Financial Planning Association of Malaysia (FPAM) chief executive officer Linnet Lee explains.
Question: Why is this age group more inclined to accumulate debt?
Answer: Parents don’t want their children to struggle like they did. They want to protect their children from financial and physical suffering.
In the process, many parents forget to teach their children to live within their means.
Out of love, they subsidise their children’s expenses. Many parents continue to support their children even after the latter have started working, by paying for car loans and personal insurance, as well as other expenses.
When will young adults learn to manage their finances? It’s painful to tell your child “no”, but that “no” goes a long way.
In the long run, it’s better for them to know that there are some things that are affordable and others that aren’t. It’s survival.
Taking out a National Higher Education Fund Corporation loan is a double-edged sword; it’s good if the family needs the loan for the child’s tertiary education, but starting a young adult in his working life with a loan begs the question if he will think that it’s okay to owe money.
It’s good for parents to include their children in the conversation before taking a student loan. Without such discussions, they might grow up thinking that loans are acceptable.
In the past, we were taught never to owe money. Ultimately, there will always be the lure of loans, especially when one is just starting out in the workforce. That’s the reason financial literacy and discipline are important.
Question: Is the rising cost of living a big factor in Gen Ys’ debt?
Answer: Each generation has its own challenges. Youth in this day and age, in such an economic situation, need to do what’s necessary to thrive. They need to strategise.
We always assume that they can’t help themselves, but if we teach them how to, they’re not as helpless as we think they are.
The rising cost of living is part of the cause, but the bigger reason is the need for stronger financial self-discipline and financial literacy.
I’ve seen many young adults struggle with their finances because they lack the two factors mentioned, but they can rise above their debt if they’re resilient.
Most importantly, they must want to help themselves and get help from the right sources.
For those who don’t live with their parents, the rising cost of living should encourage them to cook at home instead of dining out. It’s not a bad thing.
With the haze and typhoid cases, why not relook your options? Little changes make a huge difference in the long run.
Also, don’t forget to reward yourself. Put a small amount aside for a dinner with friends or a spa treatment.
Little treats motivate you to keep on the right track.
Question: Most Gen Ys live with their parents. What are they spending on?
Answer: Those with the opportunity to live with their parents have a higher chance of saving, especially when it comes to meals and laundry.
However, parents, in giving a good life to their children, must teach them to live within their means when they start earning. Lessons must begin when a child is young.
Gen Ys can save a lot by staying with their parents. Such savings can go towards emergency savings, their first home or even retirement plans.
However, they need to have the awareness and motivation to do so.
Question: What are some tips for Gen Ys?
Answer: Talk to the right people and get professional help. Now is the time to think about delayed gratification.
But, “all work and no play makes Jack a dull boy”, so it is good to set small rewards for achieving bite-size milestones, which lead to bigger goals.
It is important to have a budget, discipline and action in your personal finances.
Finally, talk to a financial planner who’s fully certified, preferably a CFP (certified financial planner) or an IFP (Islamic financial planner).
Those who need recommendations on where to go for help can contact the FPAM office.
There are many free services out there, such as the Counselling and Debt Management Agency (AKPK). I recommend that Gen Ys in debt seek advice from AKPK.
FPAM is organising a workshop for young people, as we believe that financial literacy starts from an early age.
We are conducting a financial literacy workshop this month for those between 7 and 13.
However, at the end of the day, parents are the ones who must address the issue, as they are the first life coach to their children.