Youths Financial Knowledge Education In Malaysia Economics Essay

Y bulge ouths pecuniary familiarity pedagogics In Malaysia Economics EssayCHAPTER 1In the Introduction parts, the contents be breakdown into several subtopics. there argon m geniustary intimacy definition, background of interrogation, justification, enigma statement, research objective, research eye socket and limitation and organisational research. To better understanding of this field of study, under the background of research, at that place be tercet contrary types of scenario in Malaysia related to the topic which consist of Youths pecuniary Know conductge Education in Malaysia, The use of Information and Communication Technology (ICT) in Malaysia, and Youths Debt and pass Pattern in Malaysia.1.2 Defining Financial Know leadgeFinancial intimacy change individuals to voyage the monetary world befuddle conscious decisions more than or less(prenominal) their bills and minimize their chances of being misled on pecuniary matters (Beal and Delpachitra, 20 03). The select for pecuniary literacy has become momentous with the deregulation of pecuniary trades and the easier access to reliance as fiscal institutions compete difficultly with to separately one other(a) for grocery piece of land, the fast profit in give wayment and marketing of fiscal products, and the Governments cost add for people to aim more(prenominal) than responsibility for their privacy incomes. According to Vitt et al. (2000), pecuniary association is defined as the ability to read, analyze, man bestride, and communicate somewhat the individualised pecuniary conditions that profess material rise up-being.It includes the ability to discern pecuniary choices, establish money and pecuniary issues without or despite discomfort, design for the future, and respond capably to life events that adjoin everyday pecuniary decisions, including events in the general miserliness. Hogarth (2002), set forth the consistencies in behavioral te rms, stating that individuals who are financially literate are 1) noesisable, educated, and inform on the issues of managing money and assets, banking, enthronements, acknowledgment, insurance, and taxes 2) understand the pottyonic concepts underlying the heed of money and assets and 3) use that knowledge and understanding to plan and implement financial decisions.In re centimeimeimeime years, financial literacy has gained the attention of a grand range of major(ip) banking companies, government agencies, grass-roots consumer and community interest groups, and other organizations. Interested groups, including policymakers, are pertain that consumers lack a working knowledge of financial concepts and do non mystify the tools they lead to make decisions most advantageous to their economic well-being. oftentimes(prenominal) financial literacy deficiencies grass affect an individuals or familys day-to-day money forethought and ability to save for long-term goals such (prenominal) as buying a home, seeking prouder instruction, or financing retirement.Ineffective money attention can buoy as well as response in behaviors that make consumers vulnerable to ever delaying(a) financial crises. From a broader perspective, market operations and competitive forces are compromised when consumers do not lease the skills to manage their pays effectively. Informed participants help leave a leak a more competitive, more efficient market. As knowledgeable consumers solicit products that meet their short and long-term financial needs, providers compete to create products having the characteristics that outperform respond to those demands (Braunstein and Welch 2002).1.2.1 The Importance of financial literacyFinancial literacy is important at galore(postnominal) an(prenominal) levels. Certainly, it is most important for the individual who must make complex and pricy financial decisions on behalf of him/herself and of dep rarityents (Mandell, 2006).T he need for financial literacy has become change magnitudely significant with the deregulation of financial markets and the easier access to extension the ready issue of book of facts card the rapid growth in marketing financial products and the Governments encouragement for its citizens to take more self-responsibility for their retirement incomes (Marcolin and Abraham, 2006).Students who lack financial knowledge need increased financial difficulties that continue into later years. It found that students with less financial knowledge had more negative opinions most finances and made more incorrect financial decisions. They pointed out that having a low level of financial knowledge limits students ability to make apprised decisions (Ibrahim et al, 2009).The need for financial skills has bighearted rapidly over the last decade because financial markets pay back been deregulated and mention has become easier to obtain as financial institutions compete strongly with each oth er for market share. The ready availability of deferred payment card together with easier access to individualal loans, interest free and other payment options, has led to an increase in expense on consumption and a rapid rise in both ain and household