It's time the young woke up and became financially literate

“My mum said she invested Bt50,000 in a fund. She has advised me to put extra money into the fund, but what is a fund?” one man asks his friend, who mumbles something inaudible. 

“What is the fund doing with this money? Will there be a leak? I mean, will the money go somewhere else?” the puzzled man continues. 

Obviously, if someone working in public or private financial institutes overheard this conversation, they would want to jump off the balcony. 

Also, I guess those at the Stock Exchange of Thailand (SET) would be more shocked than others, given that the organisation has been very active in promoting financial literacy among youngsters. Apart from the True Visions’ Money Channel and two shows on Channel 5, the exchange has a public library in its building, not to mention the SET Corner kiosks set up in universities, colleges and schools nationwide. These kiosks, of which there are more than 180 to date, provide all sorts of reading material, including those centring on personal finance, investment and savings. 

The Bank of Thailand has also earmarked resources to promote financial literacy. For years, it has been running training programmes for teachers focused on financial planning, saving and investing. The www.1213.or.th website was launched last month to also spread financial knowledge among the general public. At a glance though, this website looks like it’s devoted mainly to protect those who might be lured into building up debt or investing in some ambiguous instruments, or those who are cheated or unfairly treated.

Having been in existence for nearly two decades now, mutual fund firms and securities companies have also been working hard to promote their products. 

However, with all this information made available to promote financial literacy, why did the young man mentioned above speak about mutual funds as if they are products from another planet? Why have so many fallen into debt traps? Why have many failed to build up their wealth so they can have a happy retirement?

Of course, financial literacy is not the only factor for a happy old age, but it might be able to provide strong immunity. New products are launched every month, but if consumers can learn that spending now means less saved tomorrow, then that desire to get a new mobile phone, TV set, car or other such items can be controlled. 

It never stops surprising me when I hear my colleagues boast about their bigger TV screens. If our 32-inch screen still functions, why would we want to buy a more expensive, bigger one? 

Also, the tendency for people falling into debt traps worsened with the last government. Apart from its rice-pledging scheme, the first-car buyer scheme was perhaps the most disastrous policies introduced by the ousted Yingluck Shinawatra government. 

Thousands, lured by the offered tax rebate, rushed in to buy a new car. However, few realised that it came at a price – that they would still have to shoulder the interest cost of the loan they would have to take and that the instalments would eat into their disposable income. All sales representatives at auto companies admitted that many of their clients watched their “first car” being foreclosed in the first year due to “miscalculation”. If this scheme was introduced in Germany, it is very doubtful that thousands of Germans would rush to buy a new Volkswagen. 

A one-night stay at a house in Hamburg shed light on how humbly the Germans live. The house owner was past retirement age, but was still providing medical services. Though she was wealthy even by German standards, with her house located near a big park and a Mercedes Benz in the garage, there were no signs of luxury in her house. Yet, despite being alone in a large house, this lady showed she was emotionally and financially independent. 

In comparison, poor financial literacy among Thais explains why Thailand’s household debt is as high as 85 per cent of the gross domestic product. It also explains why many Thais will die poor. 

A recent study conducted by a Bangkok University lecturer showed that only 34.6 per cent of old people in the Kingdom have any savings, with many having saved less than Bt100,000 – a sum that is meant to support them as well as provide for emergencies.

Apart from this startling figure, Thailand is fast becoming an ageing society, with some 9 million or over 10 per cent of the 65-million population crossing the 60-year mark. 

Bear in mind, most old people cannot generate any income. 

The National Savings Fund scheme that is scheduled to kick off in June is a good initiative. This is Thailand’s first pension scheme that will help citizens working in the unregistered sector, such as farmers, freelancers or odd-job workers, save for their retirement. This scheme, tied in with the Social Security Fund and other social schemes, should definitely provide some hope. However, I still doubt that the overall situation will ever change. All financial institutes encourage people to save when they are still young. Unfortunately, this message has not reached many youngsters, including that young man who had no knowledge of a mutual fund.