WHEN you get older, you will realise that the advice your parents gave you was right. Take care of your health, sleep early, eat properly, get your exercise and study hard were guidelines drilled into me from a very young age.
But like all growing men, I said let me learn it my way. Well, today I have come to realise that their advice, with a dose of love, was the best nugget of wisdom.
The only bit of advice they gave when it came to money was to save. My sister and I had savings accounts and were happy to see our deposits grow over time, but it was a race she always won.
Financial advice to save was also ingrained in society back then. Advertisements drilled the point of saving for a better future.
Today, however, the story is very different. The message to the people of Malaysia is to consume and use credit to supplement their spending.
Cold calls for personal loans from banks are common and there is hardly a sense that savings and investments are prioritised. Malaysia’s savings rate was once very high, but in 2013, according to Khazanah Research Institute, it was 1.4%, which is lower than the country said to be the greatest consumer in the world – the United States. The Americans save 5% of their income.
In Malaysia, growth in current accounts and savings accounts, which has been trending lower for years, was -0.3% in September.
When borrowings for personal loans and credit cards are higher year-on-year and savings are down, then something is wrong, and this has brought about a whole load of financial issues for society today.
In Malaysia, youth bankruptcies are up and the number of people seeking advice from a debt-management programme from the Credit Counselling and Debt Management Agency, according to a report, had shot up by a staggering 1,819% to 156,892 as at end-July 2016 from 2007.
The main reason cited for debt resolution was poor financial planning.
With household debt now at 89% of gross domestic product, Malaysians have been consuming at a furious pace over the past decade.
But what of the younger generation? There are articles that say they are good at spending their cash, as there is little chance of buying a house, given how unaffordable house prices are.
One thing is for sure, I doubt many millenials and the Gen-Y are investing the old-fashioned way and there is some truth to that.
For one, the average age of CDS accounts, which is an account with brokers for Malaysians to buy and sell shares, is said to be above 40 years of age and the growth rate of loans for the purchase of securities is trending downwards, which means people are borrowing less money with each passing month to invest for their future.
Maybe the sluggish stock market has something to do with this, as borrowings by households to invest in securities have been contracting for many months.
Some will say that investing in get-rich-quick schemes has drawn the attention of the younger generation.
Everyone likes to get rich fast, but they have to realise that any investment promising super-normal monthly returns is a sure way to lose money.
With savings down, debt rising and financial difficulties on the way up, news of the Financial Education Network, a multi-agency initiative announced and led by Bank Negara, is a step in the right direction.
Governor Datuk Muhammad Ibrahim said in a statement that the network is “extremely important to support the individual well-being and financial health of Malaysian households”.
The Employees Provident Fund is making people aware of retirement planning, but Bursa Malaysia needs to do more to get younger Malaysians interested in the stock market.
Investing in blue chips is proven to grow the wealth of individuals, and here, Bursa has to drive the awareness of the importance of investing.
There is a cost to that. Maybe Bursa might think of the cost of a stock investment education programme as a social obligation for the future.
It is never too late to get Malaysians to realise the importance of financial education. A lot of money needs to be forked out on such public service announcements, but it will be money well-spent.
Most of the Gen-X and the baby boomers had to learn financial literature the hard way, as there was little beyond the drumming of the message to save as to how to grow your money.
Financial education is important regardless of age and once the present crop of Malaysians know of the avenues out there for them, maybe they will tell their children of the various investment options in today’s world apart from your plain vanilla savings accounts, which is still a very sound, or maybe, the gold standard financial advice in my book.