Do We Have Common ‘Cents’? Malaysia’s Low Levels Of Financial Literacy 

An editor at Business Today noted that Malaysia has alarmingly low levels of savings among citizens, especially those in the B40, with the current level being around RM1,000. The editor fears that if B40 citizens were to continue at this level until their retirement, they would have only RM4 a month to spend for 20 years, and for the M40, their savings of RM25,000 would translate into RM104 a month for the same period^[1].

This problem is further exacerbated by Malaysia’s growing ageing population. People aged 60 and above will comprise 15% of our total population by 2030, in just 8 years. Further, about 40% of the Malaysian population is estimated to be uncovered by any form of social protection and is expected to face insufficient retirement funds^[1].

Following the pandemic, Jeffrey Lam, Head of Corporate Responsibility, Prudential Assurance Malaysia Berhad (PAMB) stressed the importance of being financially prepared in the face of a crisis.

The Covid-19 outbreak has only emphasised the greater need to be financially secure. While the size of the fund varies according to one’s lifestyle, dependents and monthly bills among others, a general rule of thumb is to set aside at least 6 months’ worth of expenses. – Jeffrey Lam, Head of Corporate Responsibility, Prudential Assurance Malaysia Berhad^[2]

The editor of Business Today attributes the current savings issue, which stands at approximately 36%, to inadequate financial literacy among Malaysians. This lack of knowledge is concerning as it could result in the next generation of retirees being significantly poorer and sicker. This is due to insufficient funds for healthcare. This situation poses a serious risk of a “lost generation” of elderly individuals entering retirement in poor health and inadequate financial support^[1].

But what is financial literacy? And does Malaysia have a problem with financial illiteracy?

What Is Financial Literacy?

According to Investopedia, financial literacy is the “ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.” Being financially literate provides you with the foundation of a relationship with money, and it is a lifelong learning journey. The earlier you start, the better off you will be, because education is the key to monetary success.

Fong Woon Bing, a licensed financial planner with VKA Wealth Planners Sdn Bhd, pointed out that while many Malaysians possess good financial knowledge (the understanding of financial definitions and types of financial resources that could range from personal finance to global financial matters), they tend to lack proper financial planning due to low financial literacy^[3].

Financial literacy leads to good financial well-being. This refers to a person’s ability to meet present and future financial obligations. An individual should feel secure about their financial future and make decisions that enable them to lead a fulfilling life^[4].

Fong Woon Bing notes that some examples of financial literacy include^[4]: 

• Understanding that money management is key, hence keeping track of it and ensuring that it follows your spending plan while reviewing it when necessary;
• Allocating surplus funds to your goals whenever you receive a bonus or have extra savings;
• Building an emergency fund worth 6 to 12 months of your income or expenses, solely for emergency purposes. 
• Invest responsibly and have the discipline to resist greed and herd mentality;
• Safeguard yourself and your family from debt and other life uncertainties through prudent insurance purchases. 

The Key Numbers In Malaysia

A survey conducted by the Securities Commission Malaysia (SC), titled “Youth Capital Market Survey A Malaysian Perspective 2022”, states that Malaysian youths are generally unable to manage their finances well, with most of them having low knowledge of the capital market products (e.g. stocks etc.) and low financial literacy^[5].

Using a sample of 1,003 Malaysian youth between the ages of 18 and 40 in both urban and rural populations, the results indicate that Malaysian youth’s top priorities include emergency funds, supporting family savings and debt repayment. Talks of wealth and investment were only a priority for one-third of the participants^[5].

Therefore, respondents would use their income towards emergency funds and savings earlier in life and would only focus on retirement at a later stage. – Securities Commission Malaysia “Youth Capital Market Survey A Malaysian Perspective 2022”^[5]

The survey also found that Malaysian youths spend their income on food, household expenses and debt repayment. This leaves them with little balance left for savings or investment.

