Financial literacy edu a vital tool against youth bankruptcy

Kuala Lumpur: Financial literacy education is a must for students, advocates a financial services industry trainer.

“Education is vital, they should start young, whereby one or two periods on financial literacy can easily be incorporated into the secondary school syllabus,” said Saw Ann Ping, who is also the managing director of Symphony Digest Sdn Bhd.

She said financial literacy education includes topics on the value of money, the concept of financial discipline in spending within one’s means and the repercussions if one didn’t, and why saving from a young age meant one could comfortably opt for an early retirement.  

“The other option is to make financial literacy a compulsory session in universities before graduation, then when they graduate, they will be able to manage their budget prudently, with some leftover for their PTPTN student loan repayment,” she told Bernama Sunday.

She lamented that financial literacy education was worryingly low in Malaysia, leading to many cases of youth bankruptcy and the current high withdrawal of i-Sinar.

Incidentally, the economic ravages from the Covid-19 pandemic has raised the alarm to improve financial literacy to reduce youth bankruptcies and create budding entrepreneurs with financial discipline able to survive tough market conditions.

About 29 per cent of youths reportedly only realised the importance of emergency funds when businesses went bust and layoffs became the norm rather than the exception when the movement control order was enforced in the wake of the pandemic, to flatten the curve.

Saw noted that nearly 60 per cent of the youths were unable to survive beyond three months.

“With the current youth unemployment and underemployment, youth bankruptcy would worsen. This is potentially a time bomb for the country as this generation will be mired in financial woes and worse, need to be bailed out,’’ she said.

According to Bank Negara, about 84,805 Malaysians were declared bankrupt between 2015 and 2019, and 26 per cent of the cases were aged below 34.

The statistics could worsen as a result of the lockdowns and consequent downturn in business activities over the past one year.

Saw, who is an ex-banker, said there was no shortage of volunteers in the financial service line who would willingly teach for free. 

While the benefits of financial literacy were obvious to the individual and state, she said there would be a spillover effect on the nation’s drive to create more entrepreneurs.

“Many great ideas fail, not because the ideas are not good but because the entrepreneurs do not have the financial discipline to manage their cash flow until their business has a chance to boom,” she opined.

State support on education, healthcare and public sector pension were some of the contributing factors to the lack of urgency and emphasis on financial literacy.   

If the situation was left unchecked, she said there was potentially a future Malaysia of financially-dependent people requiring handouts to survive.

“Do we have the resources to support that situation, especially if the youths who are expected to take over as the main income generators are also in that group?” she asked.

Social media appears to have produced a generation of youths that is more concerned with instant gratification and lifestyle spending, leading to a worrying situation of youth bankruptcy.

Finance Minister Tengku Datuk Seri Zafrul Aziz recently said 40 per cent of millennials were spending beyond their means while 47 per cent of Malaysian youths have high credit card debts.

Saw further noted that the salaries of fresh graduates in Malaysia range from a wide RM1,500 to RM4,000 plus. 

Hence, peer pressure in lifestyle consumption will inevitably push the lower salaried group into debt as they try to keep up with their higher earning contemporaries, she said.

She said living paycheck to paycheck will place the group in high risk of slipping into debt, plunging the spendthrifts into a situation that is difficult to get out of and made worse if they had resorted to credit cards to fund their lifestyle.

“Credit cards are good because of their convenience and free financing for each repayment cycle, but this requires discipline to fully repay when the amount is due.

“The minute you cannot do so, you are on a slippery slope. The high interest rate plus your monthly commitments mean you are always playing catch-up and you will get further and further into debt,” she said.

Saw emphasised on one message in financial literacy that needs to be taught to the young: “The YOLO (you-only-live-once) lifestyle comes with a warning – suffer later. It could even stall their career before it starts.”