2022.12 The Taiwan Banker NO.156 / By Ingrid Chang
Legislator Cynthia Wu: Instill the financial vision of the young generation early onBanker's Digest
As a legislator on the Social Welfare and Sanitation Committee, Cynthia Wu has long been concerned with financial and economic issues. In her experience as the executive director of the Shin Kong Life Foundation, she also traveled to rural primary schools in different countries many times. During these trips, the children learned about the past life experience of their elders through stage shows. She also went to a supplementary class to teach financial education. With her previous financial background, Wu feels that young people should start financial education as soon as possible. She also argues that Taiwan should also make financial literacy a compulsory course to enter high school, and hopes that young people start their financial planning as early as possible and invest in a disciplined manner. Member-choice pensions are more effective when combined salary increases and automatic escalation. FTX bankruptcy shows insufficient financial resilience of young people Just recently, FTX, the world’s second largest cryptocurrency exchange, went bankrupt. Taiwan ranked seventh among the most affected countries in the world. According to online questionnaire results collected on November 18, 2022, the highest proportion of losses ranged from US$ 1,000 to US$ 10,000, which is not high; it seems that most of the victims are young people. Wu said that the stock market was very good over the past two years. Many investors may have earned a lot of money, but then encountered a sharp drop. Most young people may have financial anxiety, which caused them to switch to unregulated cryptocurrencies. Wu said that this case demonstrates insufficient risk resilience and financial literacy of young people in Taiwan. She said that people who start working at 16 may encounter problems with labor and health insurance. High school civics classes could be planned for financial management education, or even included in the core curriculum, to teach students about health and labor insurance and retirement. They should understand how to estimate their future income and expenditures, as well as how to allocate money between capital and labor, when to withdraw money, and whether injury, illness, or retirement age might affect their withdrawal amounts. Understanding your income and expenses makes it easier to plan your savings In addition, Wu also hopes that the government can reform pensions. She observed that US 401(k) plans combine salary increases with auto-escalation. In the California CalSavers automatic contribution plan, employees can choose to automatically increase their contribution rate by 1% every year until it reaches 8%. This helps ensure the contribution rate is high enough, preventing insufficient accumulation of retirement benefits. Regarding declining birthrates, Wu also said that early retirement depends on financial planning. Member-choice pensions may be a feasible option for Taiwan. Young people are more capable of taking risks, and their investment portfolios are quite diverse. The earlier in life you start financial planning, coupled with disciplined early investment, the better the result. As for investment and consumption, Wu suggested that young people also focus on ESG issues. Among the 17 Sustainable Development Goals (SDGs) of the United Nations, SDG 12 is to “promote a green economy and ensure sustainable consumption and production patterns.” She believes that Taiwan’s low-carbon transformation can also start with information creation and disclosure, such as carbon inventories. Now the whole world is starting to make negative carbon products, and some places in Taiwan are also starting to do so. Transparent carbon emission information can give consumers with green consumption awareness enough information to choose low-carbon products, and these products can also bring young people a better future.