PETALING JAYA: A live-in-the-moment mentality paired with the convenience of easy credit and buy-now-pay-later schemes is one of the factors fuelling a rise in debt among young people under 30, say financial experts.
Their comments follow the release of the latest report from the Credit Counselling and Debt Management Agency (AKPK), which revealed that 53,000 young people are buried under RM1.9bil of debt.
The report also revealed that 28% of the nation’s working adults have turned to borrowing for essential purchases.
One financial planner, Amy Seok, said student loans account for about 60% of debt for people under 30, with credit card debt and personal loans also making significant contributions.
Other factors spurring debt are the allure of making quick returns through cryptocurrency, said another expert, Felix Neoh.
He added that the “you only live once” (Yolo) mentality is driving the purchase of trendy and luxury items among Malaysians aged 30 and below.
The fear of missing out (Fomo) is also a common reason why young adults make financial mistakes, said Neoh, who is the director of Finwealth Management Sdn Bhd.
Fomo also drives some people to invest blindly in cryptocurrency and stocks or follow trendy financial gurus who may not hold the necessary licences.
“There is also a tendency to take on unnecessary debt as they feel they are still young,” Neoh said.
Instead of taking on debt through investing, young adults should prioritise growing their salaries and savings as a primary source for increasing net worth.
“Focus on increasing income and cutting off unnecessary debt facilities.
“For example, limit credit card use to emergencies and pay the monthly bill in full,” Neoh added.
E-wallets should also only be reloaded through funds in the bank as opposed to credit cards, he said.
Parents should be more involved in teaching their children about prudent spending, while financial advice should only be sought from licensed advisors and planners.
Seok of the Malaysia Literacy in Financial Education Association said the lack of financial literacy leads to the habit of using credit excessively without an effective repayment plan.
She said that consumers should set up automatic payment to avoid late fee charges and reduce spending available funds.
“It is also important to list all debts, including interest rates and minimum payments, as well as allocate a portion of your monthly income specifically for debt repayment,” said Seok, who is also the association’s founding chairman.
“They should reassess and adjust their budget regularly to stay on track,” she said.
Financial planner Gunaseelan Kannan said that cultivating relationships with individuals who are financially prudent can help young workers stay grounded.
“As they receive promotions or new job offers, many feel compelled to upgrade their living arrangements, buy luxury items or indulge in costly experiences, often without considering the long-term implications on their financial health,” Gunaseelan said.
“Lifestyle inflation is when young adults tend to increase their spending as their income rises, often leading them to live beyond their means,” he said.
Gunaseelan added that savings from reducing expenses can be used to pay off debt, and individuals should prioritise settling debts with high interest rates.
“You can also focus on paying off the smallest debts first to create momentum and motivation.”
