Promote Personal Financial Management Education Including Insurance Principles

Speech of the Hon KP Chan on Moving Member’s Motion on Promoting Education in Personal Wealth Management (Synopsis)

•    Hong Kong is an international financial and shopping centre.  It is a community filled with strong sentiments of investment and consumption.  People are facing far too many questions in financial management but knowing too little about wealth management.  Many even think financial investment simply means wealth management.  In fact, financial investment is just an element of wealth management.  Personal wealth management has broader meanings of firstly planning for expenses in different stages of life according to personal requirements and based on individual income, spending and debt profiles, and secondly of achieving these targets with financial means like banking services, financial investments and insurance, etc that preserve or accumulate capital.

•    People in Hong Kong are poor in wealth management concept owing to inadequate personal education. At times of negative real interest rates, conventional savings-based approach is unable to meet their aspirations.  In Hong Kong, investments are very popular and market information is readily accessible.  Yet, the majority of investors are fond of hearsay.  To them, investment is indifferent from betting.  They are vulnerable to substantial loss at market shocks.

•    Many young people are spending on revolving credit.  According to HKMA statistics, credit card receivables were as high as to HK$19.1 billion at the end of last year, indicating that many people are not smart spenders.  As they are not repaying their monthly dues in full, they are accumulating substantial interest expenses.  Lately, bankruptcy cases of tertiary students are reaching record high and such anomaly is believed to arise from credit card delinquency.

•    Personal loan is becoming popular in recently years.  Money lenders are advertising borrowing as fashion and encouraging irrational spending in business promotions.  If people are given correct values of money since childhood, they would be less likely to fall into financial traps.

•    A hot social topic today is affordability in homeownership of young people as housing prices are obviously surging too high.  Young people are finding it even more difficult because they do not have the chance to learn financial management in purchase and sale of properties.

•    Hong Kong is still falling behind Europe and America in popular knowledge of insurance.  Actually, insurance is an essential element in personal financial management.  It is a pity that many people still misunderstand insurance and are not effectively using it as a tool for protection and financial management with a view to arranging for a better life.  Apart from personal savings, insurance also provides protection for unforeseen mishaps through the transfer of risks.  Thus, people would not face undue uncertainty when making important decisions in life.  The society will also benefit as people who have insurance protection are less likely to turn to the Government for assistance in case of adversity.

•    In recently years, the OECD has been actively promoting financial education that focuses on planning for life like savings, bonds, insurance and pension schemes.  Our educational authorities are adding personal financial management to school curricula in recent years as well but they are far from adequate in magnitude and practicality.  In contrast, financial education is more developed in many countries.  In the US, State Governments are mandating economic and financial education in school curriculum.  In the UK, the Parliament has set up a non-partisan panel on mandatory financial education.  Taiwan is also piloting the teaching of financial management in schools.  Apparently, it is a global trend to bring personal financial management to formal school curricula.

•    A key point of this Motion is adding personal financial management to formal school curricula or alternatively expanding personal financial management within Liberal Studies.  In Hong Kong, personal financial education is grossly inadequate in magnitude and practicality, and curriculum reform is overdue.  The best remedy is introducing financial management to both primary and secondary curricula.  However, as the educational sector has concern that an extra subject would mean extra burden for students, we may expand financial management in Liberal Studies to a separate module instead.

•    In my school years, there was no financial education at all. I have learnt financial knowledge from work bit by bit and piece by piece.  Such knowledge allows me to better plan my path of life.  I am convinced that teaching financial management in schools would benefit students for life.

•    Another key point of this Motion is to provide for more personal financial management in the work of Investor Education Council to be established shortly.  As the new Council is under the SFC, it is supposed to promote financial knowledge from the aspect of investors.  As it would target at the general public, I propose that its programmes should cover a more comprehensive concept of financial management including savings, spending, insurance and retirement protection, etc.

•    Finally, the Government should encourage people to plan for their post-retirement finance within their capabilities.  Hong Kong’s population is aging.  Not only the grassroots are having anxieties about retirement, the middle-class is also concerned about maintaining their living standard after retirement.  Many of the middle-class understand financial management, make good use of investment resources and earn realistic returns in preparing for retirement.  Yet many more people know little about basic investment, make bad decisions and worse still lose their savings for retirement.  With the establishment of the Investor Education Council, I wish that more would be done in educating people to plan and invest for their retirement smartly.

•    The financial market in a globalized world today is changing fast.  Financial management is an indispensible capability.  I wish the Government would listen to the views of Legislators and promote personal financial management education early.

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