On average, only 17% (of income) is being set aside for savings and investment; of this only 8% is set aside specifically for investment purposes. – Securities Commission Malaysia “Youth Capital Market Survey A Malaysian Perspective 2022”^[5]

RinggitPlus also found that 53% of respondents said their savings could only last three months. According to the Insolvency Department, over 20% of bankruptcy cases between 2018 and 2022 involved Malaysians under the age of 34^[6].

RinggitPlus co-founder and director Hann Liew noted that the young are not the only ones facing money problems.

Surprisingly, even professionals up to their late 30s continue to face financial difficulties. Education in financial literacy seems to have failed to reach many, even lawyers, engineers and doctors. – Hann Liew, RinggitPlus co-founder and director^[7]

• The National Strategy for Financial Literacy 2019-2023 corroborates this, noting that 84% of Malaysians who claim to save regularly do so only for the immediate term i.e. typically withdraw at month-end to cover daily subsistence expenses and that 76% of Malaysians have a budget, but 2 in 5 find it difficult to keep to the budget.

• It also showed that many Malaysians still struggle with preparation for unexpected events, with 52% of Malaysians having difficulty raising RM1,000 as emergency funds. Only 24% of Malaysians can sustain living expenses for at least 3 months or more if they lose their main source of income (10% can sustain them for more than 6 months).

• Being financially illiterate will often lead to poor financial decisions such as over-utilisation of credit cards and overspending, in turn leading to poor financial wellbeing which is what has happened to Malaysians in recent years. As reported by the Insolvency Department, 84,805 Malaysians were declared bankrupt between 2015 and 2019^[4].

The Government’s Strategy

Financial literacy or rather, the lack of it among citizens has been under the radar of the Malaysian government. In recent years, collaborative efforts between the government and economic bodies have formulated programmes to improve financial literacy among Malaysians.

The National Strategy for Financial Literacy 2019 – 2023 was launched by Prime Minister Tun Dr Mahathir Mohamad in 2019. It was formulated by the Financial Education Network (FENetwork), an inter-agency group led by Bank Negara Malaysia and the Securities Commission Malaysia. The strategy sets out priorities and actionable plans to help Malaysians make informed financial decisions^[8].

In 2020, the Financial Industry Collective Outreach (Finco), a collaboration between all financial institutions in Malaysia with the guidance of Bank Negara Malaysia, announced a financial literacy programme that was implemented in selected primary schools in early 2021^[9].

The programme was built on the efforts of individual financial institutions to address low levels of financial literacy, particularly among students from underprivileged communities. It will also support Malaysia’s national strategy for financial literacy.

It is important that the financial industry is coming together to tackle this complex issue as it has been proven time and again that we cannot deliver on shared goals if we work in silos. – Abu Hassan Alshari Yahaya, Bank Negara assistant governor^[9]

In 2022, the Financial Education Network (FEN) held a two-day National Financial Literacy Symposium (NFLS), in conjunction with their annual Financial Literacy Month (FLM) 2022, to discuss solutions surrounding financial literacy and inclusion to elevate Malaysians’ financial capabilities^[10].

Co-hosted by Perbadanan Insurans Deposit Malaysia (PIDM) and Bank Negara Malaysia, in collaboration with the Malaysian Economic Association, the symposium aimed to generate new ideas towards achieving the strategic outcomes envisioned in the Financial Sector Blueprint 2022 – 2026 and the National Strategy for Financial Literacy (2019 – 2023)^[10].

The symposium uncovered a wealth of research on financial literacy, according to PIDM chairman Tan Sri Dr Rahamat Bivi Yusoff.

We are seeing some valuable insights that can help policymakers, industry practitioners and proponents of financial literacy to develop more effective strategies in delivering sustainable and impactful financial education to Malaysians. – Tan Sri Dr Rahamat Bivi Yusoff, PIDM chairman^[10]

In May 2023, the Asia Pacific University of Technology & Innovation (APU) launched the APU AKPK Club to equip students with financial management knowledge. The club has a dedicated team of mentors, including SAF senior lecturer Dr Ooi Bee Wah, and lecturers Mohamad Shahiman Mahdzir and Dr Nur Lalua Rashidah Mohd Rahsiad^[6].

