Financial Literacy And Personal Financial Planning In Klang Valley, Malaysia

3619 words - 15 pages

Int. Journal of Economics and Management 5(1): 149 – 168 (2011)

ISSN 1823 - 836X

Financial Literacy and Personal Financial Planning in Klang Valley, Malaysia
TaN HuI BooN*, HoE SIEw YEE aND HuNg woaN TINg University of Nottingham Malaysia

This paper suggests that most individuals who have yet ensued personal financial planning were held back by their financial literacy level. In this paper, we link the financial literacy level of individuals with their engagement in personal financial planning. Primary data was collected within Klang Valley via self-administered questionnaire survey, and the relationship was examined using the cross tabulation method. The findings suggest ...view middle of the document...

In fact, a sound personal financial plan allows individual to be mindful of ways in which they deal with financial matters. It is a means to guide an individual’s financial decisions and highlight the consequences

Corresponding Author: E-mail: any remaining errors or omissions rest solely with the author(s) of this paper.

International Journal of Economics and Management

of such decisions on other areas of one’s finances (The Malaysia Financial Planning Council, 2004). Whilst being well-to-do in the long run may provide individuals with a sense of security and fulfillment, in the short run the desired lifestyle and the financial commitments may potentially draw away substantial resources from individuals and pose a considerable threat to their financial comfort in the later part of their lives. In this regard, individuals have to be prudent in strategizing what needs to be addressed and establish a realistic timeline as and when their financial goals and objectives are to be achieved. Such effort would inevitably provide individuals with a great sense of security and an ultimate financial freedom (Cheah, et al. 1998). A typical approach to personal financial planning involves effective utilization of savings to accumulate wealth, followed by careful preservation of such wealth against value depreciation and losses, and finally distribution of wealth at a later stage of one’s life (Malaysia Financial Planning Council, 2004). Such planning reflects an individuals’ current state of play and how individuals plan to progressively develop and build their capacity in managing financial needs with respect to credit and cash management, tax planning, insurance and risk management, investment, as well retirement and estate planning (Malaysia Financial Planning Council, 2004). In gaining capacity for the desired financial well-being and lifestyle, it is essential that individuals constantly review the current impact of their financial affairs on the financial status as well gauge the resources necessary to support the desired status in future. Figure 1 suggests the review process that is useful in helping individuals establish a baseline for future financial management and set objectives and targets constituting the directions of the financial plan (Lee & Ong, 2001).
goal setting & prioritizing


Information analysis & status appraisal

Developing financial plan


Monitoring & reviewing

Personal financial needs Credit and cash management Investment management Risk management & insurance Tax planning Retirement planning Estate planning

Figure 1 Framework for the engineering of individual financial health


Financial Literacy and Personal Financial Planning in Klang Valley, Malaysia

The review process requires individuals to be equipped with not only cognitive ability but perhaps more importantly financial literacy. Specifically, they require the ability...

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