PETALING JAYA: Young people, who are considered prime contributors to economic growth, are spending way beyond their means, and this has brought many of them to the brink of bankruptcy.
According to the Department of Statistics, this category – which number about 9.4 million – makes up about half of the Malaysian workforce.
Yet, many of them are heavily in debt, Bank Negara’s Credit Counselling and Debt Management Agency (AKPK) corporate communications head Mohamad Khalil Jamaldin told theSun.
He said 13.8% of the 289,936 participants in AKPK’s debt management programme are aged 20 to 30.
And the fault is mostly their own.
A 2015 survey by Asian Institute of Finance (AIF) of more than 1,000 young professionals aged 20 to 33 – referred to as Generation Y or “Gen Y” – showed that many of them rely on high cost borrowings with 38% having personal loans and 47% having credit card debt.
Worse still, 58% of them had neither the capability nor knowledge to manage their finances properly, according to the survey.
The same study also showed that a staggering 70% tended to service only the minimum monthly payment on their credit cards, and 45% also did not service their debt on time at some point.
Of those in this financial quagmire, 65% would seek help by consulting friends, co-workers or members of their families.
Only 37% sought financial advice from professionals.
This does not bode well for the economy given that Gen Y, also known as millennials, will make up about 75% of the global workforce by 2025, according to PwC Malaysia managing partner Sridharan Nair.
The problem lies mainly with the tendency for impulse buying or the “buy-now-pay-later” attitude of the young, according to AIF chief executive officer Dr Raymond Madden and its director of strategy, policy development and research Dr Wan Nursofiza Wan Azmi.
“They may be digitally savvy but not financially savvy.”
In their report Bridging the Knowledge Gap of Malaysia’s Millennials, Madden and Wan Nursofiza noted that while Gen Ys are pragmatic, highly optimistic and well-educated, they do not understand the concept of short-term sacrifice for long-term gain.
“They want it all, (and they want it) now.”
There are many examples.
For instance, Angeline Ng, 27, told theSun she allocated a specific amount of money every month for her “wants” and “needs”, yet she tended to overspend most of the time.
“I spend 40% of my salary on consumer goods,” she said.
“Sometimes I overspend on skincare and splurge on travelling.”
Prasna Devi, 25, admitted that she would spend most of her money at bars and restaurants with her friends.
“A night out can cost up to RM100. And I get my meals through the delivery service and that is not cheap.”
Nonetheless, it is not all doom and gloom.
According to Madden and Wan Nursofiza, there have been many efforts in both the public and private sectors to help young people improve their financial literacy.
“They are being equipped with the necessary knowledge to become well-informed consumers and investors.”
The rest is up to the millennials.
