Real-life application of A Level Economics comes alive for all JC Economics students under TET (ThatEconsTutor) who have completed their A Levels. Students get a free 2.5 hour session with principal Economics tutor Mr Koh to learn about financial literacy and application of A Level Economics Concepts in the real world. The session is designed to be interactive, encouraging participants to engage in discussions and ask questions while covering foundational concepts and practical information.
In the Dec 2024 run, students were exposed to the myth of the adequacy of earned income, and three elephants in the room (significant financial challenges) that could challenge their financial stability.
Elephant 1 – Rising Inflation Rates
While Singaporeans are earning more as a household, the rise in inflation rates erodes the value of real income. With inflation hovering around 3% based on the latest Economics statistics, and students’ bank deposit rates reaping them 0.05% per year, their savings are bleeding away at the rate of 2.95% in real terms.
Mr Koh anticipates inflation rates to continue rising, given the anticipated adoption of expansionary fiscal policy under Trump 2.0 and supply shocks owing to geopolitical risks and climate change. In addition, central banks are likely to adopt quantitative easing measures to tackle the effects of slowdowns, which would inject more liquidity into global markets. With inflation set to rise in future, real purchasing power would be eroded further.
Elephant 2 – Rising Cost of Living due to the Invasion of Quality
In a wealthy cosmopolitan city like Singapore, the invasion of luxury brands and high-end dining options has occurred, and is likely to continue. Hanging out with friends for an afternoon could set one back by more than $10.
In addition, the effects of mystery shopping or unplanned spending needs to be accounted for. When one is stressed out at work, retail therapy is often seen as the way out. From shopping for little indulgences to getting a foot massage, these forms of spending chalk up to a significant dent in one’s spending power.
Elephant 3 – Rising Taxes
Since all good things have to be paid for, and the Singapore government has expanded its social spending significantly, one can expect taxes to rise in future. Currently, sin taxes have partly absorbed the blow i.e. taxes on gambling, drinking and smoking.
However, one can expect Singapore’s tax system to become more progressive in future – from rising property taxes to higher personal income tax rates. While the Certificate of Entitlement (COE) scheme is not really a taxation tool, it contributes significantly to the government’s coffers and affects affluent households more than others.
Real-life Application of JC Economics to Tackle the Elephants
Mr Koh proceeded by discussing strategies for personal and financial empowerment, emphasizing the importance of skill acquisition and exploring multiple income streams. The session highlighted the need for informed decision-making in investing, ethical considerations in trading, and the significance of understanding market trends and financial instruments to achieve long-term financial security.
Importantly, the Rule of 72 and Compounding Principles were shared. Through these, students could see how locking in returns such as 4% for CPF Special Account deposits, or investing in index funds could allow them to make their money work for them.
The real-life application of JC Economics concepts go far beyond financial literacy. This includes lessons on how to make rational decisions using a marginalist approach to maximise one’s welfare. A Level Economics students who are eager to find out more can read past testimonials for the TET experience. Alternatively, you are always welcome to sign up for a trial class to experience the difference TET makes to your learning.