Wednesday, April 11th, 2018 at , Economy
By NG MIN SHEN / Graphic By TMR
The majority of Malaysians are not financially literate and have difficulty saving for the future due to insufficient income, the Malaysian Financial Planning Council’s (MFPC) research found.
In a report titled “Financial Capability and Utilisation of Financial Advisory Services in Malaysia”, the independent body found that Malaysians generally lack knowledge of how to manage money, with about 40% stating that they do not plan ahead financially.
Of the 2,000 participants surveyed, only about 60% said they know how to manage their money, while 40% prefer a good standard of living now, rather than planning for retirement.
The study also found 55.3% save less than 10% of their monthly income, while about 26% do not save at all.
Notably, this could be due to nearly half (47.2%) having income that is only sufficient for basic needs, while 12.3% of those surveyed indicate that they do not have sufficient income for living expenses.
“With depressed real wage growth, the data indicates respondents are just able to meet day-to-day expenses, with only 16.9% having enough and being able to live comfortably,” the report stated.
Vehicle hire-purchase loans made up the highest percentage of citizens’ debt (36.2%), followed by education loans (33%), mortgages (29%), personal loans (26.3%) and creditcard debt (19.6%).
Only 36.9% of participants own their own homes or have family-owned homes.
“The emergence of zero down payments and reduction in sale prices have encouraged Malaysians to incur debt in car purchases, with the misconception that one can afford the monthly repayments.
“For the respondents’ current asset-to-debt ratio, the majority have assets value that is lower than debt. Also, 81.3% of respondents either do not save or save less than 10% of their monthly income, which is a major national concern,” the report revealed.
Additionally, only 33% have an understanding of financial products, while 60% have little confidence in financial planners and do not stay informed of changes in the financial landscape.
Associate professor at Universiti Putra Malaysia Associate Professor Dr Mohamad Fazli Sabri, who led the study, noted that a disturbing 25.7% of respondents believe all investments in Malaysia are legal.
“As participants of investment instruments, consumers must be wary of various measures used by unscrupulous platforms that may attract them to channel their money into illegal funds.
“Many consumers, particularly those in rural areas who have little access to financial education, are susceptible to the get-rich-quick schemes,” he said on the sidelines of the fifth MFPC International Conference on Islamic Wealth Management and Financial Planning in Kuala Lumpur yesterday.
Some 18.5% of those studied are of the opinion that all investments in the country are profitable and low-risk.
Another 43.8% believe they can depend on their Employees Provident Fund savings to support them after retirement, while over half of respondents are deemed illiterate in risk management as they do not mark insurance as a need on their priorities list.
Some 68.1% of participants said they do not have a financial planner, while only 15.4% said they would obtain financial advisory services from an independent financial planner.
The report was commissioned by the Capital Market Development Fund to investigate Malaysians’ financial capability.
Conducted in collaboration with academia and industry professionals, the survey aims to investigate Malaysians’ general financial literacy and capability, as well as to determine Malaysians’ literacy of the capital market and understand their preferences with regard to financial planning advisory services.
Date of Input: 13/02/2019 | Updated: 07/07/2021 | rozlita