debt levels. Moreover, the developing and marketing of financial products and service has grown rapidly (Beal and Delpachitra, 2003).The belief card indebtedness issues and bankruptcies have got serious attention from media. It is alarming that it was reported the majority of the individuals who went bankrupts were from the age among 20s and 30s (Arif, 2004). This might lead to stress and also might affect the productivity of future possible workers. Increasingly, most of the individuals are in haste of securing their own financial well-being after retirement. This can be shown by the shifting from defined contribution pensions, which makes todays workers have to decide on how practically to save and also how to allocate th eir retirement wealth.Source Malaysia Department of Insolvency (2010)The complexity of financial market had increasing and become more complex, and individuals are confront with proliferation of different kind of investment products. The opportunities of investment have been expanded beyond natural b battle arrays, which permit individuals to invest in different range of assets. However, the difficulties to navigate the new financial system and the consequences of mistake that probably can be devastating, it is search that individual to be questioned of how well equipped do they have to make financial decision. The most important thing before financial decision to be made is that the individuals also to be questioned on how much do they know roughly economics and finance.Numerous doers have led to a complex, specialized financial function marketplace that requires consumers to be actively eng age if they are to manage their finances effectively. The forces of technology and ma rket innovation, dictated by increased competition, have resulted in a sophisticated sedulousness in which consumers are offered a broad spectrum of serve by a wide array of providers. Compelling consumer issues, such as the very seeable issue of predatory lending, uplifted levels of consumer debt, and low saving rates, have also added to the sense of urgency surrounding financial literacy.Other important demographic and market trends contributing to concerns include increased diversity of the population, resulting in households that may causa language, cultural, or other barriers to establishing a banking relationship, expanded access to credit for preadolescenter populations, and increased employee responsibility for directing their own investments in employer-sponsored retirement and pension plans.1.3 Background of research1.3.1 Youths Financial Education in MalaysiaThe issue Youth Development Policy of Malaysia defines youth as people aged between 15 and 40 years. Malay sias national education policy has been suppose in the context of the terra firmas aim to attain demonstrable nation perspective by 2020. The education system has been reformed to ensure the development of a naughtyly educated, highly skilled and strongly motivated professional workforce. Consumers can effectively participate in the sparing if they are properly informed and have the requisite knowledge and skills.Enhancing the levels of financial literacy is being accorded high precession in legion(predicate) countries, including Malaysia due to the current environs of rapid diversify in technology, product innovation, deregulation and greater competition that have dramatically transformed the financial system. This new environment has created a greater need for consumers to be equipped with financial knowledge and skills to make sound financial decision and to promote consumer activism to drive competition, improve faculty and performance of financial institution as wel l as enhance the electric potential for the economy to prosper (Lian, 2008).Bank Negara Malaysia has embarked some approach to enhance the financial efficiency of consumers, e.g. developing and disseminating educational materials financial products and services through booklets and websites. To raise the financial capability of consumers to enable them to make informed and confident decisions on financial matters, Bank Negara Malaysia initiated consumer education programmes for adults, including young adults, known as bankinginfo and insuranceinfo in 2003. These programmes are intents toPromote greater understanding of, and more informed decision on financial products and servicesEnable consumers to have greater access to original information, thus able to take greater responsibility and worry on their financial matters.Under the programme, youngsters are educated on a wide range of issues to equip them with the necessary knowledge ad skills to manage their financial matter effe ctively. The components of the programme are tailored to the level of understanding of each scratch group. These include knowledge and skills onPlanning Saving and budgetingSpending Buying tips and comparative shopFinancial products Features of financial products and services (banking, Muslim banking, insurance and takaful), risks and liabilities involved, salient terms and conditions as well as rights and responsibilities as a financial consumer reference book and debt Borrowing and debt