Articles

Getting married and starting a family can be an exciting period in life.
 
However, starting a family is a huge responsibility that needs proper planning and preparation, and this includes your finances. But many young couples may not be prepared for this financial commitment.
 
If you are not ready to handle the financial commitments, this added pressure may put a strain on your relationship. One of the leading causes of divorce in Malaysia is getting married before being financially prepared. From 2013 to May 2019, the National Registration Department recorded 17,359 cases of divorce due to financial problems.
 
Avoid making these financial mistakes if you’re just starting a family at a young age.
 

1. Going broke to keep up appearances

 
Being young usually means that there are a lot of material possessions you wish to own in order to fulfil your lifestyle needs.
 
Among the most common financial missteps are:

• Putting luxury first when it comes to vehicles, clothes and food
• Keeping up with the latest trends in home furnishing, fashion and gadgets
• Comparing one’s lifestyle to others based on what you see on social media

 
This mindset may cause young couples to lose sight of their financial responsibilities and the expenses that come with this lifestyle. For example, getting a car will make it easier for your daily commute. But young couples may be tempted to buy a vehicle that they cannot afford. Going broke to appear fashionable can truly cripple a young family’s finances.
 
Every purchase, big or small, should be made with your family’s financial well-being in mind, and stability should be the number one priority over everything else. After all, as the saying goes, money can’t buy happiness. Instead, true happiness will come from the peace of mind that financial stability offers you.
 

2. Spending more than you earn

 
When all you’re seeing on social media is people enjoying all the finer luxuries in life, sometimes you just can’t help but give in to temptation. However, bringing such spending habits into married life is a sure-fire recipe for disaster.
 
If you don’t have any money left over at the end of the month, it’s clear that you need to rethink your expenses. But this is easier said than done, especially when a stream of promotions and discounts available on online shopping platforms are a constant temptation.
 
Avoid these spending mistakes:

• Using your credit card to make purchases you can’t afford
• Increasing your debt commitments beyond what you can afford in monthly repayments
• Buying expensive clothes, toys, and gadgets for your children which will only be used for a short time
• Buying things online during the sales season without a proper budget

 
Pro tip: According to Encik Kedek’s spending tips in #BorakBerUang video, if you are tempted to spend more than you budgeted on online shopping platforms, take some time out and consider the purchase for 3 days and 3 nights before you decide. Chances are you will realise it’s not necessary and if you are still thinking about it then, maybe it’s best to just delete the app! Making a list of your purchases before you buy also helps you avoid impulse purchases.
 

3. Not planning ahead for your children’s education

 
While your bundles of joy grow, so do your financial responsibilities. Raising a child to adulthood can cost upwards of RM400,000, including university education. Fortunately, you don't have to come up with the funds all at once, but it will still take a long time to save that much money.
 
Education costs from the toddler to university years include:

• Daycare, preschool, enrichment classes
• Miscellaneous schooling fees, uniforms, transport and food
• University fees plus transportation, room and board

 
Tip: You can start planning for your children’s higher education needs early by opening a PTPTN SSPN-i account for each child and enjoy income tax relief on the savings as well.
 
After all, your children will depend on you for everything until adulthood and as a parent, it is your responsibility to provide that financial support. If something were to happen to you, it will be a tragedy if you are unable to care and provide for them.
 

4. Not getting insurance protection

 
We should protect ourselves and our family from unexpected events. Which is why the protection offered by medical and life insurance coverage is very important, especially if your income is not enough to cover emergency expenses.
 
The National Health and Morbidity Survey (NHMS) in 2019 revealed that only 22% of the population have personal health insurance. This means that most Malaysians can only depend on healthcare services provided by the government if they fall seriously ill or suffer from critical illness. However, if you become ill, you may not be able to continue working to support your family.
 
When you have life or medical insurance, you’re creating a safety net for your family.
 
Pro tip:  You can make use of the medical coverage provided by your employer for medical check-ups and treatment at panel clinics and hospitals. However, you should still have your own insurance plan because your company’s insurance will only cover you while you’re still working with the company.
 

5. Taking big investment risks

 
One huge mistake that many young families are making today is not doing their due research before investing, especially families who are newbies to investing.
 
This mistake is then compounded by another mistake, which is to put all of their money into one type of investment. This is very risky because if the investment doesn’t pan out, then all that money will be lost.
 
As an alternative to high-risk investments, you can consider fixed income or money market funds and unit trust funds. Before starting your own investment portfolio, you should learn and understand the basics of investing. Make sure you do your research and choose investment platforms and companies that are regulated by the Securities Commission.
 
Remember, the bigger the advertised returns, the bigger your risk will be. So, be sure to balance the risk and returns of your investment.
 

6. Not having emergency savings

Saving money while starting a new life with your partner is difficult indeed. However, this is no excuse for not preparing any emergency savings for your family.

 Without emergency savings, financial problems can easily lead young families into debt, even resorting to borrowing money from illegal money lenders or ‘Ah Long’. According to Persatuan Pengguna Islam Malaysia (PPIM), there has been a 40% increase in reported ‘Ah Long’ cases since November 2020, due to the effects of the COVID-19 pandemic.
 
In fact, you should have enough emergency savings that can sustain your family’s expenses for at least 6 months.
 
You can figure out how much you need for expenses by separating them according to categories first then decide if you can live without the additional expenses:

• Fixed expenses: Car/house installments, house rent, insurance premiums
• Non-fixed expenses: Transportation costs, groceries, utilities, children’s expenses
• Additional expenses: Dining out, clothing, subscriptions such as internet connection, Netflix and Spotify, non-essential groceries and others

 
It is very important for young families to plan and prepare their emergency savings as soon as possible. It’s okay even if you’re saving a small amount monthly, what’s important is you’re consistent and disciplined about saving.