When should you commit to a regular savings plan in Malaysia?

Every month, as a Malaysian, you receive your salary. You work hard at your job, and after deductions from things like Income Tax, SST and EPF – the net income left over for living expenses is minimal. But with a low income comes lower savings for an emergency fund or retirement savings, making you more likely to fall into debt if any unforeseen moments occur.

It does not have to be this way, though. Suppose you are willing to forgo some of your unnecessary spending. In that case, it will become easier to build up a financial security buffer that is essential in the case of emergencies such as health problems or job loss. By putting away a certain amount of money every month with discipline, you will eventually build up a financial safety net that can help you out, even if the amount may be small.

This article looks at when you should commit to a regular savings plan in Malaysia.

Start low but start now.

As with many things, the hardest part is starting – and it is certainly no different for saving money. The first step is getting into the habit of putting away a certain amount every month – maybe even as low as RM20-30 – and committing to saving that money instead of spending it frivolously on something else. Once it becomes a habit, moving on to saving more becomes easier. After all, you won’t feel like giving up your newly developed good habits for unnecessary spending because you already have a set amount that has become a part of your lifestyle.

Look at it this way – if you only commit to saving RM20 per month, and you save for ten years, then with an interest rate of 3% – that RM20 will be worth over RM200 by the end! It is why it’s never too soon to start, and putting away as little as RM50 per month can make a massive difference in the long run. One word of advice, though: keep the money somewhere safe where you won’t feel tempted to withdraw it until you need it.

It pays to start young.

The earlier you start saving for an emergency fund or retirement, the better your future self will be. This sort of ties back to our last point about committing to saving RM50 per month for ten years, but it goes beyond that. The earlier you start saving, the more money you’ll be able to amass in your life because of compound interest(read more here).

For example, if you are 25 and start investing RM500 monthly into a stock market fund with an average return of 8% (which is conservative), by the time you are 65 – that investment will have grown to RM735,000! That’s something worth getting excited about. And that’s only starting at age 25; imagine how much more money can be accumulated if you started earlier?

If You Can’t Commit

Sometimes life gets in the way and makes it hard for us to commit to taking public transport or using less water. It’s not easy to commit to saving money for emergencies or retirement without something changing along the way.

But since this is a regular savings plan in Malaysia, you must make time to build up your nest egg even if things get in the way of your original plans. The most practical thing would be to automate your monthly transfer into an online banking account or trading account to avoid any more excuses about forgetting. One word of warning, though: try not to use this money until you need it because you are still technically spending cash when you withdraw from an automated transfer.


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