WITHOUT a doubt I would say that young people today have too little to spend. What is evident is that they have too many things to spend on, compared with, say, 30 years ago.
Technology was relatively simple then -- calls were made using the house phone (fixed line). Phone calls were relatively cheap. Today, young people send out texts and emails daily from their smartphones more frequently than all the calls we used to make in a week. So, it is not unusual that their monthly phone bills take up to about 10 per cent of their take home pay. Imagine the amount three or four young working siblings in one household pay for their phone bills. It is likely enough to pay the monthly installment for a modest house. No wonder the telcos thrive.
Owning a car is a necessity today. Thirty years ago a family car was a luxury. Today, each working person in the family will try to use his or her own car to go to work. So there may be a minimum of two cars parked in the family porch. So the family's monthly income is depleted by car installments, toll fares and petrol. On average, a monthly car instalment would not be less than RM500 to RM600 (25 to 30 per cent of his monthly income). Thirty years ago, a Honda 70 motorcycle or Vespa scooter would be good enough for us to go to work in and also to send our dates right home to their smiling parents.
Young people today are not really earning that much (compared with their counterparts 30 odd years ago). In the 1970s, a fresh graduate earned about RM700 a month but then hawker food, coffee, beer and cigarettes were cheap. Today's fresh graduate would be lucky if he could land a RM3,000 monthly salary. At the same time, the price of necessities and wants have risen 10 times.
So, how can one say that they lack financial management skills? In fact, we should pity them for having to go through the ordeal of making ends meet.
Another often unmentioned factor is life insurance and the medical cards the young have. These, although seemingly good investments, drain young people's income. Their sense of insecurity and protective instincts cause them to get insurance cover when they are least able to afford it. Quarterly or annual premium payments can easily put a dent in their budget. This is not optional and so, another piece of the monthly cake is accounted for. Still think the young have enough to spend?
Bank Negara's move to contain household debt is a good move. It would at least help lessen credit card debt and defaults. Banks and financial institutions have been too greedy and aggressive in giving out loans to the young, knowing fully well that they can reap great profits from the 18 per cent annual interest while they pay four per cent for our savings.
Banks are one of the main causes for household debts because of the easy access to credit card facilities and the lengthy repayment tenures. It's ironic and sad that young people can choose their government and clamour for freedom but are enslaved by their debts to banks and have to plead for leniency from the magistrate when they default and are declared insolvent.
One gets into debt because one does not have enough and has to borrow. The majority of young working adults, married or otherwise, fall into this category. One does not need to borrow when one has more than enough to spend. The majority of young people do not belong to this group unless they have rich parents. Those who overspend even though they have enough, need counselling. Those who have to overspend due to contingencies should be given the choice to renegotiate the terms of repayment and grace period.
Choon Pin, Kuala Lumpur The New Straits Times Letters to the Editors 28/07/2013