Recognised as a leading international financial hub, Singapore boasts deep capital markets, a dense banking network, and one of the world’s most developed defined-contribution pension systems. Yet sophistication at the national level does not always translate into optimal decisions at the household level.
Why do some individuals diversify their investments and manage debt cautiously, while others with similar incomes do not? Research by Associate Professor Joelle Fong of the Lee Kuan Yew School of Public Policy (LKYSPP) provides new causal evidence that financial literacy drives—rather than merely correlates with—a broad spectrum of saving, investment, and borrowing decisions that shape the household balance sheet. The broader question is whether financial knowledge itself leads to measurable changes in behaviour, and for whom.
Financial literacy in the Singaporean landscape
With a sophisticated economic context, Singapore offers a compelling case study for the outcomes of financial literacy and its application. To illustrate this, Dr Fong points to Singapore’s Central Provident Fund (CPF), entailing a defined-contribution scheme that places the primary responsibility on individuals to manage their savings.
The CPF requires Singaporeans to make complex decisions about their contribution allocations, balancing housing and retirement needs, selecting insurance coverage, and managing debt. These choices significantly impact older Singaporeans’ quality of life, illustrating Dr Fong’s point that “good financial decision making has far-reaching consequences in such an environment.”
Dr Fong adds that the challenges of complex CPF decisions are intensified by demographic and economic trends. She notes that “financial market volatility, rising inflation, and the proliferation of new financial products and services, has generated policy interest in better understanding how to promote good financial decision making.”
Drawing from the 2021 MoneySense National Financial Capability Survey of a representative sample of Singaporean adults, Dr Fong’s study goes beyond documenting associations. Using causal inference methods, she examines whether financial knowledge itself leads to differences in financial behaviour, rather than financially active individuals simply becoming more knowledgeable over time.
Her findings show that individuals with higher financial knowledge are more likely to diversify investments, use credit prudently, and plan strategically for retirement. Importantly, the results indicate that financial literacy itself drives these behaviours. In other words, knowledge results in improved saving, investing, and borrowing decisions—not the reverse.
Singapore’s demographic divide in financial literacy
Although financial literacy is generally high in Singapore, it is unevenly distributed. Dr Fong notes that knowledge tends to be higher among men, higher-income households, and individuals with higher educational attainment. These groups are more likely to understand financial concepts such as interest rates, inflation, and risk diversification, enabling them to make informed investment, saving, and borrowing decisions.
Concurrently, certain groups lag behind. Women, younger adults under 25, the elderly, and lower-income individuals consistently scored lower on standard financial literacy measures.
“Nonetheless,” Dr Fong writes, “the gender gap is not large given the equal educational opportunities for both sexes in Singapore; average financial literacy score for women is 2.18 versus 2.36 for men.”
The age pattern, however, is noteworthy. Dr Fong finds that financial literacy tends to peak in mid-life, when individuals are actively managing mortgages, family expenses, and retirement contributions, but is lower among the youngest and oldest segments of the population. These gaps suggest that even in a country with advanced financial infrastructure, not all households are equally equipped to navigate complex financial choices.
The implications of these literacy gaps are significant. Individuals with higher financial knowledge can diversify savings, participate in financial markets, and use debt strategically, while those with lower literacy are more vulnerable to costly mistakes and under-saving. Because the study establishes that literacy causally influences behaviour, these gaps are not merely descriptive but signal potential differences in long-term household financial resilience. While Singapore’s overall cost of living is rising more slowly than in many countries with similar economies, everyday expenses are gradually increasing, creating additional pressures for younger adults navigating early careers, housing, and family responsibilities. Understanding how literacy intersects with these financial pressures is crucial for policymakers seeking to ensure that the benefits of Singapore’s sophisticated financial system are broadly shared, rather than concentrated among the most advantaged.
Translating knowledge into informed financial action
Financial literacy in Singapore not only increases understanding but also drives the financial choices households make. Professor Fong’s research demonstrates that individuals with higher financial knowledge are more likely to diversify their savings across stocks, retirement annuities, and insurance products, rather than concentrating wealth in a single instrument. They are also more inclined to hold multiple financially complex assets, reflecting a proactive approach to risk management and long-term planning.
The study also challenges common assumptions about debt. “While financially savvy Singaporeans have more debt,” writes Fong, “they are also far more likely and motivated to repay their debt on time. This leads to a striking conclusion: those individuals who are using debt seem to be doing so in a fairly informed manner.”
Taken together, the findings suggest that financial literacy strengthens household balance sheets on both sides: expanding assets through diversified saving and investment, while improving the management of liabilities through informed and disciplined borrowing. By linking knowledge to action, the findings illustrate how literacy can simultaneously strengthen both assets and liabilities, promoting resilience and security. In Singapore’s defined-contribution pension environment, this capacity to translate knowledge into informed financial behavior is especially consequential.
Policy pathways for effective financial education
Although financial literacy supports informed decision-making, disparities across demographic groups highlight the need for focused and inclusive interventions.
“These results suggest that policymakers should continue to invest in boosting financial literacy and capabilities in the Singaporean population, because such efforts will reap benefits by strengthening household balance sheets on both the asset side–saving and investing–and the liability side–borrowing,” says Dr Fong.
Programs that provide clear instruction on complex financial products, retirement planning, and digital financial services can help individuals apply knowledge in practice and improve household financial outcomes. Additionally, collaboration between public and private actors may be important. Dr Fong’s findings reveal the value of financial institutions, regulators, and educators working together to deliver accessible, practical programs that respond to evolving market conditions and the growing role of digital finance, including online banking, mobile payments, and investment platforms.
Ultimately, policies that combine targeted education, accessible guidance, and support for digital financial engagement can help ensure that financial knowledge translates into informed, actionable, and equitable decisions across the population.
Regional lessons: a template for Asia-Pacific?
Singapore’s experience offers insights for other Asia-Pacific economies with defined-contribution pensions and similar demographic trends. Countries such as Malaysia, Australia, and Hong Kong face population aging, rising life expectancy, and increasing exposure to digital financial services, all of which heighten the need for informed household decision-making. Economies like Australia also contend with greater cost-of-living volatility, underscoring the importance of equipping households with the knowledge and tools to manage financial pressures effectively.
While Singapore’s gender literacy gap is relatively modest, women across many ASEAN economies score lower than men on financial literacy measures. This can result in women’s limited access to financial and digital services, highlighting that addressing these gender gaps is essential not only for equity, but also for promoting household resilience, broader economic growth, and equitable outcomes across the region.
Additionally, the Asia‑Pacific has seen a rapid surge in digital financial services, from mobile payments to online investing, with evidence linking digital inclusion to stronger economic growth. This underscores the value of policies that combine household financial education with accessible, inclusive digital finance infrastructure. The Singaporean context provides a practical model for other economies facing similar demographic and technological shifts.
For policymakers, the central lesson is clear: financial literacy is not simply correlated with better financial outcomes, but a causal driver of household financial behaviour. In systems where responsibility for retirement security increasingly rests on individuals, investing in financial capability is an investment in stronger household balance sheets and long-term economic resilience.
As Singapore’s financial landscape continues to evolve, the causal link between literacy and resilience remains a cornerstone of national stability. Investing in this capability is not merely a policy goal but a continuous process of education and public engagement. To further this mission and explore these findings in depth, the Lee Kuan Yew School of Public Policy invites readers to join the conversation at the Social Science and Humanities Ideas Festival 2026. This upcoming poster exhibition, hosted by Associate Professor Joelle Fong, offers a unique opportunity to engage directly with the next generation of researchers and see how these insights are being applied to strengthen the future of retirement systems in Asia.