There is an increasing need to provide individuals with access to financial knowledge through alternative formal channels. For example, the EPF offers its Belanjawanku mobile app, which assists individuals in planning, tracking and managing their expenses, thereby providing much-needed financial guidance. — FAIHAN GHANI/The Star
BANKRUPTCY cases in Malaysia have made headlines again with more than 2,000 individuals declared bankrupt from January to May and over 185,500 old cases still unresolved.
The Insolvency Department says almost half of the new bankruptcies were a result of personal loans, followed by business loans and other types of loans.
The largest group consisted of those between the ages of 35 and 44, followed by those between 45 and 54. Interestingly, males constituted the majority of loan defaulters.
Such figures are stoking much concern and calls for schools to make financial literacy a priority have grown louder.
In fact, Deputy Finance Minister Datuk Seri Ahmad Maslan suggested last October that financial literacy classes be introduced in schools.
So, why hasn’t anything been done yet?
Developed nations have financial literacy classes at schools for children as young as six or seven, and Malaysia should take a leaf from them, notes an observer.
“Financial literacy is as important as learning Maths, Science and English. What’s the point of having all this knowledge if you’re saddled with financial problems in adulthood?” he quips.
Yap Ming Hui, founder and managing director of Whitman Independent Advisors Sdn Bhd, agrees it is crucial that children are taught how to manage money from an early age so they are prepared for financial decisions in the future.
“Children who learn to manage their money well are more likely to avoid debt and financial pitfalls in the future. However, teaching money management is a gradual process that evolves as they grow,” Yap tells Star Biz7.
In his opinion, at around the age of seven, education is less about formal training and more about setting a good example.
“Children’s understanding of money deepens as they grow into teenagers, making this the ideal time to introduce more structured financial education to them. A short course, workshop, or book on personal finance would be a good choice at this time.”
Financial literacy is empowering
Like many, Yap reiterates that financial literacy is key.
“A broader knowledge of personal finance empowers individuals to develop healthy saving habits, create effective budgets, and make informed spending decisions.
“These skills, along with an understanding of appropriate investment strategies, can significantly reduce the risk of falling into a situation that leads to bankruptcy.”
Bankruptcy cases are not unique to Malaysia.
Across the Causeway, there was “an unprecedented surge in personal bankruptcy applications in 2023, hitting an 18-year high at 3,986,” according to Singapore’s CNA. The harsh economic landscape post-pandemic has largely been blamed for this, coupled with increasing interest rates and inflationary pressure.
Back to Malaysia, most financial observers believe that since financial literacy has not been emphasised in the traditional education system thus far, there is an increasing need to give individuals access to financial knowledge via other formal channels.
The Employees Provident Fund (EPF), for instance, has launched the Belanjawanku mobile app which helps individuals to plan, track and manage their expenses. It also offers recommendations for managing expenditures and savings, providing financial guidance to those in need.
Ultimately, the responsibility of financial management is in the hands of the individual.
One can download all the apps and go for all the financial management courses and workshops, but it is necessary to translate all this knowledge into action.
This article first appeared in Star Biz7 weekly edition.
