Let’s understand these two facts. 90% of rural households do not have any savings at all. For urban households, 86% have zero savings! This meant that only 14 percent of households in cities have savings. The full article in TheStar here: Sad Truth about Financial Standing. Within the article, it was pointed out that most Malaysians have low financial resilience and are vulnerable to financial shocks. It quoted a survey which found that more than 75% of Malaysians said it was a challenge to raise RM1,000 cash in the event of an emergency. When they need cash during emergencies, they will cut down on spending, borrowing from friends and family members, or depending on credit lines. seem to be the solution when a large amount of cash is needed for emergencies. (NOTE: They can CUT down their spending… when funds are needed but somehow they could not save anything during non-emergency times)
Some other discoveries include these:
- Malaysians like to “live for the moment” and focus on “instant gratification”. It says that these are usually millennials who wants to keep pace with the latest digital lifestyle, resulting in high borrowing, personal loans and credit card debts.
- Most Malaysians have no long-term financial planning, with only 40% considering themselves as financially ready for retirement.
- With the current life expectancy rising, savings would need to be stretched to last between 15 – 20 years after retirement. (Perhaps don’t retire so early? Here’s an article: Tips for retirement? Don’t retire so early)
- EPF in one of its reports stated that 50% of retirees would exhaust their savings within the first five years of retirement!
- Many Malaysians are prone to financial fraud and easily attracted to “get rich quick” schemes. (Speaking of this, just yesterday an old friend asked if she should invest in a scheme offering 5% returns per month. Total of 60% per year… I laughed and replied that I would not take that as an investment. Frankly, even 2% return per month for a 24 percent return per year already sounds too good to be true…)
When it comes to post-retirement, if we want to have RM3,000 per month, we should have a minimum of RM720,000 while for those who wants to have RM5,000, then a minimum retirement savings of RM1,200,000 would be required. The writer also said that Bank Negara, employers, community leaders and finance professionals could play their part in making us a financial-literate nation. Employers can invite financial or wealth professionals for town hall sessions to share knowledge on money management with their workers. (I still remember when I shared Property Investment 101 in my company’s usual monthly sharing sessions. The 50 seats were all taken up in 12 minutes! Haha. For some topics, it may take a long time. Anyway, 6 months after the sharing, a colleague told me that she bought her second property after my ‘motivation.’ Haha.) Here’s that full article in TheStar.com.my
I still believe ‘forced savings’ is a good way to start for all Malaysians. For example, buying a property, investing into unit trusts, buying a savings plan etc. Yes, even buying 1,000 units of a good counter in Bursa Malaysia works well too. Aim at the dividend paying ones for example. Basically, make it ‘official’ so that we must keep putting aside some amounts every time we have our salary. In this way, even if we forget that we need to save, we will still have something to fall back on when needed. By the way a RM200,000 property with a 2 percent increase in price every year will become RM500,000 after 30 years. Here’s an earlier article: Will affordable home prices go up? Savings will never happen easily or voluntarily. Force it into our lives and then it may happen. Happy savings my dear Malaysians.
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written on 14 Sept 2018
Next suggested article: Are we earning, saving, investing and preserving?
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