FINANCIAL LITERACY AMONG YOUTH IN MALAYSIA

Before we start with stating the facts, we need to understand WHAT IS FINANCIAL LITERACY.

Financial literacy can understand and effectively use various financial skills, including personal financial management, budgeting, and investing. So, why is financial literacy necessary for youth?

It is generally difficult to fix bad decisions concerning finances – it can take several years to do so. Teaching young people about money at an early age will impart them with vital knowledge and skills that will assist them in making informed decisions regarding financial matters.

In 2020, we Malaysian and the world as a whole were hit with a Pandemic that many of us are not fully prepared for. Many lost their jobs, get pay cuts; some even have to get a second job to sustain the cost of living since the start of MCO (Movement Control Order).

A current pandemic is a generational event that has caused many to reflect on their financial situation and look closely at their financial habits. MALAYSIA’s unemployment rate rose 4.5% in 2020, the highest rate recorded since 1993, according to the Department of Statistics Malaysia (DOSM).

About 84,805 Malaysians were declared bankrupt between 2015 and 2019. Based on the figure provided by the Insolvency Department, people below the age of 34 made up 26 per cent of the bankruptcy cases.

Low-income Malaysians and millennials are piling up debts and risking bankruptcy by turning to banks for loans, and credit cards to support their lifestyle choices, says a World Bank Group report.

According to the 21st edition of its Malaysia Economic Monitor, about 27 per cent of households in Kuala Lumpur earn less than Bank Negara’s estimated monthly living wage of 2,700 ringgit (US$650) for a single adult, 4,500 ringgit for a childless couple or 6,500 ringgit for a couple with two children.

Households with income below the living wage tend to take on personal financing loans and credit cards to keep up with lifestyle choices and raise living standards, it said.

Financial literacy is the ability to make informed judgements and effective decisions regarding the use and management of money. The pillars of financially literacy include

1. Budgeting 2. Saving 3. Investing 4. Understanding Credit /Managing Debt 5. Paying bills

Why is this happening? The education system did not pay a lot of attention to this matter. Primary and Secondary school has not made it compulsory to study about managing your finance. So how to fix some of these problems? Haa, let me share my method.

I use... The 50-20-30 rule is a money management technique that divides your paycheck into three categories: 50% for the essentials, 20% for savings and 30% for everything else. 50% for essentials: Rent, bills, groceries, petrol, insurance, etc.