More jobs and money management skills trainings key to reducing financial anxiety

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By Sofea Azahar,

The unprecedented Covid-19 pandemic which has caused many people to lose jobs or even unable to get jobs resulting from business disruptions has led to an increase in financial anxiety among the rakyat, primarily because all these mean the loss of income.

In simple words, financial anxiety refers to the state of worry about finances.

There can be various reasons causing financial anxiety surrounding the rakyat in the midst of trying to recover from the crisis, be it loan moratorium, PTPTN loan repayment, the ability to secure jobs due to the uncertain labour market, insufficient retirement savings and other factors.

Interestingly, financial anxiety appeared as one of the emerging issues discussed between participants during EMIR Research focus group discussion for our upcoming quarterly poll.

In the April-June period (2Q20), the state of financial anxiety can be seen as critical because the Gross Domestic Product (GDP) figure contracted deeply at 17.1 percent on the back of disruptions across sectors and economic activities before the Recovery Movement Control Order (RMCO).

So, the question often raised by the rakyat when talking about measures that had been introduced by the government was, “what happens next?”

Well, let’s go through some of the initiatives announced by the government and banks so far in trying to address the issue of financial anxiety.

Take the case of PTPTN loan repayment, for example. Fortunately, the federal loan institution announced that the deferment of PTPTN loan repayment will be extended for all borrowers until the end of the year. This was one of the suggestions written in my previous article which has been realised.

Besides that, the bank loan moratorium has also been extended for another three months but now it is targeted only towards the vulnerable groups namely those who lost their jobs this year and those who remain unemployed. Monthly instalments have also been reduced for Malaysians who had to take pay-cuts.

Then, the reduction in Overnight Policy Rate by Bank Negara Malaysia at 1.75 percent to stimulate economic growth which makes it cheaper to borrow for entrepreneurs and SMEs.

The short-term economic recovery plan (Penjana) announced in June also include stimulus measures to address financial anxiety such as the extension of Wage Subsidy Programme, Bantuan Prihatin Nasional payouts, hiring incentives, child care subsidy and funding facilities for the businesses.

These together with the reopening of more economic sectors during the RMCO have gradually helped in tackling the unemployment problem.

In June, the number of employed persons improved by 0.7 percent on a month-on-month basis to 14.99 million persons. Concurrently, the unemployment rate in June went down by 0.4 percentage points on month-on-month basis from 5.3 percent in May to 4.9 percent.

Anecdotally, as people get employed, it could possibly help calm down the financial anxiety amongst rakyat yet it is subjected to their respective financial commitments.

Nonetheless, these measures are only for short term and again, what happens next?

Eventually, people would have to repay their loans despite the current low interest rate environment.

Eventually, people will retire from their jobs and there is a need to have adequate savings as their emergency funds. Statistics show that 52 percent of Malaysians experience difficulties to raise RM1,000 as emergency funds.

What else is there that is long-term in nature to help people to lower their financial anxieties? So long as vaccine to cure the invisible enemy is absent, economic recovery would be contingent on it.

There are two things that should be the focus here.

Firstly, people need to attain jobs for them to be able to earn a living. That is why the hiring incentives alongside training incentives for the unemployed and youth known as PenjanaKerjaya comes in handy after its commencement on June 15.

The objective is in line with what needs to be done – create jobs and increase employment opportunities and prospects. Whenever an initiative is executed, it is a must to perform constant monitoring to track on its effectiveness.

For instance, as reported by The Star, the Minister of Human Resources Datuk Seri M. Saravanan said over 11,000 have been hired through PenjanaKerjaya. In between June 15 and August 7, 8,170 employers have registered for the incentive with 3,177 of them hiring 11,368 workers.

However, from the total of 300,000 job seekers who are expected to benefit, the 11,368 only represent 3.8 percent – a miniscule amount. So, hopefully more companies will take part and provide greater opportunities to more people.

What comes after earning incomes is for people to look a bit forward – retirement savings. Although now may not be the best time for everyone to start saving due to different financial commitments, Malaysians still need to be educated on basic financial knowledge to ensure financial sustainability in life.

For example, statistics from Employees’ Provident Fund (EPF) as of December 31, 2019 shows that there were only 7.6 million active members out of 14.6 million members (52 per cent). This means that close to 50 percent of the total members are not actively contributing for their retirement.

Other publicly available statistics also showed that only 24 percent of Malaysians can afford living expenses for at least 3 months if they lose their main source of income, and close to half of Malaysians are not confident in having sufficient income stream for retirement.

These worrying statistics prove that there needs to be a serious consideration to continuously educate Malaysians about financial management skills that can be easily understood at early phases of childhood – secondary school to university levels.

It can be in line with the National Strategy for Financial Literacy (2019-2023) launched last year.

Financial anxiety is one crucial issue that constantly needs to be addressed for the sake of the whole nation and to ensure sustained economic recovery.

Sofea Azahar is Research Analyst at EMIR Research, a think tank focused on strategic policy recommendations based on rigorous research.

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