choose Option ____ because…

Option A

•Computer $1800 •Computer Games

$100 • Tota

$1900

Option B

•Computer $1800 • Insurance Plan 1

$100 • Total

$1900 • Insurance Plan 1

provides insurance against theft.

Option C


$150 • Total


Provides insurance against theft and accidental damage

option A option B option c

Ad

van

tag

esD

isad

van

tag

es

option A

• Computer $1800

• Computer Games$100

• Total$1900

option B

• Computer $1800

• Insurance Plan 1$100

• Total $1900

• Insurance Plan 1 provides insurance against theft.

option B

• Computer $1800

• Insurance Plan 2 $150

• Total $1950

• Insurance Plan 2 Provides insurance against theft and accidental damage


Activity

YOU’VE GOT A NEW COMPUTER!

You need a new computer and your parents gave a total budget of $2000 to spend on it. Below are 3 options you get to choose from.

Option A Option B Option C

Ad

van

tag

es

Dis

adva

nta

ges

I decided to choose Option ____ because…

Option A

•Computer $1800 •Computer Games

$100 • Tota

$1900

Option B


$100 • Total


provides insurance against theft.

Option C


$150 • Total


Provides insurance against theft and accidental damage



Have you ever shopped online only to realise that the value of the goods are in another currency? Do you know that these values can be easily converted back to Singapore Dollars? Understanding currency exchange may even help you find better deals when shopping online! Currency refers to the form of money used in a particular country. Foreign Exchange is the trading (buying or selling) of one currency for another. Exchange Rates refer to the value at which one currency can be traded for another. Exchange rates constantly change and are affected by the demand and supply for that particular currency. You can easily look up for the current exchange rate, at that point in time, online. For example, as of July 20x4 the exchange rate between Singapore and American dollars is: 1 USD = 1.25 SGD In other words, you can exchange every US$1 for S$1.25. How will this help me find better online deals? By converting currencies using the respective exchange rate, you can compare all the prices in terms of Singapore dollars. So, before buying an item online you can look for the same item sold in various countries. Convert the listed price in the respective country’s currency to Singapore dollars, and compare which pricing is relatively less expensive!

21 Exchange Rates

Have you ever shopped online only to realise that the value of the goods are in another currency? Do you know that these values can be easily converted back to Singapore Dollars?

Understanding currency exchange may even help you find better deals when shopping online!

currency refers to the form of money used in a particular country. Foreign Exchange is the trading (buying or selling) of one currency for another.

Exchange Rates refer to the value at which one currency can be traded for another. Exchange rates constantly change and are affected by the demand and supply for that particular currency. You can easily look up for the current exchange rate online.

For example, as of July 20x4 the exchange rate between Singapore and American dollars is:1 USD = 1.25 SGDIn other words, you can exchange every US$1 for S$1.25.

How will this help me find better online deals?

By converting currencies using the respective exchange rate, you can compare all the prices in Singapore dollars. So, before buying an item online you can look for the same item sold in various countries. Convert the listed price in the respective country’s currency to Singapore dollars and compare which pricing is relatively less expensive!

Exchange Rates21



Activity Go online and search for the current exchange rate for the following foreign currencies:

One unit of foreign currency Singapore dollars Australian Dollar Euro Malaysian Ringgit Sterling Pound US Dollar 100 units of foreign currency Singapore dollars China Renminbi Hong Kong Dollar Indian Rupee Indonesian Rupiah Japanese Yen Philippine Peso Thai Baht **Will you be looking at the buying rate or selling rate?

1. How much Malaysian Ringgit will I get in exchange for S$1?

2. How much Euro will I get in exchange for S$1?

3. How much US Dollars will I get in exchange for S$1?


5. How much Philippine Pesos will I get in exchange for S$10?

one unit of foreign currency Singapore dollarsAustralian DollarEuro Malaysian RinggitSterling PoundUS Dollar

100 units of foreign currency Singapore dollarsChina RenminbiHong Kong DollarIndian RupeeIndonesian RupiahJapanese YenPhilippine PesoThai Baht


Activity Go online and search for the current exchange rate for the following foreign currencies:

One unit of foreign currency Singapore dollars Australian Dollar Euro Malaysian Ringgit Sterling Pound US Dollar 100 units of foreign currency Singapore dollars China Renminbi Hong Kong Dollar Indian Rupee Indonesian Rupiah Japanese Yen Philippine Peso Thai Baht **Will you be looking at the buying rate or selling rate?

1. How much Malaysian Ringgit will I get in exchange for S$1?

2. How much Euro will I get in exchange for S$1?



5. How much Philippine Pesos will I get in exchange for S$10?

1. How many Malaysian Ringgits will I get in exchange for S$1?

2. How many Euros will I get in exchange for S$1?

3. How many uS Dollars will I get in exchange for S$1?


5. How many Philippine Pesos will I get in exchange for S$10?


What do you hope to achieve financially in

10 weeks? 10 months? 10 years?

Try to s-t-r-e-t-c-h yourself when setting your goals. Remember to make your goals S.M.A.R.T.

Specific – State exactly what you want to do. Measurable – How will you know that the goal has been met? Achievable – The goal should be within your ability to accomplish. Relevant – The goal should be related to your overall life objectives. Time-bound – Set milestones and deadlines to achieve your goal.

The journey of a thousand miles begin with one step.

~ Lao Tzu ~ Activity The most difficult part about goals is usually the first part of writing it down. Let’s set some goals now and make a pledge! The first step is to think about your future life events. Use the table below to help you plan. Remember it has to be S.M.A.R.T.

Timeline My life events

10-weeks

10-months

10-years

22 Make Your Pledge

Timeline My life events

10-weeks

10-months

10-years

1. How many Malaysian Ringgits will I get in exchange for S$1?

2. How many Euros will I get in exchange for S$1?



5. How many Philippine Pesos will I get in exchange for S$10?

Activity

The most difficult part about setting a goal is usually the first part of writing it down. Let’s set some goals now and make a pledge!

The first step is to think about your future life events. Use the table below to help you plan. Remember it has to be S.M.A.R.T.

Make Your Pledge22



Now let’s make a pledge. I, _________________, promise to Save, Manage, and Share (SMS) as follows:

SAVE

What are my goals?

1.

Date due:

2.

Date due:

3.

Date due:

MANAGE

What are my goals?

1.

Date due:

2.

Date due:

3.

Date due:

SHARE

What are my goals?

1.

Date due:

2.

Date due:

3.

Date due:

How will I achieve them?

1.

2.

3.


1.

2.

3.


1.

2.

3.

I pledge to work hard towards achieving the goals above. Name: Signature: Date: