In our previous article on the National Strategy for Financial Literacy 2019-2023, we briefly touched on the five strategies that were the main focus of the entire plan. In this article, we dive deeper into what they actually contain.
"This National Financial Literacy Strategy" is essential for developing a sustainable society make wise financial decisions to avoid the pressure of misbehaviour or mistakes financial affairs." Tun Mahathir.
According to the Credit Counselling and Debt Management Agency (AKPK), One out of three Malaysians is not comfortable with their financial knowledge, while half of the population (52%) say they face difficulties raising even RM1,000 for emergencies.
AKPK also found that 68% of Malaysians who retire at 55 do not even have at least RM240,000 in their Employees Provident Fund (EPF) account. This all boils down to how much you really know about managing your money. We were taught in school to "Menabung" and we always hear the infamous Malay saying " Sikit sikit, Lama lama jadi bukit". But the harsh reality is that for the majority of us, we don't really get to see the "Bukit"
Raising financial literacy is crucial in empowering individuals with the knowledge and skills necessary to improve their financial wellbeing. The ability to make wise financial decisions is vital to our everyday lives, enabling us to provide for current and future financial needs. People from all walks of life should be equipped to manage personal savings and expenses, invest wisely and borrow responsibly in line with their financial goals and circumstances, including in retirement.
Enhancing financial literacy across all segments of society requires a systematic, sustained and coordinated approach that focuses on engendering long-term behavioural change. The National Strategy for Financial Literacy 2019-2023 (National Strategy) identifies the key priorities for achieving this and serves to align and harness synergies across initiatives with the ultimate goal of elevating the financial well-being of all Malaysians. Mastering basic financial principles and understanding the potential trade-offs between risks and returns are essential life skills that need to be emphasized.
Vision and Objectives Strategic Outcomes and Guiding Principles
The National Strategy focuses on empowering
- Save, manage and protect the money;
- Plan ahead and ensure a sustainable future; and
- Protect oneself from fraud and financial scams.
The guiding principles that should be adopted to implement the National Strategy are:
- Shared responsibility among stakeholders to improve the financial literacy of Malaysians. Collaboration enables us to identify and address financial vulnerabilities as well as optimise resources and achieve synergy.
- Development of inclusive and targeted financial education programmes for Malaysians in all life stages. Literacy initiatives should take into account financial needs according to life stages, and by focusing on groups that are most vulnerable.
- Implementation of initiatives that encourage and empower Malaysians to take responsibility for their own financial well-being. A core principle advocated in the strategy is individual responsibility
Strategic Priority 1: Nurture values from young
- Educate schoolchildren with basic financial knowledge and skills.
- Inculcate good financial values as a foundation for financially responsible Malaysians.
- Young Malaysians understand and are able to apply basic financial knowledge, skills and values when making financial decisions.
Financial education should start at an early age. Basic financial education must be taught to school children in order to inculcate and nurture good financial values in our young. This will enable students to apply what they have learnt about personal finance and practise prudent money management. Financial education can be incorporated both in curriculum and co-curriculum activities. The private and public sectors can also contribute and collaborate on such initiatives with the assistance of the Ministry of Education Malaysia.
Action Plans under this strategic priority aim to expand and reinforce financial education in schools as well as support capacity development and resources for teachers. Parental groups and the broader community are also encouraged to advocate financial education as they play a significant role in imparting the right values among young Malaysians.
Strategic Priority 2: Increase access to financial management information, tools and resources
- Provide timely and relevant financial education information, tools and resources to Malaysians through various delivery channels and touchpoints.
- Malaysians have greater awareness to make prudent financial decisions and practice good financial behavior.
Studies reveal that Malaysians lack sufficient confidence in their financial knowledge and skills. One in every three Malaysians rated their financial knowledge as low; while one in ten Malaysians feel that they are not disciplined when it comes to managing their own finances.
FEN seeks to educate and encourage Malaysians to adopt a healthy financial lifestyle. To advance and improve financial awareness, the information will be communicated through bite-sized messages using various channels including social media, digital platforms and physical touchpoints in order to reach out to as many Malaysians
Crucial information pertaining to money management is relevant to promote good financial behavior among Malaysians, such as:
- Knowledge of basic financial concepts;
- Ability to live within means;
- Management of expected and unexpected expenses;
- Being vigilant to avoid financial scams; and
- Ability to assess the risks and benefits of financial products and services, including those offered through digital platforms.
