By Hann Liew
IN my career as a chartered financial analyst (CFA) charter holder, I’ve come across my fair share of financial horror stories. While some are victims of circumstance, others quite simply had poor financial management skills – which become apparent when they receive a bump in income. What should have been a great opportunity to grow wealth instead left these individuals digging themselves deeper into debt.
Last year, we decided it was time to take action. We believe it was our responsibility to shed some light into the state of financial literacy in the country. Our first simple survey done last year had results which left us in no doubt that Malaysians really are in trouble. With most respondents coming from Greater Kuala Lumpur, it was eye-opening to see just how big the number of respondents was who were effectively living from pay cheque to pay cheque.
Financial illiteracy is a national problem
We believe it is crucial to continue to highlight financial literacy as a national problem, and that making the RinggitPlus Malaysian Financial Literacy Survey (RMFLS) an annual affair would give Malaysians the opportunity to see if we have progressed as a financially-literate society. The data would also be shared, allowing analysts and members of the media to further expand from our findings.
For this year, we are happy to collaborate with Visa International, a global entity which was also on a mission to improve financial literacy among consumers. This collaboration was a strong justification of our cause, and allowed us to take the survey one step further and gather data from a much larger pool of respondents. We then got our data scientists to employ stratified sampling to obtain a dataset that is statistically representative of our population.
Once again, the results show that Malaysians still have poor financial literacy. In fact, our results show that in general, financial literacy is just as much an issue for urbanites as it is for those living in rural areas. We found that in some cases, the rich and the poor faced the same financial issues.
Malaysians in denial
Our headline finding led us to believe that Malaysians may be in denial of their financial reality. About 69.3% of respondents said they are in control of their finances, but a shocking 53% of this group also admit to not being able to survive for more than three months with only their savings. How exactly do they believe to be in control is a worrying thought.
Not only that, 43.4% of Malaysians spend equal to or more than what they earn, essentially living from one month’s earnings to the next. Interestingly, this particular statistic holds true both in the rural and urban areas – the variance is less than 5% across Peninsular Malaysia, before widening to around 12% when we include Sabah and Sarawak.
Another interesting statistic we found shows that regardless of demographic, Malaysians simply do not save enough: a staggering 20.7% do not save any money each month.
The popular Malay proverb, Sediakan payung sebelum hujan, espouses being ready for an emergency. But as our data shows, the umbrella is almost always not big enough.
The RMFLS 2019 results also reveal Malaysians’ perspectives on insurance. We found that more than half of the respondents are ready to spend above RM100 on a night out with friends, but of this same group, an incredible 44.3% are not covered by insurance at all.
Those in their 20s show promise
That’s right – there’s a significant number of Malaysians who would spend more money in one night than to protect themselves for a month. With a huge selection of affordable insurance policies, some of which can even be purchased online without medical check-ups, I find this statistic truly worrying.
One part that surprised me about the RMFLS 2019 results was the data we got from the youths in the country. Compared to other age groups, more youths (respondent age between 20 and 29) saved above RM500 in a month. They are also more frugal, making up the largest proportion who spend less than RM30 per day on meals and the second-largest age group that spends below RM150 on a night out.
The data goes against the notion that youths live a so-called “YOLO lifestyle”, stressing that you only live once, and so you should meet the wants of today and ignore the needs of tomorrow. They instead display some basic understanding of financial management.
However, there are still areas to address. For instance, 54.6% of youths do not have a retirement plan – even when more than 90% agreed that their EPF savings will not be enough. On top of that, a quarter of youths in Malaysia are not covered by any form of insurance. These two data points are a strong indicator of a lack of financial literacy and awareness.
Collaborate to get ahead
The shocking results of the RMFLS 2019 is another strong call to Malaysians to wake up and face their financial realities. The results also echo the motivation behind the National Strategy for Financial Literacy 2019-2023, which aims to cultivate financial literacy across all age groups. Further to that, I believe the goal of improving financial literacy should be a shared responsibility between the government and private entities.
As business owners, we are better exposed to the very real consequences of poor financial management. As entrepreneurs, we take calculated risks that may yield better profits over time – and sometimes we fail. Surely, our experience and expertise can be pooled and shared with other Malaysians both on an organisational and public level.
Our collaboration with Visa International demonstrated what we can achieve when we pool both resources and expertise towards a common goal. At RinggitPlus, we have collaborated with various partners who share the same goals.
Whether it is creating a chatbot that assists first-time homebuyers, developing a series of videos that explain life insurance in layman terms, or even organising free workshops with certified financial advisers, we believe our actions speak volumes as champions of financial literacy.
Let us work together – friends, colleagues, and peers – and play our part in creating financially-smart Malaysians.
Hann Liew is the CEO of Malaysia’s leading financial comparison website, www.ringgitplus.com. He is also a Chartered Financial Analyst (CFA) and a member of the Financial Planning Association Malaysia (FPAM) as a Certified Financial Planner (CFP)
