What do you do with your money these days determine how far you can stretch it and how fast you can grow it. I read in an article in a local daily that the bank deposits growth rate from individuals are actually rising the slowest for the past few years. One main reason stated was that due to the higher costs of living, people stretch their ringgit a little further than before, thus this meant less savings into the bank. This has been the trend for the past 2 years. Of course, for the banks, this is not a good sign because it meant that their loans may become more expensive because these savings are normally the cheapest form of funding they could have. Yes, you are right, when you save money into the bank, banks use these to lend to others for mortgages, businesses etc. This is how banks earn their profits.
I may not be an economist but I think this trend would be continuing. Besides the usual causes such as more people are paying higher mortgages, buying more expensive cars, changing phones every year, buying ever more expensive handbags etc, this may also be caused by the fact that the knowledge about money has also been growing. Many years ago, I have hardly any friends buying their personal medical plans. Today, I have many who have started to have their own medical plan, even if they are still working today. Unit trust sales are also increasing every year because their promise is that you can invest in unit trusts which matches your risk appetite and the results has been good for the past few years. I have quite a large chunk in unit trusts too.
One more issue which I think is also contributing to this is the new workforce in the market. They have been told by far too many reports that they would not be able to afford good properties. Not many reports however told them that they should buy something smaller and cheaper first. Thus, with this mindset, many of them no longer think it is necessary to save. Plus, their Gen-X parents would have the money to support them anyway. Savings would earn them paltry returns. Asking for money is easier. Long time ago and even today, their Gen-X parents continue to drink their Kopi-O but just look at the mushrooming of all the new cafes serving freshly brewed Arabican coffee and you get my meaning.
In America, majority of everyone has hardly any savings. Will Malaysia be like them in the future? The possibility seems to have started showing. Only difference? We still have a huge population that is used to saving. Thus, the rate of decline in growth should still be slow, I hope. For those who are reading this, always remember that whatever you may believe, savings remain as a very good virtue to have. When you save you would also think objectively how you use your money too. Happy Saving.
written on 5 Oct 2014
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