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Financial Literacy

As an international financial hub, Hong Kong has a stock market capitalisation of over $30 trillion, which equals to eleven times of our local GDP. The total asset of our banking sector also amounts to more than eight times of the GDP, while the total value of asset being managed by Hong Kong’s asset and wealth management services accrues to over $24 trillion. While our highly internationalised financial service industry grows robustly, financial education to investors and the public is particularly important.

As revealed in survey, while about 80 per cent of the people of Hong Kong have financial goals, less than half have taken the necessary action to realise these goals. Among those respondents who have borrowed money, about 20 per cent of them fail to make repayments on time. Moreover, some 40 per cent of the respondents lacked emergency funds to respond to unexpected financial needs. Given our ageing population, it becomes even more imminent for people to make adequate financial preparation for their retirement.

With the support of the Securities and Futures Commission, Hong Kong Monetary Authority and other supervisory bodies, the Investor Education Centre has been established six years ago to provide financial and investor education to the public. Recently, the Centre was renamed as the “Investor Financial and Education Council (IFEC)” and launched the latest version of the Financial Literacy Strategy, which aims at providing comprehensive education on a wide range of money matters to help and empower the people of Hong Kong to make informed, rational and responsible financial decisions. The new Strategy pays particular attention to the different financial needs of various groups, including the elderly, the youth, working adults, students and vulnerable groups (such as low income families, new immigrants, ethnic minorities and foreign domestic helpers), with a view to drawing up more targeted and suitable education materials for them.

For instance, layman language should be used in elderly education with the key message of avoiding risky investment choices. For young working adults, an earlier planning for long term investment could help accumulate returns for preparing their retirement. Students should also be equipped with knowledge of responsible consumption and the risk of over-consumption or over-borrowing. All these educational works may take time to show tangible effects, but in the long run, they can gradually reshape people’s financial behaviours which in turn promote the healthy development of our society.

Some people may not be convinced by the idea of financial literacy given the limited cash on hand. However, financial literacy is indeed the attitude and ability to differentiate “nice-to-have” and “must-have” during consumption. To lead a stable and healthy life, we have to manage the risks in our investments, as well as to avoid over-consumption or over-borrowing.

In fact, people’s behaviours on daily consumption, borrowing, investment and saving have an impact on the ecology behind our financial system. After the 2008 financial crisis, one of the lessons the global society has learned is that a financially educated and informed public contributes to the solid foundation of the financial system. It is therefore important for us to strengthen the educational works of financial literacy in order to maintain Hong Kong’s position as an international financial hub.

January 20, 2019