By Teoh Wei-Xiang, CEO of Versa
With the devastating impact of the pandemic still looming over our livelihoods, more and more Malaysians are beginning to understand that financial knowledge has become a necessity for survival rather than an added competence.
In an effort to impart valuable life skills to Malaysians through the launch of a virtual workshop, Finance Minister Tengku Zafrul Abdul Aziz recently emphasised the importance of financial knowledge and planning through steps like budgeting, and how these are crucial for a more certain future.
But more than budgeting and additional sources of income such as contract or freelance work to supplement one’s financial status during these turbulent economic times, many Malaysians are missing out on the passive income and benefits offered by investment avenues such as money market funds (MMF) that provide stability and liquidity — crucial conveniences in today’s investment scene.
Understanding Malaysians’ Financial Habits
Undisciplined in managing finances, improvident spending and challenges in keeping to budgets are some of the common reasons cited for the average Malaysians’ inability to achieve financial savviness. These habits lead to a bigger problem when it comes to saving and investing for the future.
In an independent market research conducted by Vodus Insights towards Malaysia’s digital cash management scene, the incidence of digital investment apps and online trading apps (stock trading, cryptocurrency) is very low compared to the usage of traditional banking apps such as Maybank and CIMB.
Considering the facts, a huge number of Malaysians are facing the issue of financial volatility with minimal prospects in money-saving and investing — what happens when emergencies arise and a huge sum of money is needed?
Taking into account the current unpredictable environment we find ourselves in, it is always important to have a sense of financial stability and security. And while there are many viable options that could help Malaysians attain financial savviness, many are still unaware of these alternative offerings in the market.
Why Money Market Fund?
Leveraging on the concept of money market fund, a type of low-risk and high liquidity mutual fund, the digital cash management platform, Versa, is developed to provide a new way for users to manage and generate interest from their spare cash while also allowing them free access to the funds, hence addressing the various needs of contemporary Malaysians.
During these unpredictable times, having the ability to invest while also possessing cash on hand when needed is incredibly important. In the same research conducted by Vodus Insights, convenience, ease of cash withdrawal and trustworthiness are some of the most important features that determine the adoption of a digital financial savings app.
With its liquidity nature, money market fund investors can benefit from null lock-in periods and also receive return rates that are similar to the rates of other fixed deposits in the market. This feature allows users to make full use of their idle cash by transforming them into money-earning opportunities without any strings attached.
Additionally, adults in their late 20s and early 30s who are now facing life-changing decisions such as putting a downpayment for a home, preparing it for renovation or even deciding on marriage proceedings, can learn how platforms like Versa — with the option to withdraw money anytime without penalties, unlike fixed deposits — are able to make their lives easier as well as better secure their futures.
Towards A Financially Resilient Society
According to the Malaysia National Strategy for Financial Literacy 2019-2023, it was found that 84 percent of Malaysians who claim to save regularly do so only for the immediate term. As such, savings are typically withdrawn during the end-of-month to cover daily expenses.
But as the economy and even consumers become better prepared to face external hurdles compared to 2020, more aspiring investors will naturally gravitate towards digital cash management platforms that double as an additional source of income, all the while promising a low risk and consistent return environment.
While the adoption rate of digital investment apps is considerably low, the Covidd-19 pandemic has definitely encouraged more retail investors in 2020. This is likely to continue throughout 2021 as the current low interest fixed deposit rate environment has led to the diversification of customer demands for alternative solutions that can meet their financial circumstances. Additional factors that have made fixed deposits undesirable include the lack of flexibility in depositing and withdrawing funds, unattractive lock-in periods and high minimum requirements also.
On the other hand, MMF is poised to be a force to reckon with due to its potential, stable and low-risk nature. Versa, for example, which partners with Affin Hwang Asset Management Bhd (AHAM), will help investors to invest in Affin Hwang Enhanced Deposit Fund, an RM2 billion-sized MMF that had achieved 66 per cent in returns since its inception in April 2005.
On a path to financial stability and security, it is ever more important to find additional ways to secure passive income on top of having a full-time job. And what better way than to put your sleeping cash to good use and earning money as you sleep?