While the country is going through a gradual economic recovery phase with the vaccine program underway at the same time, the COVID-19 pandemic continues to show the interdependence between our financial system and other sectors of the economy.
This ongoing pandemic has impacted the economy widely and negatively in social, economic, and financial terms. Many are asking, "When can we go back to the time before the pandemic?"
However, the fact remains that the new norms of wearing face masks and the practice of social distancing will continue even if a person has received the vaccine.
The loss of jobs and businesses leading to the rising unemployment rate reminds us how critical it is for authorities and governments to take more proactive measures and not reactive ones to reduce systemic risk.
Having a solid and effective financial safety net system in place is vital in reducing systemic risk and promoting the overall stability of the financial system.
At the level of banking and insurance institutions, Perbadanan Insurans Deposit Malaysia (PIDM), which was established in 2005 as the national deposit insurer, complements the functions of Bank Negara Malaysia and fosters close cooperation in maintaining the country's financial stability. PIDM is a statutory body that is part of the financial safety net in Malaysia and contributes to the country's financial system's stability by strengthening public confidence in the overall financial system and promoting appropriate risk management.
Publicly, PIDM prioritises and protects depositors by giving incentives to member institutions (banks and insurers) that practice sound financial management.
To ensure a sustainable life for the public, a financial literacy communication plan that reaches them on all levels should be developed by all parties, including the government, financial institutions, members of institutions, and even the public themselves.
Communicating 'smart money management' as a key message must be amplified. With the majority of the public living from paycheck to paycheck, it can be challenging to save up.
However, when there is a will, there is a way.
- Knowing when to spend. Humans need to spend to live. However, when it comes to buying things that influence temptation, you need to ask yourself if the time is right and if you have enough money for it. If it’s not an emergency, could you possibly wait a month or two before purchasing it?
- Emergency savings. The emergency fund should be managed wisely by prioritising the expenses needed for survival. For example, paying for hospital bills or well-being expenses, rent, food, and your children's needs. If you can save RM1 a day, your emergency fund will snowball to RM90 in three months’ time.
- Prioritise spending according to your needs. While shopping, you should prioritise needs over wants. It is good if you can segregate the expenses into categories of needs and wants and prioritise the ones you consider important. The silver lining is that you can save as little as RM1 by doing this.
All parties from the institutional level to members of the public from every walks of life must move in unison to increase their financial resilience respectively. Instead of spending because you want to, it is better to spend because you need to.
Ivlynn Yap is the Head of Communications & Public Affairs, Perbadanan Insurans Deposit Malaysia (PIDM).
Issued in 2021
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