THE proposal by our newly minted women and family development minister for husbands to contribute to a Employees Provident Fund (EPF) account for housewives has raised a few eyebrows.  

The idea as it stands now is, the housewife will get 2% of the husband’s monthly salary credited into her own EPF account.  The government will top this up with RM50, presumably monthly. The mechanism hasn’t quite been fully worked out.

As with most things, there are those in favour of and those against it. 

You have those saying that the government has no right interfering in the financial management of a household and that the government should just be focused on managing the government coffers.  There are those that think housewives do not work for their husbands and as such it is a futile exercise. Then there are those who think the husbands do not allocate enough money for their wives anyway and as such, this is a good thing. And there are also those who think savings are not important and that day to day expenditure is what is foremost on people’s minds, especially those in the lower-income groups.

While all arguments have their merits, let’s take an objective look at this proposal. Based on the assumption that the 2% will be taken out of the husband’s existing 11% EPF contribution, it means that his take home pay will not be affected, so there will be no change in the family’s spending power.

If the 2% is over and above the current EPF contribution, this is what the monthly shortfall would look like: For someone earning RM1,500, 2% is RM30; RM2, 000, RM40; and RM2,500, RM50.  So, we can surmise that for every additional RM500 earned, the 2% additional contribution would cause a shortfall in take home pay by a multiple of RM10.  Doesn’t seem like much, does it?  The argument, however, is that every ringgit counts.

Now what does it look like for the housewife? Let’s say a couple gets married at the age of 25. The husband earns a salary of RM1,500 and contributes 2% EPF to his wife.  This means a contribution of RM30 per month which translates to RM360 annually.  Add to this the RM50 each month from the government, which adds up to RM600 a year. In total, that is RM960 annually . Again, let’s say the annual EPF dividend is 6%.  Let’s also say the husband does not get an increment in the whole of his working life and continues to earn RM1,500 until he retires at age 60, in itself a highly unlikely scenario.

Working on the above assumptions, when the housewife turns 60, she will have around RM120,000 in EPF savings! Pretty amazing, really, when you consider that over 35 years, the husband will have contributed only about RM13,000 while the government will have paid close to RM22,000. Almost RM86,000 will have come from compound interest!  

Using the same assumptions but with a husband earning RM2,000, the wife will have RM136,00 in her account at age 60.  With a husband who earns RM4000 per month, the wife will have close to RM197,00 in her EPF account at 60.  Of course the figure will be higher if we take into account the husband’s salary adjustments and increments in the course of his career.

What this analysis shows is that compound interest and forced savings really reap rewards. It is a way for a household to ensure that the wife has some savings of her own for her old age. This also ensures that the husband provides for her in some form or fashion as there are enough tales of husbands who just do not take the monetary needs of their wives into consideration.  This money can also be used by the family if there is a need.  On the other hand, if the family plans the finances well enough and there are indeed enough savings, the wife can consider it a bonus for all her hard work taking care of the family over the years and perhaps treat herself to a Birkin handbag. Or not. The choice, however, will be hers.

After all, it is often said that a housewife has the most difficult job in the world that is more often than not unappreciated.

So while the jury is out on whether the EPF contribution is a good thing or not, my personal take is that it is a positive thing.  I am wholeheartedly in favour of this proposal.  Any form of forced savings can only be a good thing. The housewife will have a monetary windfall to look forward to upon turning 60.  This will be her hard-earned savings. Any additional money at that age, or any age for that matter, can only be a good thing.

* Dharm Navaratnam reads The Malaysian Insight.
 

* 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.