Youth and Financial Management
a. What do you understand from your reading regarding this issue?
In this day and age, financial management is becoming one of the issues that draw the attention of people all around the world. Financial literacy is equally important for mankind no matter the person is wealthy or poor. If we observe through the happenings, youth should be thought about financial management in their early age. The absence of their knowledge about finance made them falls into the trap of spending without concerning about their financial capabilities. At the same time, the presence of credit cards will lead to the misuse and also the spending above their financial abilities. News had been portrayed on the dailies about the poor financial management of youth. With the income level of the youth, it will be suitable to seek advice from financial planner to explain about the financial situation of the youth. Without the proper management of their finance, youth will be easily got into trouble of bankruptcy and the bright future will be destroyed. As the education level of the higher learning institute nor at home is mainly about theory, youth did not get the chance of learning it practically. For instance, youth knew that the advantages and the disadvantages of buying things in credit. However, they did not use apply the theory because they did not realize on the importance of the items purchase when using credit payment. The poor financial management did not just applied to low income earner youth. It goes the same for the high income earner youth. When the ability of purchasing goods increases, they tend to spend more rather than saving it. Therefore, it is undeniable that the youth will fall into the situation where their liability is more than their assets. A good financial management of youth will be of the assets more than their liability. In this term, the total expenses of the youth must be in their limit coverage. For example, most youth thought that their house is an asset for them. However, it will be a liability when they tend to work monthly and pay to the bank. The house will only be an asset for the youth when they use the house to earn rental as their income. In this case, the goods purchase will come from the rental from their home, asset which will not cause them to work only for the bank. This example applies to all assets which will bring in income to the youth and not only about house rental. It is a very good example to portray the importance of financial management of youth in order to keep the financial level of youth always positive. Therefore, financial literacy should be taught at home since young and parents play an important role in order to ensure the financial ability of youth in proper management.
b. Why do you think it occurs? Explain your answers.
Regarding financial management of youth, there are several factors that lead to good and poor financial management. First and foremost, the main factor of good financial management of youth is the financial literacy from their parents. The financial advice from their parents and the way the parents control the finance of their children is very important. For instance, parents could set a credit limit where the children understand they must spend their expenses according to priority of goods. The understanding on how cash flow is important for children to use their money wisely in the future. Another factor that determined good financial management is the way youth understand about the financial system in our country. For decades, youngsters had been taught to study hard and get a good job in the future. But, they are not taught to study hard and be an employer in the future. If this mindset is taught earlier, youth can really understand the importance of cash flow and will be able to set their budget according to the mindset of an employer. The knowledge of how to earn money before spending can also lead to good financial management. For instance, to purchase a product of RM100000, we must have the cash flow of RM200000 to ensure that we can settle all our liabilities if accident occurs.
For poor financial management, the occurrence is mainly because of lack of financial knowledge. The desire to own everything within limited resources leads to the increase of liability of youth. At last, all of the youth with liability will work for money to settle all their bills. Another reason that causes the poor financial management is because the youth is not taught to save their money for future use. Most of the youth spend their money to purchase things that they desire. Without saving their money, there will not have extra money to use in case of emergencies. The poor financial management also cause by the wrong investment of youth. Most youth wanted to get easy money by buying shares without the proper understanding of the current market situation. The greedy characteristics of youth will easily affect the financial level of youth. The poor understanding of how the banking system in the country will cause youth to have poor financial management. The importance of understanding of every policy of the banking industry can give advantage to the youth when they want to do something regarding money. In short, good and poor financial management depends on the financial literacy and how they understand about the cash flow.
c. Explain their impacts on society and nation.
Society
Youth is the asset for the country where the society needs them to contribute for the future development of the country. Financial management of the youth will directly affect the future pathway of the country. Imagine a society with high liabilities and the income level is insufficient to cover the expenses. This indicates the society will not undergo any development due to limited resources. As the liability increases, there is a high percentage of youth with bankruptcy. At the same time, the economy of the country will be shrinking due to the less demand from the market. The country will also be borrowing money all around the world to solve the increasing liability issue. If this occurs, the government is not stable anymore and will be easily controlled by other power. For instance, Greece is a country which already announced bankruptcy due to improper financial management. This applies the same to the Malaysian government. If the liability of the country is still increasing, no doubt the Malaysian government will go into bankruptcy in the future. Simply put, the main impact that poor financial management of youth will lead to a society with high liabilities and low purchasing power.
Nation
As mentioned, youth played an important role for the future development of the country. Therefore, the utmost impact behind the poor financial management will be the country having a poor nation. At the same time, debt will be increasing in an alarming rate. In addition, another impact that will affect the nation will be less of experts in the financial sectors. As we know, the financial sector is the most important sector in a country as it determined the wealth of the country. As the financial management of youth is poor, the experts will be less. This will directly affect the market globally. Without the knowledge in the global market, nation all around the world will face economy problem due to the unstable economic downturn which will affect all the industries. Unemployment rate will be increasing and a nation which is poor will occur. For instance, youth in poor countries could not obtain financial literacy. Although other industries is developing, the country is still facing financial constitutes due to the lack of financial knowledge among youth. In conclusion, financial management among youth should be set as priority to build a nation with strong financial knowledge.
