By Aishah Mohmad Afandi

In February 2020 when COVID-19 first held the global economy by its throat, people worldwide including in Malaysia had scrambled to calculate how much savings they had and how long they can sustain without an income.

The tourism as well as the aviation industries that were first affected as borders were instructed to be closed were the first in line to conduct layoffs due to negative cash flow.

Some even conducted salary reduction for the first three months, followed by unpaid leave to, finally, layoffs.

The small and medium businesses had also been severely impacted as state and district borders were closed in line with the movement control order in place.

With the service sector and SMEs facing the largest challenge of all time, leading to their closing their doors temporarily or indefinitely, unemployment rose to the highest rate since 1993 and was recorded at 4.7 per cent in December 2020.

While all the financial assistance from the government through PRIHATIN, PENJANA and PERMAI had managed to put a buffer on financial stress for now, it is undeniable that the downturn will place a heavy burden on people’s finances for years to come.

A year has passed. Where are we now, financially?

Where are we in financial literacy?

When we were kids in school, most of us were given the Buku Tabung as well as a piggybank by Bank Simpanan Nasional or Tabung Haji.

But as we grew older, moving up from primary school to secondary school to college, no one guided us on how to actually save for our future.

What all of us knew was that when we start working, we will have EPF savings for retirement, and as for civil servants, they will get a pension.

In our heads, that will be enough. Truth be said, NO, it is not enough.

But how can it be?

Have you ever heard our parents’ story that a bowl of mee kari was 10 sen previously, but is now RM5?

That is what we all knew as inflation as well as the rising cost of living, which leads to one of the main reasons why our savings that we think are enough, are actually not.

Grim outlook for many

Based on data tabulated by the World Bank, only 60.8 per cent of working Malaysians are actively contributing from their monthly income to the Employees Provident Fund (EPF). The report noted that the coverage is especially low among lower-income households, with less than a fifth of working-age B20 (income group) being active EPF contributors.

It highlighted that if the amount is translated into an indexed annuity, almost three-quarters of workers will have a monthly benefit of less than RM1,050, only slightly more than the poverty line income (PLI) of RM980 before its revision.

Studies have also shown that almost 60 per cent of Malaysians do not have savings that could last them more than three months and about 34 per cent spend all or more of what they earn.

It also highlighted that the balance 40 per cent could not even fork out a minimum of RM1,000 in case of an emergency.

What is worse, the bankruptcy data shows that more of the young generation are declared bankrupts due to the inability to repay car loans, personal loans as well as credit card bills.

Not to mention, those unemployed or self-employed who mostly do not have an EPF account and a majority of them do not have an alternate savings account for the long haul.

It is noteworthy that this occurred even before COVID-19 came and wrecked our lives. The pandemic has only made it worse for many.

Educating oneself in financial literacy

Taking into consideration that those affected by the pandemic have withdrawn their retirement funds, it is important for the government to mobilise a targeted campaign to help them recover the money they took out as well as educate them in creating a buffer the next time recession hits.

It is important to note that an economic crisis (or some call it a recession or market correction) would occur every 10 to 12 years. We have witnessed this many, many times. All of us have seen with our eyes how the livelihood of the people around us has been affected by the pandemic. This must act as an eye-opener to educate ourselves on the importance of financial prudency.

However; it is very crucial to understand that fast and easy money does not exist. We need to be wary of various dubious investment scams that are rampant, be it online or offline.

If you want to invest, check the credibility of the investment company you wish to associate with. Do not trust anyone easily when it comes to money, even if they are close to you.

At this juncture, educate yourself about financial literacy. What we need and what we desire are two different things and distinguishing these helps a lot in charting our finances.

Even 50 sen or RM1 a day makes a difference in crises. It is never too late to start.

-- BERNAMA

Aishah Mohmad Afandi, a former business reporter, is a market and financial observer.