#Lifestyle

Malaysian Youths are at Risk of Going Bankrupt, and it's Because of Low Financial Literacy

by Danial

Mar 07, 2019 at 6:21 PM

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Finance Minister Lim Guang Eng said that Malaysian youth are going bankrupt and it’s all because of poor financial literacy.

During the launch of ‘Belanjawanku – Malaysian Individual and Family Expenditure Guide’ on 4th March 2019, the minister talked about the issue: “A study by S&P Global Literacy Financial in 2014 reported that financial literacy rate in Malaysia is only at 36%, compared with 59% in developed countries.

Low financial literacy and worrying bankruptcy problems are the main factors of high levels of debt among youth, the minister said. He cited statistics between 2013 to 2017, stating that a sum of 100,610 Malaysians were declared bankrupt, with 60% of them aged between 18 and 44 years old.

Not enough savings for retirement

The Finance Minister also said that older citizens are also facing tough financial challenges, particularly in regards to retirement. He remarked that estimates by the Employees Provident Fund (EPF) reveal that each person needs to save at least RM240,000 by age 55 so they can retire comfortably. “However, based on the EPF 2017 Report, active contributors aged 54 have an average savings of only RM214,000 in their accounts.”

He also pointed out that 2/3 contributors aged 54 only have RM50,000 and below in their EPF accounts in 2015, which is a far cry from the suggested savings threshold.

Source: The Edge Markets

Guan Eng explained that the insufficient savings would be exhausted in five years after retirement at age 60, particularly given the average life-span of Malaysians is 75 years old. He summarised that Malaysians need to develop their financial knowledge so they can start making smart financial decisions such as spending and investments.

The Belanjawanku Expenditure Guide can be found here.

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Source: The Star

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