UM Surabaya Economic Expert Shares Tips on Managing Finance for Millennial Generation

• 04 Jul
• 2022

Ilustrasi gambar (pixabay)

UM Surabaya Economic Expert Shares Tips on Managing Finance for Millennial Generation

• Article
• By Uswah Sahal
• Economy
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The fact that young people are attached to the digital savvy generation has resulted in lifestyle transformations in the digital era that are massive in everyday life. The development of life in the future requires skills in the digital world in every sector of life, one of which is the financial sector through digital financial services. Then another requirement that must be met by the millennial generation is proficiency in financial literacy.

Arin Setyowati, an economic specialist at UM Surabaya, explained that the lack of financial literacy in Indonesia is evidenced by the results of a 2016 OJK survey, the level of financial literacy in Indonesia is 29.7%, which is still below other ASEAN countries.

Several studies have examined the level of financial literacy in young people (Das, 2017; de Bassa Scheresberg, 2013; Friedline and West, 2016; Mottola, 2014) which shows that millennial financial literacy levels are still very low (24%) even though they are classified as financially active. , for example evidenced from the ownership of a credit card.

According to Arin, the low level of financial literacy is triggered because the financial industry is increasingly complex but is not accompanied by a good understanding of financial concepts. So that it has an impact on difficulties in making decisions that are beneficial to their economic welfare (financial well-being), such as being trapped in excess debt through online loans (pinjol).

Apart from that, it also has an impact on poor and ineffective economic management, making it vulnerable to financial crises and losses due to crime (fraud) in the financial sector, as is currently rife, namely fraudulent investment fraud echoed by millennial influencers.

"The millennial generation is attached to the character of being confident, expressive, passionate and open to challenges. Most of them have the principle of "you only live once" which makes their lifestyle and social costs increase," explained Arin, Sunday (24/7/22)

According to him, the millennial generation is also used to keeping things up to date, placing more importance on vacations to fulfill their desire for selfies in beautiful places than meeting their main life needs, and often spending time in expensive cafes or even buying clothes only with brand considerations. So they find it difficult to distinguish between needs and wants.

The results of the financial fitness index survey launched by OCBC NISP in collaboration with NielsenIQ show that only 16% of the millennial generation have emergency funds. 86% stated that they routinely set aside a portion of their income for savings, 43% apparently still borrowed money in the last 1 year.

According to Arin's explanation, only 3% have investment products, although not many have invested properly, for example the phenomenon of following the stock investment trend or being desperate to get into crypto currency, but still using debt proceeds.

"That is, the data shows a financial health emergency in our millennial generation, so there is a need for a financial check-up and optimization of good financial understanding, so that they are not carried away by adverse financial trends," he added.

There are several main factors in efforts to improve the financial health of the millennial generation, including; by making budget allocations, keeping simple records of expenses, consulting with a financial planner and continuing to study financial arrangements.

The millennial generation needs to determine the following 3 things so they can focus more on planning and managing finances, the first is determining short-term and long-term financial goals. The second measures how much funding is needed to realize these goals. Third, make deadlines to be able to monitor the progress of financial management.

"These three things will direct the millennial generation in financial management based on a scale of priorities," he said.

Arin explained tips that can be applied in managing millennial finances according to the priority scale, one of which is through the 40-30-20-10 formula in finance. The details are as follows; 40% is the budget for daily needs, 30% for debt needs, 20% for investment and savings, and 10% for social needs and emergency funds.

Savings funds, investments, health insurance, and pension guarantees are four mandatory things that must be included in a long-term financial plan. Because the prices of goods and needs are increasing, it is important to prepare these four things early on.

What should not be forgotten next is the post for emergency funds. This fund post is for any contingencies that may arise in the future. So as not to interfere with the financial management that has been prepared.

"The 40-30-20-10 formula in managing finances will run optimally if it is accompanied by discipline to maintain the consistency of a thrifty and smart lifestyle so that life becomes more quality," he concluded.