- Published on Thursday, 12 January 2017 08:01
THE television goes on the fritz. The car engine stops functioning well. The prices of your daily household items go up. Your kid fall sick and earns himself a trip to the clinic.
These are a few of things that could go wrong during the course of the year. Recovering from any of these will set you back about RM100 to RM500, which means you have to fork out your hard earned savings, and in most occasions, you start to feel the pinch of the skyrocketing living expenses and blame yourself for not saving enough.
Last Monday, it was reported that more than 30 to 40 per cent of Malaysians do not have enough money in savings to cover the cost of unplanned expenses in which it is believed that this worrying situation will affect us, considering the weak economic situation.
Commenting on this matter, Federation of Malaysian Consumer Associations (FOMCA) Deputy President Mohd Yusof Abdul Rahman said a recent study has found that most Malaysians are not financially ready to cover short-term expenses in the event of losing their jobs.
"Based on our survey, it is revealed that 30 to 40 percent of Malaysians do not have sufficient savings for emergency situations as well as retirement. Speaking of which, it is of utmost importance we should manage our finance wisely in order to prevent things from getting worse,” he was quoted as saying.
His alarming observation comes on the heels of earlier findings contained in the Malaysia Human Development Report prepared by the United Nations Development Programme (UNDP).
Mohd Yusof urges Malaysians to save for a period of at least three to six months. When we got our monthly pay, we should allocate five to 10 percent of our income to savings. Meanwhile, he also urged the Government to intervene to ensure that the traders do not hike up the price of goods indiscriminately.
“The price hike in household items will eventually add more financial burden to the people. Therefore, the authorities concerned should reconsider and defer the proposal for price hike in tolls, bus fares and public transport, among others,” he stressed.
Malaysians Low Financial Literacy Makes Them Spend Unwisely - FOMCA
Speaking to Malaysian Digest, Federation of Malaysian Consumer Associations (FOMCA) Deputy President Secretary-General Dato’ Paul Selvaraj (pic) said it is an undeniable fact that most Malaysians regardless of income group and age have insufficient savings due to several interrelated factors.
Paul said that it's not new that Malaysians are terrible savers, saying that it is not surprise that some Malaysian families have no savings at all. Some even have less than RM1,000 in their checking and savings accounts combined.
“In fact, the saving struggle among Malaysians has been a problem year after year after year. The most common reason for not saving money might not seem like much of an excuse at all for most of us, if not all. Instead, it has almost become a fact that the stagnant salary has caused many of us hardly have enough for us to save.
“It is understandably clear that it can be difficult for most of us to save money no matter how frugal you are. This is especially true when you earn minimum wages and live in a city with high cost of living,” he opined.
Dato’ Paul, however, said that’s certainly not sole reason why Malaysians do not save enough, blaming Malaysians for their low financial literacy which makes them to spend unwisely and impulsive buying is a common behavior today.
In light of this, Paul asserted that Malaysians need to learn about budgeting and saving to manage expenses and debt. Indeed, financial literacy is an essential living skill for all of us to build financial security and achieve financial well-being.
“Individuals with low financial literacy are less likely to take calculated risks and invest their money in stocks. Many have also fallen prey to financial scams and lost their life savings,” he reiterated.
Sharing a piece of advice, Paul urged Malaysians to prioritise spending and buy according to your needs and not wants, while stressing that it does not automatically mean that you must buy something that when there is a sale but only purchase if we really need something.
How Do We Improve Our Financial Situation?
According to the Malaysia Department of Insolvency, 41 Malaysians are declared bankrupt every day, with the majority of them being under the age of 44. The main reasons cited are inability to pay off car loans, poor control of credit card usage and a failure to pay off personal loans.
There is no denying that most Malaysians do not save enough considering the high cost of living and other factors but that should not be the reason that hold us back from saving for rainy days, said an AIA financial planner, Adele Khor (pic) relayed in an interview with Malaysian Digest recently.
