Money Lessons We Wish We Learnt in School

Geography. History. Maths. These are the common curriculum that every Singaporean child has to go through as part of the education system. However, it is less common for students to be taught practical financial lessons in school.

For many of us, money is not a frequently talked about topic growing up. As such, financial knowledge is usually learnt the hard way and gained through trial and error. An uninformed decision can quickly lead to a financial disaster.

To save you the time and stress of going through a bad financial situation as a result of poor financial decisions, we have collated a list of financial lessons we wish were taught in school.

Active vs passive income

From a young age, we are conditioned to think that we have to study hard to get a well-paying job that will put food on the table. Hence, we subconsciously associate money and income with a stable job. However, that is not the case as there are many other ways to generate income outside of a 9 to 5 job.

There are two types of income that you should know: Active Income and Passive Income.

Active income is the money earned from consistent effort and participation such as your main job while passive income refers to income that requires little effort to maintain and one that you are not actively involved in. Examples of passive income include dividends from investments, rental income and even cash back from credit cards.

Note that passive income is not a get-rich-quick-scheme and would still require upfront work.

Power of compound interest

While simple and compound interest are taught in the school’s curriculum, little emphasis is placed on how powerful this tool is. As such, many graduate from school only knowing how to compute but are not able to fully utilise this to their advantage.

To demonstrate this, we will be using examples from two different scenarios.

If you make a monthly payment of S$110 for a S$5000 credit card debt at 25% interest. It would take you more than 143 payments or about 12 years to completely pay off your debt. Moreover, the amount of interest alone would amount to S$10,668, which is more than double the amount of debt.

On the other hand, if you put aside S$1,000 a month with an annual interest rate of 3.5%. At the end of 40 years, this sum would grow to a little more than a million dollars. Compound interest, if used correctly, could be a useful tool that can serve you well on the road to financial freedom.

The basics of budgeting

Budgeting is crucial in helping you achieve your financial goals by forcing you to keep track of every dollar. Laying the right foundations with budgeting can prevent you from diving headfirst into financial troubles yet it is often overlooked.

Especially for students transitioning into the adult phase, these are some monthly expenses you’ll need to look out for:

  • Housing
  • Transportation
  • Food
  • Utilities
  • Insurance
  • Medical and Healthcare
  • Savings, Investing and Debt Payment

Each category is a topic on its own so make sure to equip yourself with the right knowledge to avoid some of the common pitfalls. For those who are looking to start a budget, here are some simple steps you can adopt.

  1. Know where and how much money comes in
  2. Keep track of every expense even if it is a one-off spending
  3. Adopt a budgeting strategy
  4. Start small but remain consistent

Read more: 7 Best Budget-Friendly Ways To Treat Yourself

Saving alone is never enough

“Save for a rainy day”. Most of us have grown up hearing this classic phrase. While saving is undeniably a good habit to have, it is not enough.

Why is this so? The primary reason why savings is inadequate for achieving your life goals is because of inflation.

Inflation devalues the amount of money you have in the bank over time. While this does not reduce the amount of money you have saved, it lowers the purchasing power of your savings. For instance, a plate of chicken rice that cost S$2.50 a few years back now costs S$3.50. Even if you have saved S$2.50 in your savings account previously, you might not be able to afford a plate today.

It is, therefore, crucial to look for investment alternatives to stay ahead of inflation and maintain the purchasing power of your savings. By now you should be aware of the power of compound interest so do not procrastinate as it is never too late to start now.

Buying a house

A common misconception about buying a house is that the cost stops at the price of the unit itself. In fact, from option fee to stamp duty, the one-off upfront payments alone can already cost you thousands of dollars. Furthermore, you would have recurring property tax and maintenance fees on top of your monthly home loan payments.

Apart from the different payments you have to make, there are also many other aspects to take note of when it comes to buying a house such as administrative paperwork, renovation, and the type of loans you should apply for. With so many things to consider, do make sure to read more about it to prevent any unwanted surprises when buying a house.

Another important thing to note is that mortgage eligibility depends on your credit score. The better your credit, the more choices are available for you. A good credit score requires a lot of time and effort to build and maintain. Hence, if you are planning to buy a house in the future, it is advisable to check your credit score frequently and manage any credit card loans responsibly.

Read more: A Singaporean’s Guide to Buying Your First Resale HDB Flat

Importance of insurance

Another topic that is not widely discussed in school is insurance. Despite the bad stigma around it, there is no denying that insurance is important and that it can give you peace of mind knowing you are covered financially from any unforeseen situations.

Pro-tip: Use our insurance calculator to figure out the insurance coverage you need.

Especially for young adults making monthly mortgage payments or families with young children, the risk of being financially crippled by an unfortunate event is very high. Acting as a financial safety net, insurance transfers the risk to insurance companies so that you and your loved ones are protected.

Insurance is a long-term commitment. With so many different plans and types of coverage for just about anything under the sun, the onus is on you to do your due diligence when deciding on a plan as most policies’ surrender value is zero or even less than the total premium paid if you decide to terminate the plan prematurely.

Fun Fact: Auto insurance premiums increase with each claim based on the severity of the accident.


If only I knew… You can go on about how the school does not equip you with the right skill set but with the availability of the internet nowadays, the power of knowledge is right at your fingertips if you know where to look for it.

While we have only barely covered an overview of the vital money lessons missed in school, it is now your turn to take over and gain financial literacy that will serve you well for the rest of your life.  If you are unsure of where to begin, you can start with Personal Finance 101: What are “Funds”?

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