USE EPF MONEY WISELY
IMAG I NE being in a difficult situation and not being able to make ends meet during this time of crisis. The immediate needs of low-income families, especially parents who just lost their jobs, require the attention of the government and society.
Help is needed for basic needs and the prime minister acknowledged this when he spoke about the groups that could withdraw from their Employees Provident Fund (EPF) Account 1 soon. While it is not surprising as contributors were also allowed to withdraw from Account 2 not long ago under the i-Lestari programme, the timing between the two decisions is rather short.
This means that contributors’ savings are depleted faster than the returns that could be made if the money was invested. As a consequence, contributors who choose to withdraw their savings will be worse off in the short term due to the higher financial “opportunity cost” in the form of the dividend that they have to forego.
However, many proponents of this policy argue that the most important matter to be addressed now is creating a social safety net for the Bottom 40 percent group( B 40). This is alongterm view to ensure that they are supported through the recession and are well positioned to recover when the worst is over.
From a macro economics perspective, this and other measures introduced by EPF so far will indirectly increase domestic spending andre vitali set he economy. The latest growth projection for the gross domestic product under the 2021 Budget is 6.5 to 7.5 per cent, where about 60 per cent is expected to come from domestic consumption.
As with other initiatives announced in the budget, execution will be a key aspect of success. The government plans to use a targeted approach and open the EPF Account 1 withdrawal option to only 600,000 contributors who need it most. Compare that to the current unemployment figure of about 800,000 and this seems sensible.
To improve the success rate of this move, EPF should explore big data analytics to identify members who need help most. This includes B40 members in the worst-hit industries, such as aviation, tourism and retail, parents who have no source of income to care for their children and are left with Account 1 as the last option and members with enough minimum savings even with the withdrawal cap of RM500 per month to ensure they have some funds left for retirement.
The withdrawal will be in the form of cash, hence it should come with a spending guideline as a reminder that it should be used for basic needs and not for wants. The culture of excessive spending and living beyond our means through easy access to credit and personal loans needs to change.
Society should reflect and return to the fundamental principles of being content and grateful for what we have and nurture the willingness to help others even as we, too, are facing challenging times and may be in need of help.
The government has presented their proposal — the biggest budget in our country’ s history. We, too, must respond to this crisis with a positive mind, along with an adequate financial management plan. Learning from this experience will help us come out stronger. It is in our hands.
AKMAL AB WAHAB
Taman Melawati, Kuala Lumpur