Investor Education Centre Survey Takes a Snapshot of Hong Kong People's Financial Fitness

From students to pre-retirees, Hong Kong people need to get smarter about financial planning and money management, and increase their investing know-how

26 February 2018

• On average, surveyed respondents estimate that HK$6.32 million is needed for retirement. Over half (53%) expect they need to work beyond the common retirement age of 65 in order to accumulate enough retirement funding.
• Despite the realisation of potentially having insufficient funds for retirement, many are not giving adequate consideration to retirement planning. Only 15% of respondents are confident that they are well-planned for retirement.
• Only a third of those surveyed save regularly for a safety net and to build up wealth for their future.
• More than half of respondents (53%) invest without adequate knowledge with young people particularly prone to risky investments.

A new cross-generational study, The Financial Fitness Snapshot Survey, conducted by the Investor Education Centre (IEC) in the second quarter of 2017, shows that many Hong Kong people are ill-prepared to manage their personal savings and investments, and very few have made retirement plans.

Savings is the foundation for financial fitness

Although virtually all respondents have some form of savings habit, only 16% said they put money aside before they spend, while 35% save only when they have a surplus and 49% do not save a fixed amount.

The survey also reveals a widespread lack of investing know-how. More than half (53%) of respondents said they are investing with weak investment knowledge. About one-in-seven (14%) respondents said they have no prior investment experience, a characteristic discernibly more common among the younger generation. The survey also shows that only 33% of those interviewed save regularly while investing with a general understanding.

"Saving regularly is the first and most important step in the journey to financial fitness. The second step is to invest your capital wisely to maximise returns and mitigate risks, and this requires proper knowledge," said David Kneebone, General Manager of the IEC. "Unfortunately, many Hong Kong people seem to underestimate the importance of savings for long-term financial health and capital protection, and overlook the need to gain proper financial knowledge."

In light of fast-emerging investment opportunities such as fintech, Mr. Kneebone cautioned that it is important to always conduct informed and adequate research before making investment decisions.

Underestimating the need for retirement planning

Hong Kong has the highest life expectancy in the world (Note), and yet the public may not be preparing properly for retired life. In IEC’s survey, the ideal retirement age for the respondents is 58 on average and their estimated retirement savings sum would be on average HK$6.32 million. Unfortunately, no more than 20% of respondents think they will be able to retire at 60, and 53% expect to be still working at 65 and beyond.

Almost one-third (34%) of the respondents admitted they have no retirement plans. Half have started to save but with no specific planning, and only 15% are confident in their ability to manage their finances into retirement.

More than half (52%) of the respondents who were born in 1990s believe they need less than HK$2 million for retirement. And one-third (32%) of the more financially experienced middle-aged investors share this belief.

"It typically takes many years to accumulate the necessary funds to maintain your lifestyle in retirement, which could realistically last 20 to 30 years or more. All of us have to be mindful that we will likely face rising living and medical expenses throughout our retirement years, along with unexpected expenses. Some may have dependents that they need to support financially or aspirations to pursue even in retirement," said Mr. Kneebone. "Even for those of us who have many more years to go before retiring, we should not underestimate the need for retirement planning."

Lack of planning underpins challenges across different generations

All in all, every age group has a different set of financial management challenges.

• Many young people born in the 1990s have issues with balancing income and expenses, and they tend to lack financial goals and a regular saving habit. Almost a quarter (24%) of surveyed respondents in this age group spend more than 80% of their income, 40% have no financial goals and 35% rely on their parents for financial emergencies. More than one-third (36%) acknowledged they are new to investment.
• Though the respondents born in the 1980s tend to be financially savvy as more than half (54%) claimed to have financial plans and know what steps to take to achieve their financial goals, they carry a higher financial burden than other generations. Almost half (47%) are in debt, and 26% are on a mortgage plan. The good news is 70% reported that they have built emergency funds of up to six months in case they lose their main income.
• Those born in the 1970s and earlier have more experience in financial management, but this does not necessarily lead to a better financial situation. The survey found that 29% of this age group spend more than 80% of their income and 13% have no emergency funds.

Money Month campaign in March offers practical tools and tips

To equip people from different walks of life with the necessary financial knowledge and skills to tackle their money challenges, a territory-wide financial education campaign, Hong Kong Money Month 2018, will take place in March to support the Hong Kong Strategy for Financial Literacy (HKSFL).

With the theme Plan For Your Future, this is Hong Kong's second annual Money Month campaign. Dr. Kelvin Wong, Chairman of the IEC, said: "Financial planning and wise money management are essential to achieving personal goals and having peace of mind. This month-long campaign offers many opportunities for the Hong Kong public including students, adults, retirees and vulnerable groups to make use of all the money management resources and tools, and join in the fun learning activities."

Dr. Wong added: "The IEC and other supporting organisations will be collaborating to offer financial education activities throughout the month. We are happy to see increased cross-sectoral collaboration among the Government, NGOs, finance industry, education providers and various stakeholders on financial education."

For details and resources available, please visit Hong Kong Money Month.

Note: According to Japan's Ministry of Health, Labour and Welfare