The launch of the club by APU chief executive officer Datuk Parmjit Singh and Credit Counselling and Debt Management Agency (AKPK) chief executive officer Azaddin Ngah Tasir coincided with the National Financial Well-being Summit 2023 (NFWS 2023), organised by SAF on March 20^th.

Financial awareness is learning and knowing about your finances and money matters, while financial well-being is about how you manage your finances.

Knowing how to manage our expenses and spending wisely will enhance our well-being. This helps us to raise our families and embark on our careers more confidently. – Datuk Parmjit Singh, APU chief executive officer^[6]

Why Do We Need To Be Financially Literate?

Financial literacy entails possessing the necessary awareness, knowledge, and skills to carefully weigh the advantages and disadvantages of each financial decision. Armed with this understanding, you will be equipped with the appropriate attitude and behaviour to make informed choices. Moreover, financial literacy empowers individuals to work towards creating the life they aspire to have.

Jeffrey stressed the importance of teaching financial knowledge, skills, and values at school. “This will allow students to make savvy and effective financial decisions in their daily life and as they move into adulthood.”^[3]

Regardless of your age or income group, being financially literate is a skill that helps immensely ensure your future wealth and comfort.

These Groups, Websites Or Apps Can Help Improve Your Financial Literacy

It is important to get up-to-date on your financial literacy. Here are some good platforms to learn more about financial literacy and how to improve it.

#1: RinggitPlus

RinggitPlus is Malaysia’s leading financial comparison website. Headquartered in Kuala Lumpur, RinggitPlus makes it easy for Malaysians to apply for any financial product. This is thanks to in-house innovations such as XpressApply and its own RinggitPlus chatbot.

The RinggitPlus team is your reliable source for unbiased information on everything you need to make informed decisions, so you can save your money on daily products and services.

#2: Versa

Versa markets itself as a digital cash management platform that offers interest rates on par with fixed deposits. It is committed to removing obstacles such as lock-in periods so that you can make smart, important decisions without worries. It offers convenience and flexibility for people from all walks of life.

#3: Ringgit Oh Ringgit

Ringgit Oh Ringgit is a blog run by writer-for-hire Suraya. It provides advice on money management, earning and saving money, investing and spending money on experiences instead of things.

#4: iMoney

iMoney started in 2012 to help people reach their goals through smart money decisions. It used this as a drive to innovate and improve its services and solutions.

To date, iMoney has helped over 29 million customers across Malaysia and the Philippines in their personal financial journey through smart comparisons, simplified applications, tools, and money tips. It has also worked with over 90 financial services partners and government agencies to empower people with financial literacy.

#5: MyPF

MyPF is a leading award-winning financial education platform to help you simplify and grow your personal finances. MyPF uses technology to connect Malaysians with licensed financial planners, FREE financial tools, and trusted financial solutions. MyPF also regularly organises events, encourages community building, and strives to increase financial awareness.

MyPF was founded in 2017 and its origins can be traced to a personal finance blog started in April 2013. While MyPF was created by Malaysians for Malaysians, financial education is global wherever you are in the world.

Explore our sources:

1. Low EPF Savings Due To Lack Of Financial Literacy. (2022). Business Today. Link.
2. Investopedia. Link.
3. L. Segaran. (2021). Instilling a greater need for financial literacy. Business Today. Link.
4. F.W. Bing. (2022). FPAM: Why Financial Literacy is as Important as Financial Knowledge? Business Today. Link.
5. C. Tay. (2022). Malaysian youths generally unable to manage finance well, SC’s survey finds. The Edge. Link.
6. Boost for financial literacy. (2023). The Star. Link.
7. D. Pillai. (2023). Quest to help Malaysians better manage their finances. FMT. Link.
8. J-L. Lim. (2019). Malaysia Launches The National Strategy For Financial Literacy. iMoney. Link.
9. Financial literacy programme to be launched in selected schools. (2020). The Star. Link.
10. Advancing Malaysia’s financial literacy agenda. (2022). The Star. Link.