Plan your finances and save wisely


Saturday April 9, 2011



MONEY doesn't grow on trees. We've heard this expression countless times. Some even use the phrase on their kids, hoping they would appreciate the value of money. Moral of the story you need to plan your finances and save wisely.


You may have heard this numerous times from your financial planners or at investor workshops. Truth is, there's no shortcut (unless you strike a jackpot, of course). A thorough understanding and adequate financial literacy are key stepping stones to increase one's net worth.


Jeremy Wong, a financial planner with a local insurance agency says people often choose to invest their money to grow their net value and plan for their retirement coffers. But here's the thing not many actually know how to invest.


"You can seek opinion from your financial advisors but they may not help you to monitor your each and every investment," he says, adding that therefore, a thorough understanding is vital.


What is financial literacy and why should I care? Financial literacy is not merely about savings. It has a bearing on your investment decisions, budget as well as involves understanding a myriad of financial products offered in the market.


Securities Industry Development Corp (SIDC) chief executive officer John Zinkin says people need to understand that financial literacy is not just income and expenditure but also save, budget and invest.


"They have to understand the whole concept beyond income and expenses," he says, adding that different stages of life require different financial needs.


Zinkin says the SIDC's financial literacy programme, Bijak Mengurus Wang (BMW), caters to different levels of learning.Thus far, the programme, aimed at creating knowledge and vigilant investors, has benefited 21,133 participants, he points out.


The programme teaches participants smart money management, wise investing and how to spot scams.


Zinkin says similar to reading 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 ethics and values across different generations, from young to the old.


On top of the programme from SIDC, Bank Negara, Bursa Malaysia, banking institutions, stockbroking houses and various associations offer financial literary workshop or counselling from time to time to educate investors.


The workshops organise non exhaustive and there are many other private entities which provide financial literacy. Some companies organise such programme regularly for its employee.


SIDC investor education assistant manager Azril Bahaman says they organise such financial literacy programme regularly all over the country.


"The BMW programme can also be conducted upon request for government and private organisation, NGOs, associations and rural communities," he says, adding that the programme is free.


In some countries, financial literacy is in the education agenda and it is taught in government schools. Similarly, Malaysia, in recent years has started to incorporate financial literary in school syllabus.


Bank Negara's Credit Counselling and Debt Management Agency (AKPK) provides financial education on responsible use of credit and basic money management skills. The agency also provides counselling and advice on financial management, including financial budgeting to manage expenses and debt management programme.


According to AKPK, there are some tell-tale signs to indicate that you are in financial trouble such as paying the minimum balance each month for credit cards, taking frequent cash advances, receiving second and third payment notices from bank and creditors for non-payment debts as well as living from paycheck to paycheck.


To gauge the programme's effectiveness, SIDC recently engaged a third party to conduct an impact survey among 800 random participants.


The survey shows that 87.3% of the participants are now more vigilant when considering an investment, 85.8% have started implementing personal budget and 84.4% have started setting financial goals.


Zinkin said 88% of the participants had also set aside some money as force savings before spending their income every month.


More than half of the respondents have opted for automatic salary deduction facility to practice "pay yourself first". Additionally, 46% of the participants had become investors for the first time after attending the programme.


This year, SIDC hopes to educate 5,500 people. The programme, which is free for all, is part and parcel of the overall effort by the Securities Commission to promote investor education.


Nordalilah Abd Aziz says she used to set aside a small amount of money to pay herself. However, after attending the BMW programme organised by SIDC, she realised the importance of savings and opted for a higher percentage of "force savings" through automatic salary deduction facility from her employer. She has also started investing in some unit trusts after gaining knowledge from the workshop.


A financial planner with a foreign bank, Sophie Lee, says it is important to monitor investments and evaluate from time to time the amount of money needed given that the changing needs in different stages in life.


She says some clients do not realise the importance of knowing how much they need for retirement and setting a goal towards achieving it. "They just save blindly without having a target and did not know to make the money work for themselves."


"The golden rule for personal finance is to pay yourself first. The sooner you get money into an investment or saving, the more opportunity that money has to compound and grow over time," Lee says.


She adds that those who started at a young age, almost always have more money than someone who saves higher amounts of money later in life due to compounding effects of interest on the saved money.