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When financial knowledge alone is not enough
Posted on Aug 14, 2019
Only 24% can survive up to 3 months with own savings and only 10% can remain unemployed within 6 months
By AZREEN HANI / Pic By HUSSEIN SHAHARUDIN
FIFTY percent of Malaysians admitted to having difficulties to raise RM1,000 for emergencies. One in five working adults said they did not save in the past six months. Three in 10 individuals have to borrow money to buy basic needs.
Many are burdened with huge debts. Cases of loan defaults have been a concern with thousands have been declared bankrupt.
If these statistics are not worrying enough, according to a Credit Counselling and Debt Management Agency (AKPK) survey last year, only 24% could survive up to three months with their own savings and only 10% could remain unemployed within six months.
If these gloomy figures do not rock the concerns of many Malaysians, the police’s recent announcement that Malaysia lost up to RM2 billion annually due to telecommunications scams and e-commerce frauds would make many stand up.
The widespread incidents of such thefts and how easily victims are duped by these criminals have triggered alarm bells on the susceptibility of the public to such cons.
Many have lost their life savings to promises of fast cash and instant wealth despite repeated warnings by the authorities.
To address the problem, the government has initiated the National Strategy for Financial Literacy 2019-2023, a framework aimed to improve financial literacy across all segments of the society.
According to studies by the OECD International Network on Financial Education, AKPK and the Malaysian Financial Planning Council between 2015 and 2018, the financial literacy level among Malaysians has yet to reach a satisfactory standard.
The AKPK Financial Behaviour Survey 2018 — which focused on the financial behaviour of Malaysian working adults in terms of their spending, savings and debt management — also revealed that there are areas which need to be enhanced for Malaysians’ financial wellbeing.
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Tertiary
The world we live in is increasingly complex, especially for the youths, and they will eventually need to take charge of their future and finances. Financial education in the tertiary stage is for those between the ages of 18 to 25 currently pursuing post-secondary education. Providing them with the appropriate financial know-how at this point will build up their competence in dealing with future financial decisions. This module focuses on cash flow management, the importance of savings and setting up a budget, internet banking and other appropriate topics for university and college students.
Entering Workforce
This stage comprises those between the ages of 20 to 30, i.e. mainly those who are just starting out in life. Financial education is essential to this age group as they learn to be independent in most matters especially financial management. In their minds, a car is a want rather than a need, and normally sits at the top of their list of things to acquire. Our Entering Workforce module focuses on understanding the fundamentals of borrowing and the importance of borrowing productively to encourage positive net worth. Financial education at this stage is also aimed at inculcating the habit of managing debts wisely. The module also introduces the fundamentals of investments and the importance of insurance for a better tomorrow.
Starting and Raising a Family
The module for the next life stage is for those who are starting and raising a family. People in this category are approaching that time in their life when they will normally experience important and meaningful life’s milestones: marriage, children and a new home. Designed for those between 30 to 40 years of age, this module will focus on settling unproductive loans while reducing debt commitments as they prepare for retirement. Emphasis will again be placed on the importance of planning for and protecting against uncertainties by talking about the types of financial tools available. They will learn the various types of insurance policies and be able to decide on the best coverage based on their affordability for their precious family. Education will also be given on the appropriate investments that will provide passive income for a better tomorrow.
Retirement
The transition from working to retiring involves many tough decisions regarding income and lifestyle needs and whether one plans to ease into retirement or otherwise, while considering factors such as wealth management, whether a pension is enjoyed, and EPF balances. These are big decisions with long-term impact on their financial well-being during retirement. To make the best choices, they require sufficient knowledge and intense awareness of how they want to live through their retirement years. Therefore, our pre-retirement module will prepare them for retirement by teaching them the proper use of their investments and review of their portfolio while servicing their insurance policies and settling unproductive debts to improve their net worth positively.
Post – Retirement
You have retired. How would you manage your money now? Considering that the average life expectancy in Malaysia has improved, it is more important now than ever to ensure that you have the financial resources to live a comfortable and happy lifestyle—particularly if you are looking forward to retiring with peace of mind. Taking care of your wealth and making it last are important at this stage. Financial literacy and education is a continuous life lesson that does not end at retirement. Now, more than ever, you need to manage your finances wisely and plan for the unexpected. Our post-retirement module is focused on those who are currently transitioning into retirement or are in the early stages of retirement.