A 2016 survey conducted by GYC Financial Advisory (GYC) in Singapore polled 1,000 millennials and found that 61 percent do not invest because they lack the financial knowledge to do so. The second most cited reason was lack of funds. Although among ASEAN countries, Singapore’s population ranked one of the highest mostly likely to invest, the proportion of people investing significantly decreases amongst those in the age group between 18 to 21 and 22 to 25.
Similarly, in Malaysia, the country’s Youth and Sports Minister recently raised a concern that a high number of its youth do not invest due to lack of interest, insufficient knowledge, low financial literacy and shortage of funds. For most of them, sound financial security is at risk if they were to rely just on savings as it will erode in value due to inflation. The insufficiency of savings will see this group facing financial burden attributed to rising cost of living coupled with a responsibility to care for children and parents.
If knowledge in investment seems lacking among youth, poorer still is the understanding of wealth and investing to maintain the perfect order and beauty of Islamic wealth distribution and redistribution mechanisms. Islam treats wealth as an important vein for the community, and those endowed with wealth, as trustees of Allah.
Wealth must be in constant circulation and hoarding it is unlawful. Investing wealth is measured both by the monetary gain associated with it and the benefits that accrue to society.The net surplus from the rich and wealthy should be transferred to the less-able within a trustee-agent context. Social justice is only upheld when there are no stark imbalances between the extremely wealthy and those in poverty.
The rights of the less able are redeemed through the voluntary and mandatory mechanisms of zakat (2.5 percent on wealth), khums (20 percent on income) and sadaqat. In practical terms, one’s inability to properly use wealth either through opulent consumption or waste damages the interest of the community. It is also within this context that the Qur’an has ordained working, seeking wealth and investing such that the web of economic support may be weaved for the individual, his dependents and the community. Central in the directives of Islam to earning is welfare spending:
“…Remember, the example of those who spend in the way of Allah is like that of a grain, which sprouts into seven ears, producing a hundred grains in each ear. Allah [by His mercy] increases manifold [the rewards of such deeds] for whom He wills. And Indeed, Allah is extremely bountiful [in rewarding His servants], fully aware [of your circumstances and deeds].” [Al-Baqara: 261]
Promoting Investments for Millennials
Currently, manoeuvring one’s financial commitments is already strenuous from credit payments, mortgage to children’s healthcare and school fees. The common Millennial perspective also places great importance toward materialistic consumption. It has thus become a comfortable norm to just aim and strive to meet the mandatory zakat payment, and the once in a year extra sadaqat during Ramadan and Eid. Today, absent in a person’s financial planning agenda are these – i) conscious thoughts about faraid, ensuring one’s future generations and the ones after those do not fall into the poverty trap as time passes on and ii) waqaf – endowment funds for the community. To amass enough for the fulfilment of these aims, starting to invest early in life is key.
A prerequisite of creating investment products that would appeal to Millennials is understanding their financial behaviours and needs – they lack financial knowledge, many are unaware of available products yet they have an independent mindset and desire to steer their own financial courses. Central to their need is a digitally enhanced investment experience.
In summary cultivating a higher propensity to invest for this age group involves enabling a creative digital platform, providing easy to understand materials on Islamic investment products and stressing the importance of being cognisant of the directives of wealth and financial planning in Islam.
Are youths ready for Financial Independence? – A Report (GYC, 2016)
Mirakhor and Iqbal (2011)