Crowdsourced: Why People Don’t Care About Personal Finance

Sooooo I wrote a post last week that sparked off a flurry of responses from both bloggers and readers alike. Who would’ve thought a post that I concocted in friggin’ Xin Wang would’ve gone semi-viral?

First, let’s start off with the personal finance bloggers:

• Xeo Lye wrote about the different reasons for different age groups, and even zoomed in to students
• Ken’ichi mentioned that it might be an awareness issue
• SGYI wrote about using events as catalysts to get young people interested
• Budget Babe described how other priorities crowd out the intention to take care of money
• Chris from Tree of Prosperity feels that it’s not a bad thing – it’s just society’s way of rewarding knowledge and skilled application
• Bully The Bear talked about how it often starts out with greed, but getting skin in the game and reading more will put people on the right path

All these responses told me one thing: That I’m waaaaayyy too slow at writing blogposts.

(Seriously, it takes me at least 3 days to write a post, while these guys managed to publish within 12 hours of reading mine. Wth?!)

Anyhoo, I also had dozens of excellent comments and emails from readers all around Singapore. Everyone had insightful opinions on why Singaporeans don’t really care about personal finance, with many supplementing their findings with life stories and anecdotes. Fantastic stuff.

So I decided to aggregate all the responses I’ve received so far. Why?

Because crowdsourced answers = way richer than the three hypotheses I came up with last week.

I managed to categorise most responses into 3 categories, which will hopefully help the good folks who’re trying to tackle this icky problem. (MAS / CPF board – Are you reading this?)

Reason 1: Lack Of Awareness

i.e: People either aren’t aware, or have wrong Invisible Assumptions about personal finance

• “People don’t understand that investment is not speculation; it is a step by step process.”
• “Why don’t schools emphasize the magic of compound interest more instead of teaching all those other formulas which have little practical use after school?”
• “Perhaps the government could implement something into the education system? After all, it’s something important in one’s upbringing (health education anyone?) that can be passed down from generation to generation.”

Ah, the education system: the first response we instinctively turn to whenever people aren’t aware of something.

I’d say that education kiiiinda helps, but it’s certainly not enough. Remember those good ol’ health education classes that we used to take back in the day? Yet, you STILL eat McDonald’s every couple of weeks, right? When it comes to behaviour change (think about quitting smoking, exercising regularly, improving your finances, etc), information alone is not enough.

Still, I think putting financial literacy in the education system is a great first step. Even though students may forget 90% of it after the exam, at least they’ll be aware of the basics – which could spark off an interest for more later.

And when they search for more – and some of them will – the platforms and bloggers and courses will be there to help. And hopefully help them avoid the scammers out there.

Reason 2: Complexity

i.e: I’m aware, but it’s too hard to understand or implement

• “I think the bulk of my friends understand the need for personal finance but they have no clue where to start.”
• “Personal finance means making tough choices, e.g. taking risk, making sacrifices”
• “Then comes the myth that it’s not easy. To me its not that simple but i think it’s not THAT tough.”
• “It could be due to a sense of helplessness in view of (i) poor financial state of oneself; (ii) and the forever increasing cost of living”

I LOVE this group the most. Why?

Because they’re actually interested. They just haven’t found the right path yet.

We can help fix this by making personal finance simpler. In fact, there’s already a push in this direction:

• The rise of index investing into simple, low-cost funds
• The government encouraging us to buy simple insurance products directly online
• The MAS removing the need to take a dumb test when we wanna invest in the STI.

Still – more can be done. What about target date and real index funds (instead of just ETFs) in Singapore? What about DIY investment services that take care of all the annoying legwork for you? What about reducing the (criminally high) brokerage commissions in Singapore?

We’re on the right path, but we still have some way to go.

Reason 3: Indifference

i.e: I’m aware, but I don’t really care / have more important things to do.

• “Many that I meet at work are interested, but almost all of them are not motivated to make that effort. They would rather put their time in more “important” things than put some time to learn about their future.”
• “I think Singaporeans are generally very blessed and they adopt the mindset of instant gratification.”
• “To be honest, I’ve not started on investing because it’s not critical since I can be self-sufficient on my salary.”
• “We simply fall too easily for mental shortcuts. Those cognitive biases make us do dumb things with our hard-earned money because we do not pause and think enough.”

Now THIS is the thorny part.

Let’s be honest here – there are some people who just don’t want to work on their personal finances. It’s human nature, yo. So should we worry about these guys?

In my opinion, noooope!

When I first started blogging I used to have dinner with friends where I’d yammer on about money to them. “WHAT! You don’t use automated savings? You should REALLY set it up – it’s so important, yadda, yadda, yadda”

Then I’d watch my friends suddenly get really interested in the intricacies of the restaurant’s ceiling. Yeah, I was such an annoying douchebag.

I now realise that you can’t change people if they don’t want to change. Preaching to unreceptive ears is like trying to convince Thai Express not to charge you 30 cents for water. It ain’t gonna happen.

So when it comes to personal finance, the government already has everyone’s super basic needs covered with CPF, MediShield, subsidies, etc. For people who want more than just the basic, they can either slog at a cubicle job for the next 50 years, or they can start learning about personal finance.

Usually, it takes some sort of catalyst – like a health emergency, a job loss, or a 49th birthday – to wake people up. It’s not ideal, but that’s reality.

You’re Already Ahead

 But here’s the good news: By reading personal finance blogs like this one, you’re already ahead.

Maybe you’ve already started making some small tweaks to save an extra $300 a month. Maybe you’re on track to retiring with $3 million dollars. Or maybe you’re just starting out, and you’re searching for the right solution.

Wherever you are on your journey, keep going. You’ve got a head start, now set your sights on the finish line, and take the next step forward.

Image credit: angelocesare, gagilas, clement127, Mr Physics