How One Country Plans to Eradicate Personal Finance Zombies
By Dan Kadlec
October 11, 2017
People here lose millions of dollars each year to fraud and irrational money choices. They have almost no emergency funds and are highly vulnerable to financial shocks. Young adults are debt plagued but splurge on lifestyle choices anyway.
Welcome to Zombie Land, where millions of financial corpses roam free. But where, exactly, is this strange place? If you guessed the U.S., you would be correct. But so too if you named any of dozens, if not hundreds of nations—a harsh reality that underscores the global need for financial wellness programs and financial education.
The case in point here is Malaysia, where Bank Negara Malaysia deputy governor Abdul Rasheed Ghaffour early this month went public with a litany of personal finance offenses common in his homeland. Ghaffour was speaking in Kuala Lumpur at the annual Federation of Malaysian Consumer Associations Conference.
He blasted countrymen who like to “live for the moment” and who display “short-sighted tendencies, focusing on instant gratification.” Somewhat bizarrely, he quoted Abraham Lincoln…
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…in pleading with his Malaysian audience not to waver in pursuit of financial literacy because, as Honest Abe said, “commitment is what transfers a promise into reality.”
Ghaffour used the dais to unveil the blueprint of a long-awaited revision of Malaysia’s five-year national strategy for financial literacy. It calls for a soup-to-nuts effort, nurturing sound money values among children, reinforcing positive financial choices among adults, and counseling older Malaysians on retirement planning issues.
This lifetime learning approach recognizes that financial education must begin early and never stop—a baseline tenet that we at Right About Money have held dear since our founding. Why? People learn sticky, bad habits when they are young. As we age, so much about the money world changes that we need frequent updates—and you can’t just download them like an app. This stuff must be understood at a deeper level.
Ghaffour nodded to the changing nature of personal finance in his remarks, saying “bits and bytes are slowly replacing bricks and mortar…These factors affect, not only the way we experience financial services but also the necessary knowledge for consumers to make good financial decisions to realize financial well-being.”
The problems he noted to drive home the need for financial education align with other nations. Here are just a few:
—Some 75% of Malaysians could not raise $250 in immediate cash for an emergency and 32% have less than a week’s worth of expenses in an emergency fund. In the U.S., 60% of adults could not raise $500.
—Some 38% of young Malaysian adults rely on high-rate personal loans while another 47% count on credit cards to maintain their lifestyle, including the latest digital gadgets. Not surprisingly, the number of borrowers between ages 20 and 30 seeking credit counseling jumped by a third this year. In the U.S., the average Millennial has about $5,800 in credit card debt and the average student loan borrower owes another $37,000.
—Only 40% of Malaysians consider themselves financially ready for retirement. The average Malaysian between ages 50 and 55 has saved only 70% of the money needed to live above the poverty line through retirement. In the U.S., half of adults have zero retirement savings.
Such dire statistics moved Malaysia to turn to financial education in a serious way. One reason is that leaders are trying to turn Kuala Lumpur into an international finance hub, an effort that would benefit from a deeper workforce of money savvy individuals.
The goal is financial well-being through education—not assistance. The call to action is for regulators, banks, employers, and nonprofits—not just individuals. The commitment is to implement known best practices—not waste time on a lot of repetitive research.
Malaysia is emerging as a leader in the global quest for financial literacy. The country has mandated money lessons in primary schools since 2014 and in high schools since earlier this year, according to records from the OECD. The commitment appears unwavering; hopefully, the promise will become reality.