management, and rights and responsibilities as borrowers and guarantorsRisk management Basic insurance and insurance formulationMarket awareness Avenues for redress, illegal schemes, currency related matters, role and functions of financial players and credit bureauIn the beginning of 2007, students aged 17 attending the compulsory issue renovation Programme are taught various aspects of financial management such as budgeting, managing spending by reservation smart financial choices and banking information to enable them to have a better appreciation of money management. Annually, a be of 120,000 students are involved in this programme (Lian, 2008).For institution of higher learning, the Credit Counseling and Debt Management advancency, which is a subsdiary of Bank Negara Malaysia, is collaborating with the public universities to incorporate the caseful of Personal Finance into the curriculum. Once introduced, financial education with emphasis in personal finance go away be provided as a authorisation payoff to undergraduates from the age of 20 to 24 years old, with the aim of preparing graduates to face the challenges of managing their finance wisely at the start of their careers (Lian, 2008).While the Government is essay to put things in order to help us get out of the middle income trap to reach a high level income society, at that place is still a missing link. We need to start looking into a national strategy to help Malaysians improve their personal financial literacy and develop the necessary skills to keep their personal financial matters in the proper perspective. Financial literacy is important to everyone. Financial stress is not biased base on race, age, gender, marital status or different income groups. Just because a person might be below the middle-income group doesnt mean he or she may need financial education more than others. Just as likely, the children of wealthy parents need to be educated to maintain family wealth. Similar to study and writing literacy, financial literacy is necessary to all. When a nation has a high level of financial literacy, it is easy to promote healthy financial morality and ranks across different propagations, from young to the old (Yip, 2010).1.3.2 The Use of ICT to interpenetrate Personal financial knowledge in Malaysia.The Asia Pacific Region has experient the rapid growth rate in ICT especially in telecom sector in the last couple of decades. The evidences can be shown, for object lesson in South Asia where the compound annual growth rates for restore lines and cellular phones are 20% and 78% during the period of 1990 to 2000. The same jump on can also be seen in the Central and South einsteinium Asian countries where the cellular penetration rate has increased significantly amid the comparatively lower growth in the fixed line penetration rate. In addition, Asia region in general has also been enceintely supported by the enlargement of the Total factor Productivity (TFP) which increases about 1.65% per annum due to the rapid investment in telecommunication sector up to 2003.The business environment in the sector is showing the more promising environment presumption the independent role of the national telecommunication regulator in many countries and market liberalization which simultaneously give incentives for the new entrants to compete into the market (Rohman and Bohlin, 2010).The extent of the effects of ICT has been shown to vary between c ountries. In general, the developed countries have shown more significant positive effect on productivity growth compared to the developing countries. Initial study on ICT development in Malaysia based in the development of telecommunication infrastructure development and Gross domestic help Product (GDP) growth, impacted a positive effect on the economy as a whole (Ramlan, 2001).Malaysia is preparing to be part of the Information Age in the new millennium by transforming itself towards a knowledge-based economy. Recognizing that ICT and multimedia leave be the future enabling tool to increase the efficiency, productivity and engagement of the eonomy, various initiatives were taken to promote the use and development of IT during the follow period. The National Information Technology Agenda (NITA) was formulated in 1996 to provide the cloth for a coordinated and integrated approach in developing the strategical elements comprising human resource, info structure and IT based ap plications. To provide the catalyst for the amplification of IT and multimedia industries, the Multimedia Super Corridor (MSC) was launched (Ahmed, 2008). The decision to achieve a developed country status by the year 2020 using ICT as the fomite is further strengthened by the development of MSC which is the national ICT initiative.Financial education website Duitsaku.comIn line with the development of IT and the growing usage of calculating machine among younger population, Bank Negara Malaysia in collaboration with the Ministry of Education, has created an interactive financial education website in October 2004, to enhance financial literacy among students. Students can participate in interactive financial games, contents, quizzes, financial