BANGI: Low financial literacy among young Malaysians is a reason why many are caught in the debt trap, including ending up as bankrupts, says Finance Minister Lim Guan Eng.
“Unfortunately, a study by S&P Global Literacy Financial in 2014 reported that financial literacy rate in Malaysia is only at 36% compared to 59% in developed countries.
“The low financial literacy rate is among the factors that contribute to high debts, including worrying bankruptcy problems among the youth,” he said in his speech when launching the “Belanjawanku: Expenditure Guide for Malaysian Individuals and Families” here yesterday.
He said that between 2013 and 2017, 100,610 Malaysians were declared bankrupt, of whom 60% were between 18 and 44 years old.
Apart from the youth, Lim noted that older Malaysians also faced serious financial challenges, particularly with regard to their retirement plans.
Based on estimates by the Employees Provident Fund (EPF), he said that as of 2019, an individual required savings of at least RM240,000 by 55 years old in order to retire comfortably.
“However, based on the EPF 2017 Report, active contributors aged 54 have average savings of only RM214,000 in their accounts.
“What is even more worrying is that two-thirds of contributors aged 54 only have RM50,000 and below in their EPF accounts in 2015,” he said, adding this was well below the recommended savings.
Lim noted that the low amount of savings was inadequate and estimated to run out five years after retirement although the average lifespan of Malaysians was pegged at 75.
“Malaysians must improve their financial knowledge in order to make the right decisions in terms of spending and investment,” he said.
Lim added the government would continue to provide assistance to those who needed help through social programmes such as Bantuan Sara Hidup (Cost of Living Aid) as well as controlling the cost of living and increasing job opportunities.
He also said that reintroducing the Sales and Service Tax and controlling fuel prices had helped ease the rakyat’s burden by reducing inflation by 1% last year, from 3.8% in 2017.