Why Do you Need Financial Education ?

Shocking reasons why people overspend and live beyond their means.

“ We overspend ’ was a recent frontpage headline in our local “Star” newspaper and the shocking reasons why most people are living beyond their

Why You need Financial Education?

means.

A good number of Malaysian consumers are being described as shopaholics and having poor management of personal finances. The result of not having proper financial education at an early age of their lives.

An alarming statistic shown, was that on average 41 people are declared bankrupt everyday in Malaysia, mostly due to credit card debts. The reason is the easy availability of credit from financial institutions and their spending habits. Most spenders are spending their future income on liabilities today using their credit cards, without thinking how they can afford to pay off the credit card bills when they fall due. Instead of buying assets they are spending on “doodahs” or liabilities.

And now, with the rising cost of living, these consumers are facing difficult times coping with their spending habits. They find it hard to make ends meet with the high cost of living. Rising inflation without corresponding increase in salaries and income, are forcing people to take loans from financial institutions in the form of credit card loans to cover monthly expenses.

With high lifestyle inflation more prominent in big cities, a small family living in the big city, it will be difficult for the breadwinner to balance the monthly budget with monthly mortgage payments, house rental, motor vehicle instalments and other essential expenses. Because of this, most people find themselves more days left at the end of the money.

All of these reasons lead people to obtain credit cards to keep going until the next pay cheque. It becomes a vicious cycle as low pay and high price of food, transport and other expenses lead people to borrow from legal or illegal money lenders at “crazy high ” rates of interest to maintain a decent lifestyle.

From the statistic, those declared bankrupt are under 40 year old and they do not care about their consequences of their carefree spending lifestyles.

Many are facing financial difficulties too early in their life. The root cause is that most people were not taught financial education when they are young. As I recalled during my childhood days, in primary and secondary education and even high school as well as during University, I was not financially educated on the subject of money, even though we need to use money everyday in our lives. Yes, we were taught subjects like finance or accounting, but we were not taught money skills. How to save, how to earn, grow and keep our money ? These were not taught during my early days in school.

If you don’t have money to pay for the things you want, then someone else have to pay for it. Most people instead of living within their means, they live beyond their means.

Get Proper Financial Education Early

Live within your own means, however is easier said than done in our  materialistic physical world that we live in. Financial education and financial planning which is about educating people to spend within their means, is lacking in most people. Majority of people don’t seem to be able to manage their money well and budget their expenses with their monthly incomes. It is not surprising to see people waist deep in debts through foolish spending using their credit cards. The result is that they are declared bankrupt at a very young age.

Why we need to teach Financial Education to the young ?

We need to teach the young about financial education, basic money skills, how to save, earn and grow their money. That is why I am very passionate to teach the young , the importance  to inculcate savings habits instead of spending habits. And this must be taught while they are young to to value money. What would be the right attitude in Money Management?  Spend first, then save or Save first, then spend. What is your money philosophy? Is it careless spending, not knowing where all your money goes ? It is because of the attitude of spending first, the crave for instant gratification that is causing so many young people to have debts.

There is this saying which I always shared in my talks … “ we buy things that we don’t need with money that we don’t have or ill afford, to impress friends or neighbours that we don’t even like”.

The young people need to be financially educated about their money skills, because when they are young, they have time on their side and they can make “ time “ their friend to overcome unexpected rainy days…, they can minimize the impact of inflation as a result of rising cost of living and they can take advantage of compounding effect using the rule of 72 to double their money and grow their wealth. A dollar save and invested will be the offspring to further wealth.

For those readers wanting to learn more and have the right and proper financial education, I recommend that you read The Richest Man in Babylon, which I believed is one of the best book on personal financial thrift, ever written. You will learn the skills to save and pay yourself first, control your spending, grow your money through investments, safeguard your wealth, insuring your future income, and increasing your ability to earn. These are part of the 7 cures for a lean purse. Getting the right financial education and learning these money skills will lead you to your financial freedom at an early age instead of being declared bankrupt at a young age. The choice is yours. Its up to you to decide what you really, really want.

I hope you have enjoyed my sharing. To your success and financial education and abundance.

By Michael Tay   www.michaeltay.com

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