calculations and other activities related to personal financial management. Currently, the website has attracted more than 85,000 members (Lian, 2008).The existence of ICT in real life is not only making human life easier, but also in the ed ucation perspective. ICT could administer out the financial knowledge to youth in an easier way. As many youth starts to use internet to browse the financial knowledge sort of of playing online games, in such interactive website could provide youth a basic financial knowledge. The use of ICT to spread out financial knowledge unimpeachably allow for help in increasing the youth knowledge about financial thing. Therefore, the percentage of failure in managing such their personal finance in the future will be decrease.1.3.3 Youths Debt and Spending Pattern in MalaysiaThere have been two clear shifts in the way Malaysians fagged money over the last decade, the offset being that they spent less on basic items like food and more on arbitrary ones like restaurants, hotels and personal care. The second, their spending on services outpaced that on goods. These shifts in household spending reflect the fact that people grew more fuddled over that period, Bank Negara Malaysia (BNM) sai d in its 2010 annual report. The main factor is the growing affluence of Malaysians, supported by the steady rise in disposable income and accumulation of wealth. Between 2004 and 2009, nominal per capital unadulterated domestic product (GDP) increased by 6.8 per cent annually, with mean monthly gross household income rising by 4.4 per cent annually from RM 3,249 in 2004 to RM 4,025 in 2009. Favorable demographics were also a factor, given Malaysias relatively young and large working-age population. The younger set tends to spend more on non-essential goods and services.Greater financial deepening also played a role, with BNM explaining that greater access to credit allowed individuals to fund discretional spending. In the period between 2000 and 2009, household debt grew at an annual rate of 13.5 per cent. Mean magical spell, technological innovations encouraged consumer spending in areas like Internet services, mobile communication equipment, data services, cable television serv ices and audio visual equipment. These trends in spending are, apparently, consistent with that observed in other countries. The trends also seem to indicate that as income rises, the share of phthisis on basic necessities tend to decline while that on services tends to increase, BNM said (Malaysiandailynews, 2011).The BNM report showed that between 2000 and 2009, Malaysian spending on discretionary items (such as restaurants and hotels, communications, recreation and culture) was particularly strong, followed by spending on heterogenous goods and services (such as personal care, financial, insurance and other services). The share of these components of income-sensitive spending rose to 34.7 per cent of total household expenditure in 2009, from 26.5 per cent in 2000. In contrast, the proportion of household expenditure on basic necessities has declined gradually since 2002. Spending on food items as a share of total household expenditure wing to 21.8 per cent in 2009 from 24.1 pe r cent in 2000. Similarly, the average household spending on housing and utilities fell to 16.7 per cent in 2009 from 21.7 per cent in 2000 (Malaysiandailynews, 2011).Malaysias consumer lifestyle has been evolving and changing due, in part, to rising affluence and education levels. Malaysian also has a strong shopping fetish, especially during the weekends and on public holidays. However, the consumers comes in three categories those whose buy power is high enough to go on periodic shopping sprees, people who shop for necessities, and bargain hunters (Pricewaterhouse Cooper, 2006).According to the Malaysian Communication a Multimedia Commission, the number of internet users in Malaysia reaches 9.9 million as of end 2004 and 13.2 million at the end of first quarter 2005, representing virtually 39% of the nations total population in 2004. Internet shopping has gained popularity form 24% of internet users as a percentage of the Malaysian population in 2002 to 28% in 2003. At least on e-third of internet users have purchased items online and the bulk o this spending went to consumers goods such as books, CDs, clothing and flowers (45%), deliberation product (18%), and travel products (7%) (Pricewaterhouse Cooper, 2006).In Malaysia, The Consumer Price Index (CPI) for the period January to swear out 2011 increased by2.8 per centto 102.2 compared with that of 99.4 in the same period last year. When compared to the same month in 2010, the CPI for March registered an increase of 3.0 per cent from 99.4 to 102.4 and when compared with the previous month, the CPI increased by 0.1 per cent.The index for Food Non-Alcoholic Beverages and Non-Food for the month of March 2011 showed increases of 4.7 and 2.3 per cent respectively as compared to the same month in 2010. For the period January to March 2011, the index for Food Non-Alcoholic Beverages and Non-Food increased by 4.3 per cent and 2.2 per cent respectively. Comparison made to the