“Malaysians tend to have insufficient savings as they tend to spend beyond their limits and the continual need to play catch up on debts such as credit card, personal loan, housing loan, student loan and car loan, among others.
“In order to save, you must set goal – whether you are saving up for a big goal or paying down debt. Once you have goals in mind, it will help to encourage you as you move forward toward your financial goals. Besides, you also should slash excess spending.
“There is without doubt that it's a good idea to track your purchasing history to see where your money is going. This enables you to see where your money is going, you can make adjustments where necessary,” Khor shared.
Elaborating, Khor asserted that we all should keep things simple as it works best and knowing how to save money every month, and ways to save that money for the future.
“For example, you can divide your savings into three different accounts namely, emergency savings account, savings account for major purchases as well as a retirement savings account. Alternatively, you can get started by simply putting your money into one savings account, and then grow your savings from there,” she shared.
“You can put money aside on a regular basis for a down payment for a house, a car, or for your retirement. To get started, all of this money can go into one account, and it can double as your emergency fund as long as you don’t have ‘emergencies’ on a regular basis,” Khor added.
Asked why saving is important, she noted: “Saving money is crucially important regardless of your financial background. Saving is worth the effort as it gives you peace of mind, and the more you save, the easier it becomes to accumulate additional savings.”
What's The Real Situation Like For Ordinary Malaysians?
Yesterday, Malaysian Digest randomly polled several Malaysians to find out if they have consistent monthly saving as well as things that hold them back from saving.
Ng Shin Mooi, an accountant from Bandar Utama said it’s nearly impossible for an average Malaysian to have a consistent monthly saving, considering the high living cost nowadays.
“Honestly, one main factor that prevents me from saving money is the need to service monthly debts such as credit card, car loan, business loan, housing loan, car loan and the list goes on. Another thing to worry is that I need to make sure I pay [the debts] on time as it makes it harder to reverse things if I fail to pay.
“Besides, I have four school-going kids. As parents, we started to feel the pinch following the increasing cost of school items. Moreover, I also need to pay for their tuition fees which make it impossible to have a basic saving,” the 38-year-old lamented.
Sharing the same sentiment, Jefferey Leong, 41, a wedding planner said: “No one can save in this economy and, in fact, it’s true prices are rising too fast for me to save – more so when wages are down and prices are up.
“I do save monthly but not much. In fact, prices are rising too fast for me to save. However, that’s no excuse to stop saving entirely. When I was younger, I had misconceptions about paying off debts.
“Too many people think that they cannot save as they need to pay off debts every month. This is typically based on a falsehood, because systematically paying off debt is saving. As the amount you owe goes down, so does the amount of interest you pay each month. And that eventually put yourself on a better financial footing,” he shared.
Earlier, it was reported that one in three Malaysians does not have a savings account, and most have not saved enough to last them more than five years after leaving the working world, according to the Employees Provident Fund (EPF).
“Ninety percent of rural households have zero savings, while in urban households, 86% do not have savings. Malaysians need to be empowered and take charge of their own financial decisions according to their life stages,” said EPF deputy chief executive officer (operations) Datuk Mohd Naim Daruwish.
Mohd Naim highlighted that as of last year, 68% of EPF members aged 54 had savings of less than RM50,000. The report also stated that only 18% of EPF members achieved the basic savings quantum according to age, a far cry from EPF’s plan to get at least half of its members to meet the minimum basic savings according to age in the next five years.
Former governor of Bank Negara, Tan Sri Dr Zeti Akhtar Aziz who recently retired from her illustrious career had some sage advice given the challenging economic situation we all face today.
Due to the recent hike in prices and rising cost of living, people have been tapping into their savings, or whatever little they have, she said, Bernama reports.
The governor said for almost 20 years, the central bank has been promoting the importance of savings among Malaysians, but it cannot be realised if people still live with bad spending habits.
"People need to know that this is the period of sacrifice and we should live within our means.
"We need to adjust our spending behaviour," she added.