Financial literacy — a person’s ability to make informed judgments and effective decisions on the use of his or her money — is a subject that is not taught at school, but is worthy of life-long study. Even those with an abundance of financial expertise say they couldn’t agree more with this statement.
“As a finance major, I never realized I knew so little about managing my own money, until now,” Huang I-shun (黃怡舜), a senior in the finance department at Shih Hsin University, said at a recent award ceremony.
Last month, Huang was awarded NT$10,000 for creating the third-most feasible personal finance plan in a financial planning contest sponsored by Citibank Taiwan Ltd (花旗台灣) to promote financial literacy among college students.
His near-term goal is to save enough money to buy a netbook and repay his student loans in four years, and to save another NT$1.6 million (US$49,800) in 10 years for a down payment on a home of his own.
Huang believes he can achieve his goal by making good use of the NT$300,000 he has saved so far and his NT$36,000 annual income from a part-time job as swimming coach.
The Financial Literacy and Education Association (財金智慧教育推廣協會) praised Huang for a well thought out plan, but advised him to revise his expenditures from time to time to take inflation over the next 10 years into account.
“To plan for your financial future is an important lesson in life. However, this has to be done on an ongoing basis so that you will be able to deal with unforeseen circumstances,” the association’s chairman, former minister of finance Lin Chuan (林全), told the award ceremony.
In addition to detailed planning and being aware of possible risks, another other important point is to guard against material desires and laziness, Taiwan Stock Exchange Corp senior executive vice president Yang Chao-zon (楊朝榮) said.
“Remind yourself of your goals every time you go shopping and refrain from overspending,” Yang said, adding that a goal-oriented management style could help prevent careless spending.
Wang Shiu-fu (王湘富) of National Taiwan University and Kung Ting-yun (康亭云) of Wenzao Ursuline College of Languages, who won the first and second prizes in the finance management competition, agreed that it didn’t take a degree to learn how to manage your own money.
Wang, who won the NT$30,000 top prize, said he aimed to study further and complete his master’s degree in the US in seven years, which he estimates would cost NT$2.6 million.
“Laying down a plan helps me understand the importance of changing the way I spend money, although it is also a little bit frustrating to know how little I can spend if I want to realize my dream,” he said.
Kung won the NT$15,000 second prize with her 10-year financial plan.
Her aim is to buy a three-bedroom apartment in Taoyuan for NT$3 million in 10 years, taking into consideration expenditures including property taxes, realtor commissions and insurance premiums while making fund investment plans to maximize her income.
“I have learned to ask myself whether I need to or want to buy something,” she said.
Kung is the only one among the three winners who has actually put down money on diversified investments to reduce risk.
“I got excited whenever I found some extra money in my bank account,” she said.
Citibank Taiwan chairman Morris Li (利明獻) said he was amazed to find that college students have a higher degree of financial literacy than he had expected.
When he was young, Li said, the only investment options for his hard-earned salary were current and time deposits.
While his bank has dedicated more than NT$50 million to promote financial literacy nationwide since 2004, he said he believes there are still many college students who need to hone their financial knowledge before they will be ready to make it in the workplace.
Citibank Taiwan is urging college students to get started with a financial plans as soon as possible so that they can attain more financial freedom and improve their chances of realizing their dreams.
Becoming a youthful millionaire is possible, but only if people start planning early, the bank says.
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