Malaysia’s Budget 2023 was presented last February by Prime Minister Datuk Seri Anwar Ibrahim, who is also the finance minister.
Under the budget, RM15.3 billion was allocated to the Higher Education Ministry, a notable increase from the RM14.5 billion in 2022.
Budget 2023 also introduced several initiatives designed specifically for higher education students. These initiatives included:
- RM6.6 billion for education loans and facilities through institutions like the Majlis Amanah Rakyat (MARA), Yayasan Peneraju, and Universiti Teknologi MARA (UiTM);
- RM6.7 billion to enhance and empower Technical and Vocational Education and Training (TVET) initiatives; and
- A 20 per cent discount on National Higher Education Fund Corporation (PTPTN) loan repayments.
The initiatives included in Budget 2023, however, would primarily benefit the vast majority of students who possess financial literacy, while students lacking understanding in this area might overlook the government’s programmes, and assert that there is inadequate support for them to pursue their higher education.
It is, therefore, imperative for higher education students to grasp the value of money, learn to efficiently manage their finances, and strategise accordingly, given the limited resources at their disposal.
As a result, having financial literacy and being prepared for financial planning is crucial. Students equipped with financial literacy and preparedness in financial planning are less likely to be burdened by financial concerns, enabling them to excel in their studies.
According to a RinggitPlus survey, 70 per cent of Malaysians either saved nothing, or saved less than RM500 per month in 2022. The survey revealed that the two main issues preventing students in higher institutions from saving money are a lack of financial literacy, and inadequate preparation for financial planning.
In the Youth Capital Market Study 2022 conducted by the Securities Commission (SC) of Malaysia, it was found that a significant portion of Malaysian youths lacked basic financial literacy. This deficiency could hinder the development of effective future financial planning strategies.
As a result, college students face considerable challenges focusing on their studies when they struggle to cover their tuition costs for the duration of their studies.
The situation becomes even more distressing if a student encounters an unforeseen emergency, such as an accident, the death of a family member, a damaged computer, or the need for temporary accommodation. Such circumstances can significantly impact their academic performance.
Therefore, it is imperative for students at higher learning institutions to have a strong foundation in financial literacy.
Enhancing financial literacy has the potential to bridge the wealth gap. Notably, financial literacy has significant variations based on factors like household income, ethnicity, and gender.
For example, the level of financial literacy is significantly different based on household income. The household income disparity between the Chinese and Bumiputera ethnic groups is projected to be 1:1.71 in 2022. Particularly, the average household income of the Chinese population is RM3,000 higher than that of the Bumiputera community.
This observation aligns with the findings of the SC, indicating that Chinese youths exhibit higher levels of financial literacy, compared to Bumiputera youths.
The Malaysian government can take two key actions to enhance the financial literacy and preparedness of higher institution students. The first action involves the government, particularly the Education Ministry and the Higher Education Ministry, establishing a comprehensive national financial literacy education programme that spans primary, secondary, and higher education levels.
Prior to that, Malaysia unveiled its National Financial Literacy Strategy for 2019-2023. The major objective was to raise Malaysians’ level of financial literacy and education.
The strategy consisted of five key plans: stimulating the development of sound financial practices among the target population, expanding access to financial management, promoting long-term financial planning and retirement, and safeguarding wealth.
However, not all the strategic plans outlined in the National Strategy for Financial Literacy 2019-2023 have been effectively executed. There have been insufficient progress so far in encouraging financial literacy within elementary, middle, and high schools.
In comparison, Singapore implemented a comprehensive financial literacy programme for its citizens. The MoneySense financial literacy programme was introduced in 2003, encompassing all age groups. From primary school to higher education, the MoneySense programme was dedicated to enhancing the understanding of financial matters among the youth.
The MoneySense initiative starts by imparting fundamental financial concepts to primary school children, such as distinguishing between needs and wants, living within one’s means, and embracing smart spending. In high school, students are introduced to basic financial planning principles and responsible credit usage. Furthermore, the programme equips higher education students with practical experience in cost-benefit analysis and sound money management skills.
The second action of enhancing students’ financial literacy and preparedness for financial planning in higher education involves the government or universities creating a comprehensive index that assesses students’ financial literacy and planning readiness prior to their admission to a specific university.
Through this index, higher education institutions can gauge each student’s financial situation and levels of financial literacy, enabling them to offer appropriate financial aid and provide education on topics like financial literacy, financial planning, loans, and support.
Implementing the financial literacy and financial planning readiness index requires students’ participation in a questionnaire focused on these subjects. The responses will be considered based on the weights assigned, which will ultimately result in a unique index for each student. As a result, both universities and students will have a better knowledge of how prepared students are for studying at higher education institutions and in the future in terms of financial literacy and financial planning.
In Malaysia, higher education students typically reach out to the Student Affairs or Bursary Department to seek assistance or to communicate their financial situation. Malaysia has yet to develop an index or a standardised form that could be employed to evaluate the stability and financial literacy of students.
To put it simply, for the purpose of enhancing financial literacy and preparedness among Malaysian higher institution students, both the government and the higher education institutions need to formulate a comprehensive national strategic plan for financial literacy.
Additionally, they should create a robust financial literacy and planning readiness index that is carefully monitored by financial experts.
This can lead to a reduction in the income gap and contribute to the country’s overall progress. The benefits of having a significant number of financially literate students will be felt by all Malaysians.
The author is a Senior Lecturer in the Department of Finance, Faculty of Business and Economics, Universiti Malaya.
The views expressed here are the personal opinion of the writer and do not necessarily represent that of Twentytwo13.