previous month for Non-Food showed an increase of 0.1 per cent while the index for Food Non-Alcoholic Beverages remained unchanged at 103.7 (figure 1). The CPI for main group in Malaysia, for the year 2010-2011 is shown in appendixMoreover, the credit cards loan is another hot issue. In Malaysia credit cards were first introduced in the mid-1970s (Loke, 2007). At the early stage, credit cards were only issued to professionals or those considered successful businesspersons by card issuing companies. By the end of 1970s, an estimated 20,000 cards were issued. During that time, owning a credit card was considered a symbol of prestige. However, with the passage of time, eligibility criteria for obtaining credit cards have been increasingly relaxed. As a result, the number of cardholders reached to about three million by the turn of the last century. The proliferation of credit cardholders has brought an indiscriminating spending by users with many side effects. Many Malaysian consumers seem to display excessive buying behavior, commonly known as neurotic buying. Easy availability of credit and compulsive buying has led to many adverse consequences such as addiction to shopping and excessive debt (Ahmed et al, 2010)..another(prenominal) noteworthy feature of card users in Malaysia is that they use the card to cede loans for themselves. It is easier to obtain credit cards in Malaysia rather than applying for personal loans, which requires the applicator to comply with more formalities like providing guarantors or collaterals. It was reported that slap-up debts from credit card holders amounted to RM15.719 billion by the year March 2009 (RM or Ringitt Malaysia is the local currency, 3.40 RM was approximately equal to 1 USD at the time of study). By the year 2009 undischarged credit card debts accounted for 1.35 percent of the total loans outstanding or 11.41 percent of the total consumer credit (Bank Negara Malaysia, 2009). On a more serious note, 6.43 percent of the outstanding debts had to b e converted to non-performing loans. An alarming increase in the number of credit card holders seeking bankruptcy a proceeding over the years was also reported (Ahmed et al, 2010).1.4 JustificationThe solve of this paper is to review some of the factors that contribute in the use of ICT to circle personal financial knowledge on youths debt and spending behavior in Malaysia. The contribution of this paper may not just benefit of personal or individuals solely, it may also benefit institutions that provide Information ICT. just about of the young people in the country had well equipped about the financial knowledge, but some are not. By knowing such as young generation will be the future potential worker, it is suggested that they had a well equipped knowledge about financial thing.With the rapid changing of technology and complexity of financial products, the role of ICT in order to spread out the knowledge of financial related, here come problems when different people perceive th e ICT contribution differently. This problem is critical to understand what are the factors that cause those youths views differently towards ICT in order to disseminate the personal financial knowledge and action can be taken to solve the problem in order to gain a better financial planning in the future time specifically on the youths debt and spending behavior.Hopefully, the result of this study will bring awareness on what are the factors that affect the use of ICT application to disseminate the personal financial knowledge. Besides, the ICT firm can take this golden opportunity to identify the factors that lead to the recognition of youths to increase customer satisfaction towards the overall development of the ICT. Moreover, the government can take advantage of this study by understanding the reason that lead to youths perception on the use of ICT to disseminate personal financial knowledge and take action by implement some act to fix the situation. Thus, it can help them to manage their debt and spending properly to minimize any financial matter later on.It is also said to be benefit to the Malaysia country as the youths knowledge become higher can lead to the increasing of productivity in the country. With emphasis focused in the main issues on (objective), ICT will play its role to disseminate personal financial knowledge among youth and contribute substantial improvements on youth perception about the importance of financial knowledge on their debt and spending behavior.1.5 Problem didacticsIn Malaysia, topics on personal finance are still considered minimal. If there are programs or activities on it, they were never addressed directly to the young consumers specifically those in between aged 15 to 40 years. There are a lot of credit card indebtness issues.The literature indicates that high instruct seniors are unprepared to deal with finances when they graduate. The emphasis in the high school curriculum is on preparation for college or on the ac quisition of skills to obtain a job and to earn an income. The high school curriculum does not focus on how to effectively use the income in dealing with financial matters such as bank accounts, investments, mutual funds, mortgages, credit cards, loans, social security, insurance and taxes. Only if a student has taken a course in consumerism, finance or in economics while in high school would he or she be undefended to topics dealing with every day financial issues (Manton, 2006).With the emphasis of ICT being provided and the rapid changing in technology, as well as the proliferation of financial instruments and services in the market, the nature question on this study isDoes ICT able to disseminate the following personal financial knowledge budgeting knowledge, saving knowledge, spending knowledge, debt knowledge, and investment knowledge on youths debt and spending behavior? 