Action Plans for this strategic priority will leverage on collaboration between FEN members and other stakeholders and include nationwide campaigns to heighten awareness on financial education initiatives for all Malaysians.
Strategic Priority 3: Inculcate positive behavior among targeted groups
- Address financial vulnerabilities in selected segments or groups within society.
- Cultivate behavioral change that promotes healthy financial habits.
- Empower these targeted groups to make informed and responsible financial decisions.
- Enable them to be resilient, adaptable and be financially prepared for various life events.
This strategic priority will focus efforts on vulnerable segments of society.
Target groups include housewives, self-employed, and young graduates who are entering the workforce, as this is a period when our youth should learn how to manage an income. The FCI Survey 2018 also observed that low income
households tend to have lower levels of financial literacy.
Developing long-term financial attitudes and positive behavioural change requires consistent intervention over a period of time. Action plans include initiatives that provide information, education, and incentives for these targeted groups. FEN will leverage with the private and public sector as well as non-government organisations to inculcate positive behaviour towards financial resilience.
Strategic Priority 4: Boost long term financial and retirement planning
- Educate Malaysians on long-term financial planning.
- Empower Malaysians to plan for their retirement.
- Malaysians inculcate the habit of long-term planning for different life stages or events, such as marriage, having children, performing pilgrimage, death and illness.
- Malaysians have enough funds to meet their future financial needs and retire comfortably
Based on a study in 2017 by the Department of Statistics, the life expectancy in Malaysia is approximately 74.8 years. Hence, there is a clear need to improve long-term financial planning among Malaysians in order to achieve medium to long-term financial goals and have sufficient funds for expected life events including marriage, having children and retirement. When it comes to financial planning the FCI Survey 2018 observed that Malaysians tend to save without clear goals and “live for today”, leaving them with insufficient funds for major expenses. Eight out of 10 Malaysians claim to save money regularly. However, these savings are typically withdrawn by the end of the month with no accumulation of wealth. The absence of long-term goals leaves many Malaysians ill-prepared to deal with both expected and unexpected expenses (e.g. loss of income, serious illness, accidents).
In addition, lack of retirement planning is further exacerbated within the informal working sector. While the private sector and non-pensionable’s retirement savings are managed by the Employees Provident Fund (EPF), there remains a large number of working Malaysians in the informal sector who are not captured by any form of retirement and/or pension schemes.
Therefore, conscious efforts to boost long-term financial planning for unexpected life events and retirement planning among Malaysians is necessary. Action plans include providing tools and guides, promoting other voluntary retirement schemes and engagement with professional financial advisory services, where relevant.
Strategic Priority 5: Building and safeguarding wealth
- Enable Malaysians to make informed financial decisions after clarifying and understanding nature, risks and benefits of various investment products. Enable Malaysians to diversify their investments.
- Increased awareness and understanding on the key features of certain financial products and services.
- Build self-confidence to make informed investment decisions
Financial innovation has increased savings and investment opportunities. At the same time, Malaysians must be able
to appreciate the benefits and risks of investing in new products. They should also be able to identify suitable financial products based on their risk appetites and objectives and make informed financial decisions.
It is also increasingly important to be financially literate in this era of digitisation, as information found online can be overwhelming and even inaccurate at times. Furthermore, as new financial products and services such as internet banking and mobile payments are growing in popularity, financially literate Malaysians will be able to validate and verify such information before making any financial decisions.
Based on Securities Commission Malaysia’s survey conducted in 2018, investors perceive that an annual return of 12.4% is considered low, 24% as medium and 42.9% as high, suggesting that Malaysians have an unrealistic expectation on returns from investments. Expectations of unrealistically high returns increase the risk of falling victim to scams and illegal financial schemes. With basic financial knowledge, Malaysians will be able to make the distinction between legitimate products and fraudulent schemes and be aware of avenues to seek help when in doubt.
(Infographics Source - www.fenetwork.my)