Accumulation of Unsustainable Levels of Debt by Young People

Assoc Prof Razwana Begum Abdul Rahim asked the Prime Minister with regard to the availability of financial credit to young people, whether the Government is considering working with financial institutions to prevent young people from accumulating unsustainable levels of debt.

The Monetary Authority of Singapore has put in place various safeguards on consumer credit extended by financial institutions, so that individuals do not borrow beyond their means.

Unsecured borrowing by an individual, including through credit cards, is subject to the individual meeting minimum income requirements, and the total amount of such borrowing is capped at his or her annual income. Accounts are suspended if the borrower is 60 days past due on their payments. Mortgages, which constitute the largest liability for households, are subject to both a loan-to-value limit and a total debt servicing limit, with the latter based on a borrower’s income. Together, these rules limit how much young people can borrow from financial institutions and ensure that it is in line with income.

Besides regulatory limits on borrowing, financial education helps to inculcate good financial understanding and habits among our young adults. The national school curriculum from primary up to the tertiary level has incorporated key financial concepts, such as the effects of compound interest and the responsible use of credit. The efforts are complemented by talks and exhibitions organised for youths by MoneySense, our national financial education programme.