Are 60% of Young Malaysians Bankrupt?

According to our Finance Minister, many young Malaysians are going bankrupt because of poor financial literacy. A study by S&P Global Literacy Financial in 2014 reported that the financial literacy rate is at 36% in Malaysia compared to 59% for developed countries. The low financial literacy rate is among the factors for high levels of debt.

Of a total of 100,610 Malaysians who were declared bankrupt between 2013-2017, 60% were between ages of 18-44 years. Beyond financial literacy the common causes of bankruptcy (e.g. in the U.S.) include:

·       Medical expenses – rare diseases or injuries can quickly wipe out savings;

·       Job loss – layoff, termination means loss of income and severance packages are insufficient to draw on;

·       Unexpected disaster – business failure, natural disaster can lead to losing earnings and/or homes; and

·       Divorce – meeting legal costs, alimony, child support can strip one of ability to pay bills.

There are many reasons for bankruptcy and older folks are facing them as well. EPF suggests each person needs at least 240,000 savings by age 55 in order to retire reasonably. Those at age 54, two-thirds only have RM50,000 and below in their EPF. This savings will run out in five years bearing in mind life-span is now 75 years. Malaysians need better financial knowledge and a thriftier attitude to have quality retirement.

Reference:

1. 60% of young Malaysians are Bankrupt because they don’t know how to manage money, www.worldofbuzz.com

2. Top 5 reasons why people go bankrupt, Mark P. Cussen (www.investopedia.com)