Malaysians are still in the dark in financial education and at risk of making poor financial decisions. What is financial literacy and why is it important for us as a nation?
In Malaysia, many people are still living in the dark when it comes to financial education. Even though we are regularly reminded to prepare for rainy days, but how many of us are really prepared for the worst to come?! Many of us are still seeking for answers such as:-
- How much financial preparation do I need?
- How much should I save?
- How much do I need to invest to retire comfortably?
Many good options are available from financial institutions including saving accounts, loan instruments, and extendable credit limits. However, we can easily fall into large amounts of debt if we do not manage our finances property. The rate of bankruptcy in Malaysia is rising because are not able to manage our finances. This is especially true for many fresh graduates that have just started their working careers and earning an income. Spending all that you earn (or sometimes more than you earn!) without thinking for the future sucks you into a whirlpool of debt that threatens to drown you.
Malaysia recently amended her bankruptcy laws to a minimum debt of RM50,000 instead of RM30,000. However, the number of bankruptcies increased instead of decreased! Bankruptcy is indeed a serious matter and one faces travel bans, limited credit lines, assets seizure, and employment restrictions.
For the *ahem* slightly older ones among us who have been working for years, the situation may not be much better. We often have insufficient savings due to poor planning in finances and are largely depending on EPF for our retirement years. Malaysians generally lack awareness and proper channels to learn how to manage our finances.
“The person who doesn’t know where his next dollar is coming from usually doesn’t know where his last dollar went.”
We need to start by educating and equipping ourselves with financial education. It does not have to be difficult, but we do need to focus on and pay attention on our finances. We can learn and then apply our knowledge gained on our financial situation. This allows us to plan for the future with the right resources and tools to help us.
Financial knowledge will help you to be confident in using your resources (time, money, etc) effectively. We need to take the extra step to share financial knowledge and resources to help empower a nation where many are still poor financial literacy. Education and awareness is important to help people make good financial decisions in their lives, rather than chasing hot tips or listening to speculative/fake news.
“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” ~ Ayn Rand
Financial education is all bout making financially responsible decisions in our lives. This ranges from understanding things like banking and credit cards, to planning for a home purchase to your children’s education expenses, to planning your retirement and investments. Financial education is not tied to your schooling education levels. Someone with a high active income may be worse off in terms of financial literacy and overall finances compared to someone who only completed his SPM examinations.
The below are not “hot tips” but simple and sound advice on where to get started in your personal finances.
- Know your motivations in why you want to focus on your personal finances. Our time is a finite limited resource. You need to know why you are doing what you are doing, instead of burning hot then cold (like chicken waste).
- Start from personal finances basics. You need to get your own personal finance basics in order first. Sort out your cashflow, emergency savings, and risk management before you start working on investing, estate, and retirement planning.
- Continuous learning is a process that never ends while you are still breathing. Work with a mentor, advisor, or financially successful individuals who are willing to share with you their experiences and knowledge.
Riches are not an end to life, but an instrument to life.
An improvement in financial literacy impacts not only the individual and his family, but has the cascading effect to drive forward an entire nation on the right foot into the challenges of tomorrow. Gaining financial knowledge is not easy, but it is simple and the returns grow and compound with you over your lifetime.