Why are young Malaysians living on credit?

 

The outlook for the Malaysian economy is challenging at best.

Interest rates have risen and the value of the ringgit has fallen against other currencies.

While the inflation rate has remained fairly steady — it was at 3.3% in April, the same level as it was last year — the prices of food and other essentials continue to rise.

However, looking at the young Malaysian today, one can’t help but assume that times are still good. They are not just surviving on what they earn, they are actually thriving.

This is evident from their discretionary spending, which appears to be on an upward trend.

Unfortunately, this level of spending does not tell the real story. Behind this facade of a high living and free-spending lifestyle, all is not well with the Malaysian youth.

The fact is that they are living beyond their means, now more than ever.

The evidence is there for all to see.

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A recently completed survey by UCSI Poll Research Centre revealed that 73% of Malaysian youths are in debt. To make matters worse, they also do not have sufficient funds to meet their financial commitments.

Rational thinking dictates that spending on non-essentials or luxuries without the financial means to do so is irrational.

But young Malaysians do not seem to take heed. Why?

Societal expectations and lifestyle choices have evolved over time. Younger Malaysians seem to be feeling the pressure to “keep up” or maintain a certain lifestyle, which has led to increased spending and, when the money runs out, borrowing.

Easy access to credit has only led to increased borrowings among those in the younger generation.

Statistics show that spending on credit card alone rose to RM177 billion in 2022 from RM138 billion the year before.

Apart from credit cards, personal loans and other forms of credit such as the “buy now pay later” scheme have become more easily accessible, making it tempting to borrow now without fully considering the long-term consequences.

While young wage earners continue to increase their spending, their salaries have remained relatively stagnant as businesses also struggle with rising costs. As a result, raising wages has been pushed to the bottom of the priority list.

We all know that higher expenses on lower spending power is not a good mix. But how can we change things?

In this aspect, the Malaysian government has a big role to play.

Many young Malaysians generally have not received sufficient education or guidance on financial management.

Without proper knowledge and understanding of personal finance, they continue to land themselves in situations where they accumulate debt without fully comprehending the implications.

The government must step in here to provide this increasingly necessary education for young Malaysians, either directly or through private institutions. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.