KUALA LUMPUR – With at least RM500,000 to RM1 million needed in savings to ensure a comfortable retirement according to financial experts, what are young adults who are new to the working world to do?
Financial expert Moslem Anoar said the RM1 million estimate is based on RM3,000 a month to cover living expenses after retirement for 30 years.
He told Scoop that while more youths understand the importance of saving, they also face challenges and temptations that make setting aside a portion of their earnings more difficult.
If they can be disciplined, he said working youths could start investing and saving in unit trusts, which are good for the long term with low risk.
He advises against the stock market as it carries higher risks that fresh graduates would not have the capital nor the knowledge to navigate, despite a higher rate of return.
“The choice of savings and investment platforms depends on the risk profile, financial objectives and the timing,” Moslem said.
University Teknologi Mara (UiTM) Melaka finance lecturer Shafinar Ismail said another suitable savings platform for the younger generation is the Amanah Saham Bumiputera (ASB).
“The ASB yearly return rate (at around 5% annually in recent years) is lucrative, stable and reliable.
“It is also flexible for the account holder to withdraw funds if they are in need,” she told Scoop, also noting that the compounded interest accumulates and adds to the principal if not withdrawn.
“For example, if you save RM5,000 in your fixed deposit account which gives a 5% interest rate per annum, you will get an RM250 return rate in the first year.
“The return rate will differ each year depending on the interest rate, the balance in the fixed deposit account and inflation.
“If the interest rate remains at 5% per annum, for the first five years, the total return rate accumulated is RM1,380.42,” Shafinar said.
The younger generation should also try to save around 20% of their monthly income, she added.
“They need the discipline to stop impulsive spending and curb the desire for instant gratification.
“With easy access to online shopping, the younger generation is more inclined to overspend more than they should.
“However, we also cannot deny that there are those who work hard by doing two or three jobs to support their family’s expenses, rent, necessities and savings,” she said.
Moslem, meanwhile, said young adults should not allow themselves to be easily influenced by social media, where online shopping is popular these days.
“The most important thing is they should have good financial planning and habits,” he said, adding that youth should increase their knowledge about financial planning and think for the long term including retirement, even if it seems a long way off.
How young workers are saving
Marketing and production assistant Che Wan Nur Farhana Che Wan Azha, 24, said people her age are aware of the importance of saving for retirement, as various investment instruments are promoted on social media.
She apportions RM450 a month from her salary to three different instruments.
“I have set up a separate fund on the Maybank eWallet (MAE) for travel, shopping and education, and I will deposit RM250 to that fund monthly. I also save RM100 using the Public Gold app for long-term investment.
“I also save RM100 for hibah (gift) to help my family in the future if something happens to me,” she said.
Meanwhile, pharmacy assistant Nur Fathin Hanani Mohd Azman, 23, invests in digital gold, saying she was influenced by a co-worker to do so.
She saves a total of between RM500 to RM600 a month, some of it with Tabung Haji.
“My mother said Tabung Haji is the best place to save our money,” she said. – February 25, 2024