FOMCA (the Federation of Malaysian Consumers Associations) appreciates the efforts by Youth and Sports Minister Hannah Yeoh in highlighting and committing to the issue of youth bankruptcy. Fomca has long advocated the necessity for financial empowerment among youths.
Between 2018 and 2022, out of 48,791 declared bankrupt, 22% were below the age of 34 while 37.5% were between the ages of 35 and 44; in total 57.5% were below the age of 44, which is of serious concern.
People with debt problems can go to the Credit Counselling and Debt Management Agency for assistance. The agency provides financial counselling and debt management services.
According to the agency’s data, in 2022, out of 382,761 consumers that had participated in their debt management programme, 210,409 or 55.1% were between the ages of 20 and 40. It is worrying that so many young people are facing serious financial problems, and need assistance and support to help them address their debt situation.
The question is how are youths fairing in terms of financial behaviour and literacy?
According to a survey conducted by the Asian Financial Centre (AFC) on those aged 20 to 33, it was found that:
75% had at least one long term debt while 37% had more than one long term debt;
To offset the debt, respondents were relying on high cost borrowings – 38% had taken personal loans while 47% had engaged in credit card borrowings;
40% were found to be spending more than they can afford;
And, 70% of respondents reported they were living beyond their means.
In a study by the Consumer Research and Resource Centre on financial behaviour of youths, it was found that 47% of young workers were excessively over-indebted.
In another study on young workers, aged 20 to 40, living in public housing areas, it was found that:
88.9% made late bill payments;
48.9% needed to borrow to buy basic items;
61.1% did not have enough money for medicines;
19.4% were facing bankruptcy procedures.
The study by AFC also explored the relationship between financial knowledge and total expenditure. The survey found that those with poor financial knowledge spent 84% of their income and saved or invested the rest while those with good financial knowledge spent 64% of their income and saved or invested the rest. In fact, there is substantial prove of strong correlation between financial knowledge and financial behaviour.
The 12th Malaysia Plan (2021-2025) found that low purchasing power, high cost of living, lack of social protection and low financial education have a strong negative impact on the well-being of the people.
The report also found that poor financial management among some Malaysians due to lack of financial literacy and unsustainable lifestyles, was preventing them from making sound financial decisions, and making them vulnerable to serious financial problems and scams.
The 12th Malaysia Plan proposes that a financial education network be set up to promote financial literacy and effective credit management among youths.
We suggest that the minister introduce an effective and evidence-based programme on responsible financial management for all youths to help them manage their finances prudently.
Paul Selva Raj
Secretary-General
Fomca
