Malaysians are saving less today, by and large. You will find that the reason they are not saving is that the “cost of living is increasing, so how does one save?” They will also mention “inflation” but that amounts to the same issue.
The best time to ask such people about their savings habits is when they are in cafes and at branded smartphone retailers.
If their response is that they find it hard to save, then they should be asked why they are drinking a RM15 latte or buying a new smartphone that costs thousands of ringgit. You need to remind them to stop using the high cost of living as a convenient excuse.
With that said, here are the salient points of a survey conducted by Ringgitplus, an online financial comparison site, called the Malaysia Financial Literacy Survey 2019:
• 21% of Malaysians do not save their money.
• 89% believe their EPF savings are not enough for their retirement.
• 34% say they are unable to save because they have to pay debts.
• Out of those who said they do not save, 30% say essential expenses are just too high and 25% say they will save if they have some balance money at the end of the month.
• The number of people who do not save can be further segmented into three categories; with the second highest being 29.2% who believe that essential expenses are too high, leaving them with too little money to save.
• This is followed by 25.2% of respondents stating that they only save when there is some balance money at the end of the month, while 12% said it’s due to the fact that their lifestyle includes shopping and entertainment.
• Among those that do save, 35% save less than RM500 per month, 23% save between RM501 to RM1,000 and 13% save between RM1,001 to RM2,000. Only 9% can manage to save more than RM2,000 per month.
Liew Ooi Hann, CEO of RinggitPlus says, “The lack of awareness on personal finance is an ongoing challenge for us all. What’s more alarming is that people are in denial of their financial reality.”
He adds, “For example, we found that 54.6% of respondents aged between 20 to 29 do not have a retirement plan.”
Where spending on food is concerned, 54% of Malaysians spend RM20 or less per day, followed by RM20 to RM30. 13% do not have a budget for their meals and 3% spend between RM30 to RM50.
Interestingly, 52.7% of Malaysians are willing to buy a new phone using their credit card, due to options like an easy payment plan and cashback incentives, Only 40.5% responded that they would use cash instead.
The bottom line is that savings alone are no longer enough. You need to save in order to invest wisely. Are you saving, earning, investing and preserving?
More Malaysians need to learn and understand that without any financial planning, they are headed for financial ruin.
You cannot continue to think that short cuts like personal loans, more credit cards, renting instead of buying and many more such misconceptions are doing you any good.
In fact, if you look at it from a life expectancy and retirement point of view, you will realise why savings alone will not be enough.
Retirement was capped at 55 years of age a long time ago. Life expectancy in 1960 was estimated at 60. This meant that you only needed enough savings to last for just five years, on the average.
Today, you retire at 60 but expect to live till 75 or older. Your savings now need to be enough to last for 15 years, at least.
This article first appeared in kopiandproperty.com
Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.