The Long and Winded Road v2

What’s 3% in the long run, anyway?

Posted in Life, Money, Musings by enochlau on 13 November, 2008

The Corporation just notified me of the impending reduction of my EPF contribution from 11% to 8% come January ’09. In addition to being pleasantly surprised that they’d bother to send me the email (with the form included too!), I thought this issue would make a nice extension to my previous post on the subject of short-sightedness.

I’m inclined to avoid posting a rant about the Government — I’d like my posts to go beyond the usual collection of criticisms about suits, policies and people — so here’s my summarized reaction:

But why?

Well, of course I know why — it’s an economic stimulus package, because when people spend more, the economy gets a booster strapped to its back and switch flips on. That’s not what I’m asking about; my question is why of all times and situations the government could work so efficiently, it does so with this in particular and oh-so-quickly.

The sharp ones among you will already point out that money’s involved. Of course, how silly of me to forget the three things that will make things happen in Malaysia: money, people dying tragically, and phonecam videos on the Internet (VK Lingam: “It could have been me, maybe it was me, let’s find out after the commercials!”).

I feel that it’s overall just shortsighted. Long-term, yes — people spending more, higher consumer confidence (isn’t that a nice deceptive phrase?) and money changing hands benefits our economy. We Asians, however, are 100% tried-and-true, proven, signed, sealed and delivered, short-sighted people. We see money, we spend. We go for a variety of foreign investments* in exotic places like Europe (Gucci, Vincci, Prada), East Asia (Sony, Nintendo, Samsung) and America (Apple, Starbucks) often without thought about our personal financial situation.

3% isn’t a lot. At least for the lower-income contributors. The thing is, not everyone has had the priviledge of being taught about good money management, or even a simple thing like how your EPF really works to your advantage when you’re old and grey (at 55… heh. A retirement age post for another day). You free up a couple of ringgit now and they will spend. But how many of those people really know how the bit here and the bit there will end up compounding to the time when they actually need that money? The children automatically taking care of their parents are no longer here.

Now that our contribution is automatically reduced for us and you have to apply to increase again, and not the other way around, I’m sure there will be many people all too willing to spend the extra cash they suddenly find themselves having. I wonder how many of them will end up regretting it many, many years later on. It’s difficult for us to think that far off, so shouldn’t KWSP be encouraging that instead? It maybe only 2 years, but who knows what difference that 2 years might be for some people later on?
Don’t know about you, but I’m off to print out the form now.
* Whoops, I mean products.