By Eugene Wee

ONCE you turn 18 in Singapore, you can legally buy alcohol and cigarettes. You can watch M18 movies such as Watchmen and My Bloody Valentine.

You can buy lottery tickets.

And as of Monday, you can also trade shares on the local stock market.

This new ruling seems to have ruffled a few feathers, with many believing that 18-year-olds are not mature enough to get involved in the stock market, where the line between long-term investing and short-term speculation is sometimes blurred.

I think it's a good idea but more needs to be done.

A long time ago, it was enough to just save your money, put your savings in a fixed deposit, and you were pretty much set for retirement.

Preparing for retirement

But not any more. These days, your money needs to work harder to stay ahead of inflation.

When I met my financial analyst last year to talk about insurance, he told me that to retire comfortably, I would need to be a millionaire when I hit 65.

I almost fainted. That's not the kind of money you end up with by slotting spare change into a piggy bank.

So investing is not an option - it is a requirement.

And any financial textbook will tell you that the longer your investment horizon, the more you are likely to gain. The longer you invest, the magic of compounding returns will result in greater gains.

So the younger you start investing, the better your chances of having a sizeable nest egg when you retire.

I've always regretted not getting into investing early enough. (I was 31 when I bought my first stock.)

So I think it's good for 18-year-olds to invest and begin their journey towards financial independence.

Of course, there's always the chance that some teenagers will turn out to be punters who gamble on penny stocks hoping to make a quick gain. But considering that they can potentially enjoy much quicker gains for a lot less capital at Singapore Pools betting booths, why would they want to go through the hassle of setting up a trading account?

Still, more needs to be done for financial literacy in Singapore. While 18-year olds can buy stocks if they choose, they aren't likely to know enough to make informed decisions on their investments.

And without that, trading stocks is just gambling.

If grown-ups can lose their life savings by buying into high-risk financial instruments they don't fully understand, a teenager can easily do the same.

Which is why financial literacy lessons must be compulsory in schools. It is a skill everyone will need, no matter what career path they eventually choose.

Last month, Pasir Ris-Punggol GRC MP Penny Low recommended in Parliament that a high-level National Financial Literacy Advisory Council be set up to coordinate efforts to step up financial education.

Stock brokers and trading facilities can also play a part by sponsoring financial literacy education, and perhaps imposing limitations on teenage investors.

For example, they could disallow younger investors from making risky trades such as contra trades, where punters buy shares without coming up with any capital in the hope of selling them for a higher price within the three-day settlement period.

So if any of you 18-year-olds are planning to pick up bargains in the current slump, I hope you know what you are doing.

Otherwise, better stick to the piggy bank for now.

This article was first published in The New Paper.