Towards financial independence among Malaysian millennials
When we were young, we were often told by our parents to save for the rainy day. These days with the stagnating economy and financial dire straits, your personal savings will never be quite sufficient to cover all the costs associated with household expenditure as well as everyday living. There is simply not enough money to be made through savings alone. Continuous consumer consumption without appropriate checks & balances would essentially bankrupt the economy of any given nation. A well-planned and developed financial system is based upon prudent fiscal management with a well-balanced sustainable economy. Saving for the rainy day or for contingencies has somewhat become the norm for emerging economies, with the added advantages of dynamic liquidity and free-flowing transactions. A pertinent message to all Malaysians is to consume our financial resources wisely and prudently, and only use credit cards to supplement our daily expenditure, if or when they are deemed necessary. When a lifetime of savings is at stake, perhaps it is high time we all should start to invest our money smartly.
Smart financial management
The continual clarion calls for more personal and commercial banking loans are fast becoming a trendsetter in getting the federal government to draw up some common lending policies which could benefit both banks and borrowers. Bank Negara itself could also lend its weight in major policy changes in banking rules pertaining to housing loans and personal financing. Malaysians are typically spoilt for choice as nowadays, there is a plethora of smart loans and credit schemes available on the market. But for some reason, savings and investments have not quite caught up with the frenzy financing marketplace just yet. Savings are at an all-time low whilst loans and borrowings are at an all-time high. The credit card industry is booming, but overall saving’s market remain unimpressive. Ultimately, this has brought about a whole load and range of financial issues for today’s society. Youth bankruptcies are increasingly rampant, and the number of people seeking financial advice & assistance are more widespread. A solid & sound debt-management programme from the Credit Counselling and Debt Management Agency, i.e. Agensi Kaunseling dan Pengurusan Kredit (AKPK), had skyrocketed by a mind-blowing 1,819% to 156,892, as of July 2016 from 2007. The reason cited for the dismal debt resolution was poor financial planning. With the existing household debt standing at a staggering rate of 89% of gross domestic product (GDP), Malaysians have been steadily consuming at a phenomenal pace over the past decade. To date, AKPK has helped over 11,700 people get out of debt, with over RM476.6 million in outstanding debts settled or cleared. Debt repayment maybe encouraging, but Malaysian families still struggle with their home loans.
Latest statistics from the Insolvency Department quote that almost 22,600 Malaysians from the Gen-Y population (i.e. below the age of 35), have become official bankrupts between 2012 and September 2016. Among the chief reasons given were insolvency cases resulting from their inability to settle outstanding loans for cars, homes, and personal financing. Most of them admitted the lack of financial education and good financial management skills were primary reasons for their bankruptcy status. In order to address the issue of indebtedness among youth, AKPK has offered a host of personal financial management programmes that can be easily adopted by local academic institutions. Students enrolled in these programmes will gain invaluable knowledge as well as master lifelong skills to manage their money more wisely. The goal or objective is learning to live within their means, whilst still achieving their dreams. It includes basic financial tools, personal finance essentials, as well as local banking products and services.
Investing for the millennials
For the younger generations, the realistic chance of owning a property at this juncture is pretty slim or remote indeed. Unless they have cash to splurge, even the so-called “affordable homes” will be priced out of their financial reach as well as cash-flow. Millennials and Gen-Y’s have always preferred more contemporary approaches to investing their money or funds. Typical CDS (i.e. central depository system) account holders in Malaysia is said to be within forty years of age, which is a broker’s account to buy & sell shares on the local bourse or stock market. Perhaps the sluggish stock market has somehow attributed to the depressive state of millennial investments, further compounded by depreciating securities for housing loans, which have been contracting for months now. Investing in get-rich-quick schemes has also partially drawn the acute attention of Gen-Z’s as well.
The quest for smart investment
In the not-so-distant past, investing has always been perceived as a rich man’s game. Big bucks often translate to fast returns – the bigger the stakes, the greater the riches. Getting rich quick is the nature of the game, and the game is financial gambling. Lately, such brazen and unscrupulous investments have gained much disdain and notoriety in bankrupting many prospective investors, who simply do not possess the business acumen or financial wisdom to embarking in financial investments. MLMs, Ponzi schemes and pyramid financing plans are also a real threat and a sure-fire way to lose tons of money fast despite the apparent glitz & glamour associated with instant financial riches. To curb the rising indebtedness among Malaysians, and to instill the habit of saving, the creation of the Financial Education Network, a multi-agency initiative by Bank Negara, is definitely the first step in the right direction. Financial networking is perhaps one of the key factors or fundamental lifelines in securing & strengthening the financial well-being of individuals, as well as the overall monetary foundation of Malaysian households.
In working towards one’s retirement, the national Employees Provident Fund (EPF), or Kumpulan Wang Simpanan Pekerja (KWSP), is also gradually making inroads and creating much awareness among local citizens with respect to having a proper retirement plan. As such, it is also in the local stock exchange, Bursa Malaysia’s interest to spur and drive younger Malaysians into taking up shares, and to invest in the stock market. It is without doubt, much of the country’s tangible wealth lies in the stock market’s blue chips and premium counters. As it is with investments in stocks & shares, the impending risks, volatility and liabilities are all too real, yet the mounting benefits and rewards are too great to ignore. Sometimes we need take calculated risks in our investments in order to amass the genuine riches and true wealth. Having proper financial education programmes on stock market investments could prove to be a turning point and launching pad to unlocking the full potential of the younger generation, especially with the millennials, since these so-called Gen-Z’s will inherit the nation’s vision & agenda, as well as its future economic outlook.
Attaining financial independence
It is never too late to get Malaysians in general to realize the absolute importance of financial education. Most of the current Gen-X and baby boomers had to grasp the knowledge of finance the traditional way, literally going beyond how to make and grow money. Financial education is quintessential irrespective of age or the level of one’s academia with numerous avenues available out there. The various investment options found in today’s world would surely trump your plain old trusty saving accounts anytime, which is still considered pretty sound even when compared or benchmarked against the gold standard of modern financing. The road to financial freedom is truly a long and winding one – filled with potholes and challenges. Nevertheless, Malaysians are rest assured of the fact that there are a galore of investment programmes as well as unlimited opportunities that could benefit everyone financially in terms of breaking free from the shackles of debt, the woes of financial insolvency, and the stifling effects of poverty. – HFM