IT is alarming that in the last four years 94,408 people were classified as bankrupt. What is depressing is that people as young as 25 are included in the statistics.
As reported by the Insolvency Department, youth between the ages of 25 and 44 form the biggest group of those classified bankrupt from 2013 to August this year.
The situation is worrying as this group represents individuals regarded as drivers of national socioeconomic growth. If not managed, it can pose a threat to our aspirations of becoming a sustainable high-income developed nation.
Foresight today and decisions made now will determine the quality of results that unfold in the coming years.
Undeniably, the emergence of sophisticated marketing strategies in a globalised business environment lures the younger generation to desire products and services without assessing whether they really need them. It appears that their wants greatly exceed their needs.
The Malaysia Consumers Movement (MCM) calls on the younger generation to concentrate on building a solid financial foundation, which is vital for a successful life. The spendthrift lifestyle among the youth is mostly due to the fact that they do not appreciate the value of money. As a consequence, members of the younger generation are becoming the fastest growing age group being classified as bankrupt.
Insolvency Department statistics indicate that bankruptcies are largely due to defaults in the repayment of car, personal, housing and business loans. The lackadaisical behaviour among youth in financial management requires serious attention from all, including family members, banks and the authorities.
MCM calls on the government to make it a top priority to nurture young individuals in the principles of effective personal financial planning as part of the larger education system. There is a dire need to ensure that young adults understand and can effectively apply good financial management practices in their lives.
Parents play an important role in instilling good financial habits in children from a tender age. This enables better appreciation of academic financial planning skills as young adults.
Similarly, existing safeguards must be strictly enforced. We often see zero per cent downpayment requirements for car and housing loans. To make things worse, the bank immediately offers credit cards to successful loan applicants.
How can they afford to pay the instalments, which will consume a large portion of their monthly incomes, when they cannot even come up with the deposit? It is probably time for the government to reassess the hire-purchase duration, with an extension to nine years being too long. We cannot risk our young going into debt just to encourage car sales. In the long run, associated problems linked to financial distress, stemming from stress, will pave the way for a compromised social structure.
As for younger consumers, we should all learn to live within our means and be prudent. It is not wrong to have wants but we must be able to meet our needs first, otherwise we will have problems. Whether we like it or not, a strong financial foundation is vital to sustaining a successful life.
DARSHAN SINGH DHILLON
President, Malaysia Consumers Movement Kuala Lumpur