It’s never too young to have a retirement plan

FRESH out of university, Angeline Yeoh, 23, has joined the ranks of the workforce. And like her peers who are now beginning to draw their first paychecks, retirement is the furthest thing from her mind. “I haven’t thought seriously about retirement. It’s not a top priority at this point. I’m just starting out, and I have no financial commitments yet,” says Yeoh, who studied in Perth, Australia.

Perhaps owing to her middle-class background, she does not have immediate cause for concern. She lives with her parents and does not own a car, which significantly cuts her overheads. Her father is still employed, which means the family finances are not on her shoulders for now.

Yeoh has no insurance coverage, and puts her leftover money in a savings account. Her savings and investment knowledge is basic at best, and she has been unaware that a fixed deposit account yields 10 times higher returns than a regular savings account.

“When my dad turned 50 it dawned on me that I might have to be the breadwinner if he decides to quit or is out of a job. My kid brother is 14 and in a few years, I’ll have to help with his college payments. I probably need to get serious about my finances then,” she says. “I haven’t talked to my parents about money management. But they know I’m not reckless and that I’m stingy.”

Yeoh is one case in point, but if the statistics are anything to go by, the spending and saving habits of young Malaysians leave much to be desired.

The Federation of Malaysian Consumers Associations recently revealed at The Star’s Protect Our Pockets roundtable discussion that an average of 41 Malaysians are declared bankrupt every day due to poor financial management.

Worryingly, a large percentage of those declared bankrupt from credit card debts are below 40 years of age – signalling, perhaps, that young working Malaysians do not know how to cut their coat according to their cloth.

Employees Provident Fund (EPF) chief executive officer Tan Sri Azlan Zainol has also come out to say that there is an inadequacy of retirement savings among many people. Young people, who often face the choice of either buying that shiny new tablet now or saving for the future need to take heed of this observation.

According to one financial advisor, the main concern for those who have landed their first job is planning for the next milestone, like the first car or the first house. “Typically, any spare cash will go towards consumable items like gadgets,” reckons Ahmad Kamil Yusof, who works with Abacus Advisory Sdn Bhd, a firm that provides consultancy services and conducts training and workshops on financial management.

“Retirement is an alien concept that puts them off. A young person’s plans are usually tailored to cater for a span of five to seven years. Naturally, near-term gratification is more appealing,” he says.

Geraldine Toh, who started her career in an Internet start-up company this year after graduating from a local university, would concur. The 22-year-old says she has not given much thought to retirement, adding that she is likely to begin saving properly when she is 35.

Unlike Yeoh, Toh is already feeling the weight of repaying her debts. Car loans are her biggest monthly expenditure, followed by room rental and other living expenses. The media producer says that after paying for her health insurance, what little money she has left at the end of the month, is deposited in a savings account.

“I hope to live in the countryside after I retire; somewhere tranquil. And ideally, if finances allow, I would rather not have to continue working,” she says.

So how should young Malaysians respond? To start with, Ahmad Kamil suggests educating oneself. “Do your research, so you can ask the right questions,” he says.

Next, seek advice from a person you trust. For an immediate source, look to a member of the family who is financially stable or savvy – his experience could be your best teacher.

And the sooner you put money in the bank, the better, because the compounding effect will ensure that your returns are multiplied many times over the years, Ahmad Kamil adds.

“Most importantly, just start saving, not necessarily for retirement. Save for all the milestones you want to achieve in your life,” he says.