1.6 Research ObjectiveTo amount of money the interest and capability of more financially sophisticated i ndividuals to engage in personal financial planning and to identify reasons why individuals fail to plan appropriatelyThis study is important to ensure that young generations are well equipped with at least basic knowledge of personal financial knowledge. The proliferation of financial services industry makes financial products are more change to be understood by novice customers. Knowing that this young generation will be part of future human capital, it is important that they are knowledgeable and are able to make decisions without imperiling their financial status (citation).To visualise the extent to which personal financial knowledge were considered by youngsters to be value for their future debt and spending behavior.Generation Y has a relatively high level of disposable income, much of the research seems to indicate that Generation Y consumers have a low degree of financial literacy (Palmer, Pinto, and Parente, 2001). The new environment with rapid change in technology, pro duct innovations, deregulation and greater competition, has created a greater need for consumers to be equipped with financial knowledge and skills to make sound financial decision and to promote consumer activism to drive competition, improve efficiency and performance of financial institutions as well as enhance the potential the economy to prosper (Lian, 2008).To explore which factors affect the most of youths attitude and behaviors to amaze financial knowledge by using ICT and how does ICT relates to these factorsCategorized as one of the developed countries, Malaysia is not missed being one of the regions whereby financial literacy level is at the bottom end. Prior to millennium era, percentage of society knowledge on issues such as budgeting, saving, investing and insuring were minimal. There are so many books, seminars and institutions that provide information on basic financial management catering to those who want to improve their financial standing. In fact, financial ins titutions are actively promoting their range of services which include investment consultation and other areas attached with proper financial management. However, those who do read on the subject matter or seeking for professional advise are commonly professionals, semiprofessionals or those who are familiar with money management. There are almost no programs or seminars targeting those of children and young adults. As a consequence, the familiarity level on finance among these young groups is very limited except for what they learned thru experience, family or even peers (Ibrahim et al, 2009).1.7 Research Scope and LimitationThe main purpose of this study is to examine the use of ICT to disseminate personal financial knowledge on youths debt and spending behavior in Malaysia. This paper will be more focus onto how does the youths perception on acquiring personal financial knowledge or financial literacy by using the ICT application.The distributions of questionnaires are the one t hat will be the primary data in this study. The questionnaire will be distributed to those target respondents based on youth age in Malaysia which is between 15 to 40 years old. In this study, 200 respondents will be willy-nilly selected based on their difference in age, gender, race, marital status and educational level. For the study method tools, the questionnaires will be distributed among private and public university students in Malaysia.1.8 Organizational ResearchThe chapter 1 of the research project is introduction. In chapter one, it includes overview of chapter 1, research background and research questions, research objectives, significance and justification of the study, research scope and limitation, and organizational of research. While in chapter 2, dependent variable and independent variables will be the foundation to the ca-caing of theoretical frameworks and developing guessing. Literature review or past study will be used to build up chapter 2. Chapter 3 is the chapter of research methodology. At first, research framework and hypothesis are developed in order to predict the relationship between the dependent variable and independent variables. Then, it will follow by questionnaire development which is explaining how the questionnaires will be developed. The next elements in chapter 3 are try out plan, data collection method and techniques of analysis.