Now that the government has been clear that they’re aiming to turn Singapore into a cashless society in their relentless drive to become a Smart Nation, Singaporeans had better start saving those lucky $1 coins, because it looks like they might be a lot harder to come across in a couple of years’ time.
A lot has been said about the benefits and pitfalls of a cashless society, but the government seems to be glossing over one huge pitfall that can have an enormous impact on the finances of future generations of Singaporeans.
The folks behind the Money Doctors programme in the UK, a national support service for students, found that cashlessness actually makes it harder for young people to manage their money.
They found that many British students who got their monthly allowance from their student loans in the form of a cheque often sucked at managing their money and often found themselves struggling to buy food at the end of the month.
This has scary consequences for Singaporeans, perhaps more so than in other societies. Here’s why.
Money management and retirement-readiness is already a big problem in Singapore
To put it bluntly, in certain societies, the importance of managing one’s money isn’t as pressing as in others.
In societies with a strong social safety network, people can get away with living from paycheck-to-paycheck. If they lose their jobs, they collect unemployment benefits. If they fall ill, they may be able to take advantage of free universal healthcare. When they retire, they enjoy a decent pension. Of course, the people often pay for it in the form of high taxes, but as a result there is a stronger sense of being able to do whatever they like with the money they have left.
This is the exact opposite of the Singapore system. Singaporeans need to take 100% responsibility of their own finances. If you lose your job, you’d better make sure you have some savings to tide you through till your next one. If you fall sick, you’ll thank your lucky stars if you’ve bought private medical insurance. And one only has to look at the number of very old people toiling away in menial jobs to know how important it is to be retirement-ready.
Countless reports have shown that Singaporeans are not managing their money well, and that retirement is a problem for many.
A 2015 MasterCard survey showed that financial literacy amongst Singaporeans is falling and people are finding it harder to pay their bills and budget. A 2016 poll showed that more than half of Singaporeans are worried they won’t be able to maintain a decent standard of living when they retire, while about 44% of the people surveyed had not started saving for retirement, including 27% above the age of 55.
Part of the reason is a lack of discipline, plain and simple. Credit card debt continues to be a growing problem, and there are countless reports of well-paid Singaporeans landing themselves in mountains of debt simply because they got a little too swipe-happy.
To compound the problem, even for prudent spenders, there are many lifestyle factors that drive up spending. Overspending is incredibly easy in Singapore, since the country is basically one big shopping mall. Young people rarely entertain at home because of a lack of privacy, and going out means spending on food and possibly drinks. Many people don’t even cook at home.
An increasingly cashless society is likely to exacerbate these problems. If children are going to grow up receiving their pocket money electronically, that could mean a new generation of Singaporeans with poorer self-control and money management skills than before.
What can we do to mitigate the damage?
Despite the pitfalls, you can bet that the relentless march of progress will wait for no one. So instead of complaining about how cashless payments are going to ruin all of us, it’s important to identify ways to circumvent the dangers.
Children are going to be affected more than adults who’ve already been using credit/debit cards, online payments and contactless payments for years. These kids could potentially never have the experience of handling cash, or of thinking about money in more tangible terms.
It’s thus important that parents find ways to boost kids’ financial literacy at an early age. Budgeting and saving are NOT going to come naturally to your kid, much less so if he is paying for things digitally.
That could mean coming up with a budget together with your kid and then reviewing his/her spending regularly, taking advantage of the digital system to track all expenditure and making your kid participate in the act of putting money into the bank or e-wallet so he/she is more aware that there is a finite sum of cash in there that must be managed wisely.
Parents can go further by teaching kids about the value of money when they request that toys be bought for them, and encouraging them to save up for something they want rather than buying it for them straight away.
In short, discipline about money is something that parents need to actively inculcate in their kids at an early age.
The positives of a cashless society
Negativity aside, if more can be done to educate Singaporeans about personal finance and instill discipline, cashless payments can actually help us manage our money better.
That’s because cashless payments make tracking of spending a lot easier, and can help us figure out where our money is going and refine our budgets much more efficiently.
For instance, instead of having to manually key in cash expenditure into an app that tracks spending, going 100% cashless means that this task gets automated.
However, to harness these benefits, Singaporeans will need to first be educated about the importance of managing their money, and be motivated enough to take an active role in doing so. We’ll be covering more on this so follow us on Facebook to stay tuned.
It might also be a good idea for the government to put in place stricter limits on how much lending institutions can lend Singaporeans so things don’t get out of hand when we go fully cashless.
What impact do you think going fully cashless will have on the finances of Singaporeans? Share your views in the comments!