FOMCA deeply appreciates YB Hanna’s, Minister of Youth and Sports, efforts in highlighting and committing to the issue of youth bankruptcy. FOMCA has long advocated the necessity of financial empowerment amongst youths.
Between 2018 and 2022, out of the 48,791 being declared bankrupt, 22% were below the age of 34 while 37.5% were between the ages of 35 and 44; in total 57.5% below the age of 44. An issue of serious concern indeed. Yet, perhaps to address youth bankruptcy this is not where we start.
Before being declared bankrupt, being overwhelmed by debt, there is another agency that consumers can go to for assistance. The Credit Counselling and Debt Management Agency (AKPK) which provides financial counselling and debt management services.
In 2022, according to AKPK data, out of the 382,761 consumers that had participated in their debt management programme, 210,409 or 55.1% were between the ages of 20 to 40. Certainly, an area of concern that so many young people are facing serious financial problems and need AKPK’s assistance and support to help them address their debt situation. Yet again this may not be the place to start.
How then are youth fairing in terms of financial behavior and financial literacy in the general population? According to the survey conducted on those aged 20 to 33 by the Asian Financial Centre (AFC), it was reported that:
- 75% have at least one long term debt while 37% had more than one long term debt;
- To offset this debt, respondents were relying on high cost borrowing – 38% reported taking personal loans while 47% engaged in expensive credit card borrowing;
- 40% reported spending more than they can afford;
- Shockingly, 70% of respondents reported they were living beyond their means.
In a study by the Consumer Research and Resource Centre on financial behavior 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, the study found that:
- 88.9% made late bill payments;
- 48.9% reported needing to borrow to buy basic items;
- 61.1% did not have enough money for medicines
- 19.4% were facing bankruptcy procedures
Interestingly the study by AFC also explored the relationship between financial knowledge and total expenditure. The survey found that those low in 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 support in research that there is a strong correlation between financial knowledge and financial behavior.
The 12th Malaysia Plan (2021-2025) recognizes 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 recognizes that poor financial management among some Malaysians due to lack of financial literacy and unsustainable lifestyles, is preventing them from making sound financial decisions and making them vulnerable to serious financial problems and scams.
Way forward, the RMK 12 proposes the formation of a youth financial education network to promote financial literacy and credit management programmes for youth.
Research and practices suggest that increasing financial knowledge and self-beliefs that is building positive attitude towards financial behavior, feeling of self-control and self-confidence in one’s ability will contribute significantly to positive financial behavior which leads to financial well-being as well as over well-being.
We suggest that the Honorable Minister focus on enhancing financial literacy amongst youths on a national scale. An effective and evidence based financial literacy program would certainly lead to responsible financial management and thus to financial and overall well-being. Just as important YB it would keep them away from bankruptcy or even AKPK.
