Why Ivy Singh-Lim is wrong on blaming credit card companies for getting the young in debt

Calling herself ‘the Gentle Warrior’, Ivy Singh-Lim is a familiar name in Singapore’s mainstream newspapers, often penning letters on issues that are close to her heart or being quoted on current topics about which she had a point to make. Recently, I chanced upon a Youtube video of Ivy Singh-Lim who was blaming credit card companies for getting the younger generation in debt and I can’t say I agree with some of the points she made in the video.

Credit cards are only a form of leverage with some benefits

If used wisely, credit cards can be an amazing financial tool that give us the flexibility and convenience to use and leverage our money in the most efficient and cost-effective ways possible. However, if you choose not to make repayment of your credit card bill at the end of the month, you are digging yourself in the debt grave.

Personally, I have an OCBC credit card and I use it to pay bills. Although I have been very thrifty and my low monthly spendings don’t always qualify for most of the benefits, my OCBC 360 current account gives me an additional 0.5% interest for making payments through my credit card instead of cash from my wallet.

It’s the debt mindset that needs to change

A simple way to ensure I do not get myself into credit card debt, I would put the same amount I spent on my credit card into a short term saving goal called “Credit Card Spendings” in my OCBC 360 account. By doing so, I acknowledge that amount of money is for my credit card bill and do not spent it on anything else.

A credit card is just a financial product from a bank and that’s all it is. It is the mindset of consumers that need to change to prevent themselves from getting into bad debts that worsen their financial status.

A free tertiary education does not solve the debt problem

Ivy proposes that Singapore is rich enough to pay for education for Singapore citizens all the way through university. While the idea is attractive and Singapore is a reasonably wealthy nation, I don’t think it’s a sustainable solution as we continue to grow the country.

A free education program is attractive, but at what cost?

Imagine taking away money from the country’s existing budget that used to be spent on infrastructure and economic growth (like it or not, we need it) and putting it into a free education program. It means taking a few step backwards in the nation’s progress to ensure our citizens grow up debt-free. Sounds awesome right? Would you be comfortable if our trains break down more often? Or if elder workers are losing their jobs because existing wage subsidies are removed and it is no longer attractive to hire elder workers because for the same amount, employers can hire someone younger.

Even if we can live with the costs, the expense of the free education program is a recurring cost and increases proportionally if Singapore turn the population decline around successfully. Like any other corporate budgets, the country’s budget is simply a balance of revenue and expenses. In order to run the program, we need to increase the country’s revenue through taxes and I bet nobody would like that.

Introducing a sustainable government-aided education savings plan

A much more simplistic and sustainable solution would be for citizens to be more prudent in unnecessary spendings and be realistic about real needs like education and start saving early. The government can help by seeding a small dollar-for-dollar education slush fund for each citizen at the age of 10 and let it grow through low-risk investments such as bonds. Parents can start putting money away for their child’s education in this slush fund and every dollar they save, the government puts in a dollar as well. By the time it’s time to enter the university, each citizen would have a decent slush fund to tap on to pay for the education fees all the way through till the completion of their bachelor degree.

Take charge of your life and stop spending beyond your means

While I don’t agree with a lot of what Ivy said in the video, I think we are both heading in the same direction in the big picture. Most Singaporeans are spending beyond their means by splurging on branded products, choosing to drive a car instead of making full use of one of the best public transportation system in Asia.

It is easy to blame big corporations and the government for things we don’t like about ourselves and our current financial situation but the reality is that change can only begin within. Singaporeans need to learn to spend within their means, and below their means if possible. That means being in control of their finances and budgeting for their expenses.