Personal loans are leading to a surge in bankruptcy cases, especially among young adults aged 25-44. The text urges for structured financial literacy education in schools to prevent future financial distress among the youth.
Data from the Malaysian Insolvency Department (MDI) reveals that 2,776 bankruptcy cases resulted from personal loans last year, marking a rise from 2,225 cases in 2023. The majority of these young individuals involved range in age from 25 to 44 years old. Young people are said to be easily drawn to a luxurious lifestyle and their failure to manage their finances adequately leads them into a cycle of unpaid personal loans , ultimately resulting in bankruptcy.
Personal loans have emerged as the primary cause of bankruptcy, particularly among younger generations in the country, accounting for 49.11% or 15,413 cases recorded up to last year. The scenario of bankruptcy among young people is alarming and necessitates appropriate preventive measures to prevent our youth from succumbing to extravagance and the desire for a lavish lifestyle.Among the primary factors identified as contributing to the phenomenon of young people becoming bankrupt is the weakness in personal financial management, especially upon entering the workforce and receiving their first salary or generating their own income. Therefore, it is high time we implement initiatives to raise awareness among young people through structured or formal personal financial literacy education, teaching them how to manage their expenses derived from their monthly income. For the record, a previous study by Bank Negara Malaysia indicated that the level of financial literacy among the population remains low, encompassing knowledge about financial issues, as well as behaviors and attitudes regarding financial management. In this context, schools emerge as the ideal platform for nurturing and enhancing financial literacy knowledge before they face the challenges of the real world after formal schooling ends. Overall, financial literacy can empower individuals to manage their daily expenses more effectively. Through this skill, individuals can learn how to create budgets, manage expenses according to priorities, and avoid impulsive spending that can negatively impact their finances.
Financial Literacy Bankruptcy Personal Loans Young Adults Education
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