7 Reasons Why Malaysians Don’t Save

Do you have a problem with saving money? You are not alone.

We all have our excuses or reasons for why we can’t save. The only way to overcome this difficulty is to realise and identify the problem first. Then, we should work towards eliminating our excuses and working to find better solutions.

In 2012, Visa conducted a Financial Literacy Barometer survey on over 900 participants in Malaysia. The survey showed that one in five respondents had no savings at all and over 70% cannot endure a personal emergency of over three months.


That’s pretty scary, and to overcome this biggest financial hurdle, one must understand the cause.

Here are seven excuses that is perhaps unique to Malaysians for not saving money—and how you can bust them to build your financial stability.

1. Low income

The most common reason for not saving money might not seem like much of an excuse at all for many. Instead, it might feel more like a fact. Currently Malaysia’s minimum wages is RM900 for Peninsular and RM800 for Sabah and Sarawak. This is hardly enough for a family to fulfil their basic needs, what more saving.

It is easy for one to save money when they make four or five figures a month. However, if you earn minimum wages and live in a city with high cost of living, it can be difficult to save money no matter how frugal you are. It’s scary because the importance of savings is especially important for those in the lower income bracket.

It’s essential that you try your absolute hardest to save. Even if it’s a little bit at the start. If trying to cut corners on your spending fails, you might want to look into increasing your income.

Quick tips Negotiate for a raise, consider finding a different position, work more hours, or establish some part-time work on the side by monetising your hobbies.

2. Lack of financial literacy

People with higher financial literacy will assume greater responsibility for their financial well-being. For example, individuals need to determine not only how much to save for retirement, but also how to allocate the retirement wealth wisely. They can learn about budgeting and saving to manage expenses and debt. Indeed, financial literacy is an essential living skill for all of us to build financial security and achieve financial well-being.

However, individuals with low financial literacy are less likely to take calculated risks and invest their money in stocks. Many have also fallen prey to financial scams and lost their life savings.



Quick tips You must stop telling yourself this excuse. There are so many fantastic resources at your disposal that will help you boost your financial education.

3. Servicing multiple debts

On the bright side, if you’re reading this article then you’re on the right track!Take the initiative and start reading up on personal finance and how money works in the real world. Seek help from trusted professionals and don’t be afraid to ask questions.

Another reason that prevents people from saving money is the continual need to play catch up on their debts. You most likely fall into this category if you owe massive amounts of debts – credit card, student loan, personal loan, housing loan and/or car loan.

The worst part about this position is that it is hard to get ahead. Once you are behind, it makes it that much harder to reverse things unless you make drastic changes.

According to the Malaysia Department of Insolvency, 41 Malaysians are declared bankrupt every day, with the majority of them being under the age of 44. The main reasons cited are inability to pay off car loans, poor control of credit card usage and a failure to pay off personal loans.

It is highly possible for an average Malaysia earning RM4,000 to service debts worth RM3,700 every month:

Monthly repayment Total RM3,700 Credit card RM500 Student loan RM200 Personal loan RM300 Housing loan RM2,000 Car loan RM700

Sure, you need to repay your debt. But it’s not the only financial priority that deserves your attention. Your twenties and thirties are your prime saving years. A Ringgit saved today can be more than a Ringgit earned tomorrow – thanks to the power of compound interest over time.



Quick tips You can put the bulk of the money available each month toward debt repayment. But still set aside 10% to 20% for savings. It’s okay to work towards more than one financial goal at a time.

4. Low financial incentive for saving

It’s important to know how to clear your debts effectively so you can start saving quicker. Here are some effective methods!

Savings and fixed deposit (FD) accounts do not yield returns as much as investments do. The maximum interest rate offered is only 4% per annum, which may come with various terms and conditions. If that’s not bad enough, current inflation rate stands at about 1.8% – and this means the effective interest rate we earn from our savings is only 2.2%.

Some may still stick to savings and FDs as they have a low tolerance for risk and is dead afraid that they will lose all their hard-earned money in investments. However, understanding how an investment works can help you take calculated risks when it comes to growing your money through investments. Consider investments like unit trust, REITs and share trading if you are looking for higher yield for your savings.



Quick tips Savings or FDs accounts can be good to put some of your savings intended for emergency as they are more liquid than investments. They are a place to stash away your cash so that you do not use it until you really need it.

5. Procrastination

This is another huge financial mistake. Procrastination can be very costly; for example, if you save RM100 per month for 25 years at an interest rate of 3% you will accumulate RM44,712. If you chose to start saving later, and you saved for 15 years instead, you would only have accumulated RM22,754. This is the advantage of compounding interest. And this is a really conservative example!

Quick tips If you start saving earlier, you can get away with making smaller monthly contributions to your nest egg than if you waited and tried to play catch up down the road.

6. Having wrong misconception of saving

Let compound interest do the heavy lifting for you!

Whenever there is a hike in petrol prices, we can see Malaysians queuing up at the petrol station to fill petrol the night before the price rise. They somehow believe that they are saving money on petrol – which is a misconception altogether.

If a Toyota Vios driver decided to fill up a full tank before the recent petrol hike of RM0.10 for RON95. Before the price hike, his full tank would have cost him RM87.75 (RM1.95 x 45 litres). After the price hike, it would cost him RM92.25 (RM2.05 x 45 litres). So, he would have made a one-time saving of RM4.50 only.

That may just be enough for a plate of mixed rice with two dishes. Look for real ways to save instead of focusing on the petty things.



Quick tips If you are really looking forward to save money on petrol, consider driving at a moderate speed, avoiding congested zones, or dump the car whenever you can and start walking or taking public transport.

7. Malaysia is a shopping heaven

These real money saving tips will definitely help you save hundreds a month.

Not shopping is probably a tough thing to do for most Malaysians. With shopping malls at almost every neighbourhood, pasar malam, warehouse sales every weekend, cutting off spending can be truly torturous.

And this is probably the number one cause for Malaysians’ inability to save money. As Malaysians we are always spoilt for choices, from food, entertainment or branded items. A friends gathering never goes away without an eat-out or sales never swing by without us taking advantage of that.

You can always enjoy a better television or a newer car, but splurging on the latest models can be a very expensive (and unnecessary) habit. You should only upgrade when your current item, be it smartphone or TV, is broken, not every time a newer model comes out. This is a result of the mentality that believes your money is yours to spend (now).



Quick tips Prioritise your spending and buy according to your needs and not wants. When there is a sale, it does not automatically mean that you must buy something. Buy only if you really need something.

Anytime you must spend, think thrice if you can do without it. And the money you put into savings is the highest priority “spending” you can do. Pay yourself first, and then use what’s left over to purchase something you want. Here are tips to help curb the temptation to spend money!

Don’t let these excuses stop you from saving for the rest of your life. If you don’t, you won’t achieve what you want. Or worse, if something bad happens, you’ll be completely exposed financially.

Identify your common excuses that stop you from saving and start taking proactive steps in overcoming your stumbling blocks. Once you have done that, you may find saving money much easier to accomplish. It may not be easy, but it is possible and it is well worth it, because saving gives you peace of mind and financial independence.

What’s the number one reason that stops you from saving? Share with us.