THE Federation of Malaysian Consumers Associations (Fomca) deeply appreciates Youth and Sports Minister Hannah Yeoh’s efforts in highlighting and committing to the issue of youth bankruptcy. Fomca has long advocated the necessity of financial empowerment among the young.

Between 2018 and 2022, out of the 48,791 declared bankrupt, 22% were aged below 34 while 37.5% were between the ages of 35 and 44; in total 57.5% below the age of 44. It is an issue of serious concern. Yet, to address youth bankruptcy, this is not where we start.

Before being declared a bankrupt, being overwhelmed by debt, there is another agency that consumers can go to for assistance. The Credit Counselling and Debt Management Agency (AKPK), which provides financial counselling and debt management services. 

In 2022, according to AKPK data, out of the 382,761 consumers who had participated in their debt management programme, 210,409 or 55.1% were between the ages of 20 and 40. Certainly, an area of concern that so many young people are facing serious financial problems and need AKPK’s assistance and support to help them address their debt situation. Yet again this may not be the place to start.

How then are youth fairing in terms of financial behaviour and financial literacy in the general population? According to the survey conducted on those aged 20 to 33 by the Asian Financial Centre (AFC), it was reported that:

• Seventy-five per cent have at least one long-term debt while 37% had more than one long term debt;
• To offset this debt, respondents were relying on high cost borrowing – 38% reported taking personal loans while 47% engaged in expensive credit card borrowing;
• Forty per cent reported spending more than they can afford;
• Shockingly, 70% of respondents reported they were living beyond their means.

In a study by the Consumer Research and Resource Centre on financial behaviour of youth, it was found that 47% of young workers were excessively over-indebted.

In another study on young workers aged 20 to 40 living in public housing, the study found that:

• Some 88.9% made late bill payments;
• Some 48.9% reported needing to borrow to buy basic items; 
• Some 61.1% did not have enough money for medicines
• Some 19.4% faced bankruptcy proceedings.

Interestingly the study by AFC also explored the relationship between financial knowledge and total expenditure. The survey found that those low in financial knowledge spent 84% of their income and saved or invested the rest while those with good financial knowledge spent 64% of their income and saved or invested the rest. In fact there is substantial support in research that there is a strong correlation between financial knowledge and financial behaviour.

The 12th Malaysia Plan (2021-2025) recognises that low purchasing power, high cost of living, lack of social protection and low financial education have a strong negative impact on the wellbeing of the people. The report also recognises that poor financial management among some Malaysians due to lack of financial literacy and unsustainable lifestyles, is preventing them from making sound financial decisions and making them vulnerable to serious financial problems and scams. 

Moving forward, the 12MP proposed the formation of a youth financial education network to promote financial literacy and credit management programmes for youth.

Research and practices suggest that increasing financial knowledge and self-beliefs that is building positive attitude towards financial behaviour, feeling of self-control and self-confidence in one’s ability will contribute significantly to positive financial behaviour, leading to financial wellbeing as well as overall wellbeing.

We suggest that the honourable minister focus on enhancing financial literacy among youth on a national scale, which will help keep them away from bankruptcy, as well as ensure their overall wellbeing is taken care of. – February 20, 2023.

* Paul Selva Raj is Federation of Malaysian Consumers Associations secretary-general.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.