7 Reasons Why Malaysians Dont Save

Do you have a problem with saving money? You are not alone.
We all have our excuses or reasons for why we cant save. The only way to
overcome this difficulty is to realise and identify the problem first. Then, we
should work towards eliminating our excuses and working to find better
solutions.
In 2012, Visa conducted a Financial Literacy Barometer survey on over 900
participants in Malaysia. The survey showed that one in five respondents had no
savings at all and over 70% cannot endure a personal emergency of over three
months.
Thats pretty scary, and to overcome this biggest financial hurdle, one must
understand the cause.
Here are seven excuses that is perhaps unique to Malaysians for not saving
moneyand how you can bust them to build your financial stability.
1. Low income
The most common reason for not saving money might not seem like much of an
excuse at all for many. Instead, it might feel more like a fact. Currently Malaysias
minimum wages is RM900 for Peninsular and RM800 for Sabah and Sarawak. This
is hardly enough for a family to fulfil their basic needs, what more saving.
It is easy for one to save money when they make four or five figures a month.
However, if you earn minimum wages and live in a city with high cost of living, it
can be difficult to save money no matter how frugal you are. Its scary because
the importance of savings is especially important for those in the lower income
bracket.
Its essential that you try your absolute hardest to save. Even if its a little bit at
the start. If trying to cut corners on your spending fails, you might want to look
into increasing your income.
Quick tips
Negotiate for a raise, consider finding a different position, work more hours, or
establish some part-time work on the side by monetising your hobbies.
2. Lack of financial literacy
People with higher financial literacy will assume greater responsibility for their
financial well-being. For example, individuals need to determine not only how
much to save for retirement, but also how to allocate the retirement wealth
wisely. They can learn about budgeting and saving to manage expenses and
debt. Indeed, financial literacy is an essential living skill for all of us to build
financial security and achieve financial well-being.
However, individuals with low financial literacy are less likely to take calculated
risks and invest their money in stocks. Many have also fallen prey to financial
scams and lost their life savings.

Quick tips
You must stop telling yourself this excuse. There are so many fantastic resources
at your disposal that will help you boost your financial education.
On the bright side, if youre reading this article then youre on the right track!
Take the initiative and start reading up on personal finance and how money
works in the real world. Seek help from trusted professionals and dont be afraid
to ask questions.
3. Servicing multiple debts
Another reason that prevents people from saving money is the continual need to
play catch up on their debts. You most likely fall into this category if you owe
massive amounts of debts credit card, student loan, personal loan, housing
loan and/or car loan.
The worst part about this position is that it is hard to get ahead. Once you are
behind, it makes it that much harder to reverse things unless you make drastic
changes.
According to the Malaysia Department of Insolvency, 41 Malaysians are declared
bankrupt every day, with the majority of them being under the age of 44. The
main reasons cited are inability to pay off car loans, poor control of credit card
usage and a failure to pay off personal loans.
It is highly possible for an average Malaysia earning RM4,000 to service debts
worth RM3,700 every month:
Monthly repayment
Total

RM3,700

Credit card

RM500

Student loan

RM200

Personal loan

RM300

Housing loan

RM2,000

Car loan

RM700

Sure, you need to repay your debt. But its not the only financial priority that
deserves your attention. Your twenties and thirties are your prime saving years.
A Ringgit saved today can be more than a Ringgit earned tomorrow thanks to
the power of compound interest over time.

Quick tips
You can put the bulk of the money available each month toward debt repayment.
But still set aside 10% to 20% for savings. Its okay to work towards more than
one financial goal at a time.
Its important to know how to clear your debts effectively so you can start saving
quicker. Here are some effective methods!
4. Low financial incentive for saving
Savings and fixed deposit (FD) accounts do not yield returns as much as
investments do. The maximum interest rate offered is only 4% per annum, which
may come with various terms and conditions. If thats not bad enough, current
inflation rate stands at about 1.8% and this means the effective interest rate
we earn from our savings is only 2.2%.
Some may still stick to savings and FDs as they have a low tolerance for risk and
is dead afraid that they will lose all their hard-earned money in investments.
However, understanding how an investment works can help you take calculated
risks when it comes to growing your money through investments. Consider
investments like unit trust, REITs and share trading if you are looking for higher
yield for your savings.
Quick tips
Savings or FDs accounts can be good to put some of your savings intended for
emergency as they are more liquid than investments. They are a place to stash
away your cash so that you do not use it until you really need it.
5. Procrastination
This is another huge financial mistake. Procrastination can be very costly; for
example, if you save RM100 per month for 25 years at an interest rate of 3% you
will accumulate RM44,712. If you chose to start saving later, and you saved for
15 years instead, you would only have accumulated RM22,754. This is the
advantage of compounding interest. And this is a really conservative example!
Quick tips
If you start saving earlier, you can get away with making smaller monthly
contributions to your nest egg than if you waited and tried to play catch up down
the road.
Let compound interest do the heavy lifting for you!
6. Having wrong misconception of saving

Whenever there is a hike in petrol prices, we can see Malaysians queuing up at

the petrol station to fill petrol the night before the price rise. They somehow
believe that they are saving money on petrol which is a misconception
altogether.
If a Toyota Vios driver decided to fill up a full tank before the recent petrol hike of
RM0.10 for RON95. Before the price hike, his full tank would have cost him
RM87.75 (RM1.95 x 45 litres). After the price hike, it would cost him RM92.25
(RM2.05 x 45 litres). So, he would have made a one-time saving of RM4.50 only.
That may just be enough for a plate of mixed rice with two dishes. Look for real
ways to save instead of focusing on the petty things.
Quick tips
If you are really looking forward to save money on petrol, consider driving at a
moderate speed, avoiding congested zones, or dump the car whenever you can
and start walking or taking public transport.
These real money saving tips will definitely help you save hundreds a month.
7. Malaysia is a shopping heaven
Not shopping is probably a tough thing to do for most Malaysians. With shopping
malls at almost every neighbourhood, pasar malam, warehouse sales every
weekend, cutting off spending can be truly torturous.
And this is probably the number one cause for Malaysians inability to save
money. As Malaysians we are always spoilt for choices, from food, entertainment
or branded items. A friends gathering never goes away without an eat-out or
sales never swing by without us taking advantage of that.
You can always enjoy a better television or a newer car, but splurging on the
latest models can be a very expensive (and unnecessary) habit. You should only
upgrade when your current item, be it smartphone or TV, is broken, not every
time a newer model comes out. This is a result of the mentality that believes
your money is yours to spend (now).
Quick tips
Prioritise your spending and buy according to your needs and not wants. When
there is a sale, it does not automatically mean that you must buy something.
Buy only if you really need something.
Anytime you must spend, think thrice if you can do without it. And the money
you put into savings is the highest priority spending you can do. Pay yourself
first, and then use whats left over to purchase something you want. Here are
tips to help curb the temptation to spend money!
Dont let these excuses stop you from saving for the rest of your life. If you
dont, you wont achieve what you want. Or worse, if something bad happens,
youll be completely exposed financially.
Identify your common excuses that stop you from saving and start taking
proactive steps in overcoming your stumbling blocks. Once you have done that,
you may find saving money much easier to accomplish. It may not be easy, but it

is possible and it is well worth it, because saving gives you peace of mind and
financial independence.