Compound interest, tax brackets, loan rates, stamp duty, credit ratings, capital accrual, debt consolidation, share indices…
How many of us can honestly say we really understand the financial concepts that determine so much of our lives today?
The shocking news that 65,000 Malaysian youths have been declared bankrupt over the last five years has put the spotlight on the urgent need for financial literacy.
To compound matters, studies by the Consumer Research and Resource Centre, Asian Institute of Finance and the Central Bank (BNM) have swelled the chorus showing that ordinary Malaysians are experiencing financial difficulties.
Personal debt has ballooned, with three out of ten consumers having to borrow to pay for essential goods while many others are not saving enough for retirement or emergencies.
Paul Selva Raj, CEO of the Federation of Malaysian Consumers Associations (FOMCA), attributes this to economic and demographic trends, such as stagnating wages, increasing cost of living, higher life expectancy, pressure to consume and aggressive marketing techniques as well as the expanding diversity and complexity of financial products.
“Overall, more responsibility for financial decisions is being shifted to the individual,” Raj writes in Free Malaysia Today.
“How successfully people adapt to these changes will be affected not only by their skills and knowledge but also by their access and ability to use effectively financial products, services and information,” he adds.
Empowering through financial education
Malaysia has long provided a diverse range of financial training, including formal lessons in the secondary school syllabus, free workshops by the Securities Commission and Bursa Malaysia, and high-quality resources offered by BNM’s Credit Counselling and Debt Management Agency (AKPK).
Many will remember the iconic “Buku Wang Saku” (Pocket Money Book) distributed to 15 million schoolchildren between 1999 and 2012, which featured comics-style narratives by cartoonist Lat, intended to nurture financially savvy youth.
However, with recent trends, the government is beefing up its response. Most recently, Finance Minister, Lim Guan Eng launched “Belanjawanku - Malaysian Individual and Family Expenditure Guide”.
The guide published estimations of minimum monthly expenditures for different Klang Valley households with allocations for basic necessities, social participation, recommended savings, loan repayment and emergencies.
Accessible and easy to digest
Arguably, the groundswell on financial awareness has been led by intrepid citizens using digital technologies to support well-informed, effective and responsible financial decisions.
The public’s hunger for clear and easy-to-use resources has propelled one of Malaysia’s most successful start-ups, iMoney, which provides information about loans, credit cards, car insurance, fixed deposits and lots more.
“We’ve created a dedicated multi-function online platform containing up-to-date, unbiased information for the entire repertoire of banking products and services in Malaysia,” CEO and co-founder Lee Ching Wei explained to Asian Entrepreneur.
“No one should ever need to fall victim to making a choice they’d regret when it comes to banking products,” Lee said.
On the strength of demand for accurate and simplified financial knowledge, iMoney records thousands of visitors a month, has expanded to other Asian countries and is valued at more than RM100 million.
Overcoming the language barrier
Editor and co-founder of personal finance website, pepitih.com, Amir Hafizi acknowledges the formal education Malaysians receive in Malay while at school, but wonders how “sticky” this is when faced with real-life financial decisions in adulthood.
“We wish to provide the information in as simple a manner as possible, with minimal use of jargon.
“Reading time for each article should be below 3-4 minutes,” he elaborates.
The Malay-language platform is designed to reach a younger crowd, in order to educate before large financial commitments are made.
There are tips on how best to manage individual finances, such as keeping a money diary, taking advantage of tax breaks and incentives, maximising savings with competitive interest rates, and accessing underutilised initiatives like government-backed unit trust programmes, ASB and ASM, and the National Higher Education Fund Corp’s (PTPTN) SSPN-i savings scheme.
“Pepitih hopes to be a cheat sheet of sorts - a refresher for those who already know, and a gateway for deeper understanding to those who never paid attention,” Amir says.