Are Young Malaysians In Control Of Their Finances?

Illustration by Katya Marquez

Impulse spenders, trend-seekers, lazy, entitled…there’s no end to the unflattering labels heaped onto millennials. Young Malaysians, in particular, have gotten a bad rap for prioritising self-gratification over building up their savings.

But how bad is it, really?

What proportion of young Malaysians are actively saving money, and how much are they saving? Are millennials really spending all their disposable income on overpriced coffee and avocado toast?

That’s what we’ve tried to find out. In May, we ran a survey with Perbadanan Insurans Deposit Malaysia (PIDM) and 1,525 Malaysians, aged 24 to 35, responded to the survey to share their views with regards to saving money.

While this survey may not be representative of the entire millennial population in Malaysia, their responses can shed some light on what drives millennials to save money, the strategies they use in achieving their goals and the challenges they face in the process.

Here’s what they told us.

Most of the respondents are savers

Most of our respondents (78%) said that they have been saving part of their income, although 34% of them only started saving one to two years ago.

However, they aren’t shying away from working hard or making lifestyle changes in order to achieve their savings goals. Around half of our respondents have engaged in freelance work or side businesses, and some have reported downgrading their lifestyle or investing in education or personal development.

It’s interesting to note that while millennials are not often considered long-term planners, at least 2 out of 5 respondents are already saving for retirement. This could be part of a larger trend of millennials being increasingly concerned with having adequate retirement savings – Private Pension Administrator Malaysia (PPA) found that the number of millennials who are private retirement scheme (PRS) contributors have been steadily increasing in the past few years. As of 2017, they made up almost 27% of the total number of PRS contributors.

Low savings

While our respondents generally have positive savings habits, their total savings are meagre.

The PIDM survey found that 37% of savers had total savings amounting to less than one month’s income. This seems marginally better than the national average – in 2016, Khazanah Research Institute reported that 50% of the country’s urban households did not have any savings.

However, you should ideally have enough savings to last you at least a few months – this would be sufficient to help you recover from financial shocks such as a sudden job loss or a large emergency expense.

It’s no surprise, then, that many savers (68%) in the PIDM survey are still trying to save for an emergency fund.

Why is it so hard to save?

Why aren’t more respondents saving, and why are they saving so little?

In short: low wages, rising cost of living and loan commitments.

The Employee Provident Fund’s (EPF) expenditure guide noted that the median wage in Selangor is RM2,580, but the minimum level of income required for a single person to live comfortably in the Klang Valley is RM1,870 (without a car) and RM2,490 (with a car). iMoney’s own Monthly Budget Survey found that the average monthly spending of a single, car-owning individual is RM2,695. For income-earners who fall in – or below – the median wage bracket, this doesn’t leave a lot of room for savings.

Likewise, the PIDM survey found that among those with lower monthly salaries were less likely to be savers, suggesting that a key obstacle to saving is insufficient income.

Little wonder that 63% of non-savers feel that their income isn’t enough for their needs.

When non-savers were asked why they found it difficult to save, the most commonly cited reasons were that the cost of living has been rising (61%) and that they still have loans to pay off (37%). Another 15% revealed that they did not know how to save.

Nevertheless, non-savers do strive to reach their savings goals. Around half of them (53%) engage in freelance work or side businesses, and 35% reported having to downgrade their lifestyles.

Even those who save are finding it hard to do so. Around half of our respondents (49%) who identify as savers found saving either difficult or very difficult. They echoed non-savers in citing the rising cost of living and loan commitments as obstacles to saving.

What could encourage millennials to save more?

PIDM’s protection plays a role. About 1 in 4 respondents (25%) said that a PIDM protection limit of more than the existing RM250,000 would encourage them to save more. In fact, if there were no PIDM protection, 50% of respondents said that they would put less money in banks, and 37% said they would not put any money at all. These numbers suggest that PIDM’s protection could assure customers as to the safety of their deposits, and in turn encourage them to save more.

Around half of our respondents (52%) also said that being rewarded for reaching saving milestones would encourage them to save more money, while 42% said that they would be encouraged to save if someone helped customise a savings strategy for their personal goals.

Young Malaysians have cause to be optimistic, as there are now mobile phone apps and digital platforms that can ‘gamify’ their personal finance journeys. You could, for example, use an app to turn your savings goals into a mobile gaming experience. Some apps and platforms can also help you customise saving strategies to reach your financial goals. Millennials, many of whom are digital natives, would do well to leverage these services.

The bottom line

Generally, the young Malaysians who were surveyed have positive attitudes towards saving. They have high savings aspirations, and are willing to work hard or make lifestyle changes to achieve them.

On the flipside, their total savings are low. Economic forces – such as low wages and a rising cost of living – present major challenges to saving more. Compulsive spending and lack of financial know-how also make it hard for millennials to save. Despite these challenges, 80% of our respondents said that they feel in control of their finances.

For more personal finance insight, tips and tricks, visit PIDM on Facebook.