Financial literacy is a phrase rarely seen or heard of by those in our early 20s. This is because we were taught fewer practical things such as finding the volume of a sphere, finding the root of an equation and memorising “nilai murnis”. In short, being financially literate is equate to understanding what finance is about.
We can all agree that financial literacy should be part of our education from a young age. Currently, many of us were only exposed to this during younger times when our parents tell us that they will save our ang pao money every year (only to never see it again), when our parents occasionally tell us that saving money is important, or when you finally have to come out and work and face the real world.
But, why is it so important to learn how to manage money from a young age?
1. Good habits take time to form.
How you think, how you walk, how you talk are all habits and characteristics that are formed and developed from a young age. It takes time to identify what is the best way for you. When it comes to personal finance, it is no different.
Your mindset and perception of money is a habit and personality that is formed and developed. The earlier you expose yourself to good habits, the more time you have to identify what works and develop it further. So, is it everything has to get involved with money?
2. YES! Because everyone deals with money.
Money is in everyone’s life. So why not increase your knowledge and master the game? The goal of having financial literacy is not so that everyone can become rich, but it is to help people make better financial decisions to prevent them from hurting themselves financially.
While debatable, I believe the core idea of personal finance is to spend wisely. Being “rich” is not measured by the ability of how much you earn, but by the ability of how much you can keep. Everyone spends money on a daily basis, so why not learn about how you can spend wisely?
Especially, people who are in their 20s, their spending power could be higher than others. As for some people, it could be their first time to handle a lump sum of money in their life. Apparently, youngsters in Malaysia are not doing well in managing their money. Why is that?
3. More and more young people are going bankrupt
“About 84,805 Malaysians were declared bankrupt between 2015 and 2019. Based on the figure provided by the Insolvency Department, people below the age of 34 made up 26 per cent of the bankruptcy cases.”
“It was stated by the then Bank Negara Malaysia (BNM) Assistant Governor, Nazrul Hisyam Mohd Noh, that 47 per cent of Malaysian youth have high credit card debt. Most of the bankruptcy cases were primarily due to the inability to sustain debt made of instalment purchases, personal loans, and credit card debt.”
These are just two of many statistics that show that youths make a large percentage of individuals who are falling into financial trouble. Many are not aware of how financial facilities work and even if they did, they do not have the discipline to use them properly. Hence, being equipped with and exposed to proper financial knowledge as soon as possible, this can be prevented. But, how could this be prevented?
4. Protect yourself
Being equipped with proper financial knowledge will help prevent one from being cheated. There have been many cases of financial scams which could have been prevented if the victim were more financially knowledgeable.
Common financial scams that involve “guaranteed” returns and high returns with little to no risk often can reel in individuals due to lack of knowledge and greed. If something is too good to be true, it normally is. So, what should the youngsters in Malaysia do?
5. Life is short, make fewer mistakes
Being financially literate would help one make better financial decisions and this could help reduce the number of financial mistakes in one make. Financial mistakes take time to recover from and making a significant one could result in one’s financial situation being adversely affected for many years, and some might not even be able to recover for it.
Increase your financial knowledge, decrease potential mistakes.
There has never been a better time to learn about personal financial management. There is a world of knowledge at your fingertips. Read books and articles, listen to podcasts, and watch videos on the topic. If you are going to spend time on social media, why not spend it wisely? (no pun intended)
“An investment in knowledge pays the best interest” – Benjamin Franklin
*This article is written by the founder of Makingsenseofdollars and arranged by Goodymy's editor (Trissss).
Cover photo source: Canva