Earning just enough to make ends meet

PETALING JAYA: A study done by the Malaysian Financial Planning Council, in which the majority of respondents were from the B40 group earning less than RM3,000 a month and between 20 and 39 years old, found that almost half of the respondents had enough money to cover only basic needs, while 81% either did not save, or saved less than 10% of their monthly income.
The study, commissioned by Capital Market Development Fund to investigate Malaysians’ financial capability, was conducted from April to August 2017. It involved 2,000 respondents, of which 57% were in the B40 category, with monthly income of less than RM3,000.
Of the respondents, 55.3% were married; 54% were female; 64% were of Malay ethnicity; and 56.4% were young adults between 20 and 39 years old.
The study was separated into four target categories – public sector employees; SME/private sector employees/general public; Felda/rural area residents and youth in institutions of higher learning.
The survey revealed that almost half of the respondents (47.2%) had enough money to cover only their basic needs, which could be due to the higher percentage of respondents earning less than RM3,000 monthly.
It also found that vehicle hire purchase comprised the highest percentage of respondents’ debt (36.2%), followed by education (33%), housing mortgage (29%), personal loans (26.3%) and credit cards (19.6%).
“With the emergence of zero down payments and a reduction of sale prices, it is significant that this has encouraged Malaysians to incur debt in car purchase, having the misconception that one can afford the monthly repayments,” the report said.
Furthermore, the survey found that majority (52.5%) of the respondents had a very low asset-to-debt ratio and 81.3% of them either did not save or saved less than 10% of their monthly income. In terms of the proportion of monthly income that goes into savings, 55.3% saved less than 10% of their monthly income while about 26% did not save at all.
“This is indeed worrying as respondents seem not to feel the need to save nor have the ability to save,” it added.
It is worth noting that only 36.9% of the respondents owned their homes or had family-owned homes, while the rest lived in rented accommodation.
Meanwhile, 44.3% of respondents admitted to have little knowledge of the time value of money, an important component of financial planning, inflation and had a highly inadequate understanding of risks and investments.
This explained the findings, where over 80% of the respondents believed that expenses can sometimes be higher than income and that they could depend on their Employees Provident Fund savings after retirement.
The majority of them also believed that the Credit Counselling and Debt Management Agency, which provides counselling and financial advisory services, offers loans: and only 25% of the respondents were aware that not all investment schemes here are legal.
The report proposed that financial education should be made mandatory. It also recommended that the Securities Commission aggressively interact with the public to educate them on real investments and scams.