The Rise of Debt Among Young People in Malaysia: A Growing Concern
A Live-in-the-Moment Mentality and Easy Credit Fuel Debt Crisis
Financial experts in Malaysia are sounding the alarm on the rising levels of debt among young people under 30, attributing it to a combination of factors including a live-in-the-moment mentality and the ease of access to credit through buy-now-pay-later schemes. The latest report from Malaysia’s Credit Counselling and Debt Management Agency revealed that a staggering 53,000 young individuals are struggling under RM1.9 billion (S$573 million) of debt. Additionally, the report highlighted that 28 per cent of the nation’s working adults have resorted to borrowing for essential purchases.
Main Contributors to Debt
- Student loans account for approximately 60 per cent of debt for individuals under 30.
- Credit card debt and personal loans also make significant contributions to the debt burden.
The Influence of Cryptocurrency and Yolo Mentality
Experts point to the allure of quick returns through cryptocurrency as a factor driving young people into debt. Mr. Felix Neoh, director of Finwealth Management, highlighted the impact of the “you only live once” (Yolo) mentality on the purchase of trendy and luxury items among Malaysians aged 30 and below. The fear of missing out (Fomo) also plays a role in financial decisions, leading some individuals to invest blindly in volatile markets or follow unlicensed financial gurus.
Advice from Financial Planners
- Focus on increasing income and cutting off unnecessary debt facilities.
- Limit credit card use to emergencies and pay the monthly bill in full.
- Reload e-wallets only through funds in the bank rather than credit cards.
- Seek financial advice from licensed advisors and planners.
The Importance of Financial Literacy and Prudent Spending
Ms. Amy Seok, founding chairman of the Malaysia Literacy in Financial Education Association, emphasized the need for financial literacy to combat excessive credit card usage without a proper repayment plan. Setting up automatic payments, listing all debts with interest rates, and allocating a portion of monthly income for debt repayment are crucial steps in managing debt effectively.
Combatting Lifestyle Inflation and Prioritizing Debt Repayment
Financial planner Gunaseelan Kannan highlighted the phenomenon of lifestyle inflation, where young adults increase spending as their income rises, leading to living beyond their means. He advised individuals to cultivate relationships with financially prudent individuals, reduce expenses to save for debt repayment, and prioritize settling debts with high interest rates.
Conclusion
The growing trend of debt among young people in Malaysia is a cause for concern, driven by a combination of societal influences, easy access to credit, and lack of financial literacy. By prioritizing income growth, prudent spending, and seeking advice from licensed professionals, individuals can take steps towards financial stability and debt-free living.
FAQs
How can young adults avoid falling into debt traps?
Young adults can avoid falling into debt traps by focusing on increasing income, cutting unnecessary expenses, limiting credit card usage, seeking financial advice from licensed professionals, and prioritizing debt repayment.
What role does financial literacy play in managing debt effectively?
Financial literacy is crucial in managing debt effectively as it helps individuals understand the impact of credit card usage, interest rates, and debt repayment strategies. By being financially literate, individuals can make informed decisions to avoid excessive debt accumulation.