My parents were born in the 50s and can be considered the Second Generation Singaporeans.
They weren’t highly educated but they worked hard. It is typical for that Generation of Singaporeans to be considered highly educated if you have passed the Cambridge ‘O’ Levels. My parents had Primary School qualifications.
They didn’t earn a lot but they had enough to get by.
Life could be better but it wasn’t that bad after all. There was nothing to complain about.
Like the rest of their peers, my parents found themselves working in the fast growing Singapore in the 80s to 90s. They contributed to the economic success of Singapore and also get a share of the wealth creation.
For example, they were the beneficiaries of the record low HDB prices we probably won’t see ever again. My parents bought their matrimonial house, a brand new 4-room flat in Tampines from HDB for $50,000.
In 1997, the house was worth $320,000! I bet my parents were not the only ones who benefited. I would say majority of the Singaporeans made a fortune from properties. However, the wealth paths started to diverge among the Singaporeans. Those who managed the profits well continue to prosper, owning multiple properties. Those who squandered away the profits ended up much poorer relatively. Unfortunately, my parents belonged to the latter.
My parents decided to move to a place closer to city and they bought a 4-room flat for $420,000 in the resale market. And it wasn’t surprising that the interest of moving was during the property market frenzy in 1997. If you do not remember, it was the peak of the Singapore property market before the Asian Financial Crisis. This is what psychology can do to you – fuel your greed and entice you into actions that are detrimental to your wealth.
They sold the old house for $320k and due to a positive sale, they got several hundred thousands in cash after repaying the mortgage payments to their CPF accounts! On hindsight, I would have hoped that they downgraded to a cheaper place and invest the extra cash wisely. Too bad that I do not care about money in my teens to give meaningful opinions to my parents. They didn’t use much of the proceeds as down payment for the new house and instead, took a brand new 25-year loan. They probably also did not know where the money went to after all these years.
Fast forward to 2007. The CPF Board notified my Dad that his CPF account has no money left. This means that my dad has to cough up $750 cash for mortgage repayment each month, on top of the deduction from my mum’s CPF account. To make things worse, my mum’s CPF does not have much to last for another 15 years of mortgage repayment. Even if they could, they would be asset-rich but cash-poor.
The decision was to sell the house and downgrade to a 3-room flat. They sold the house and we moved to my Grandparents’ place before getting a new place. Unfortunately we were caught in the property boom ever since and we didn’t manage to get a place. With the minimum sum kicking in for their age, my parents are unlikely able to afford a house.
I believe most Singaporeans were given a chance, or even chances. Was it because the lack of financial literacy that resulted in financial hardships? To me, most of the problems are created by ourselves, not because of circumstances. It is easy to complain but on reflections we may have no one to blame except ourselves.
However, I do not blame my parents for the lack of financial literacy. They only believed in working hard and no one emphasised the importance of financial literacy to them. I am thankful for their mistakes. They have taught me about finance albeit indirectly. They showed me how costly wrong financial decisions can be. A single decision can wipe out years of hard work. They paid for the lesson and I am not going to pay for the lesson again.
I hope this story can help you as much as it had helped me. Please do not think you can afford to be financially illiterate in a capitalist society.
Co-Founder. Believer of the Factor-based Investing approach. Running a Multi-Factor Portfolio that taps on the Value, Size, Profitability and Momentum Factors. Quant at heart. Believe the financial industry can treat their customers better. Wants to change the world.