These families are ‘middle-income’ earners, but why can’t they save?
A. RUBAN, AIZYL AZLEE AND YISWAREE PALANSAMY, MALAY MAIL ONLINE
Nurjehan Mohamed, 37 and her husband Aref Omar, 39 have a joint monthly income of RM8,000 a month which puts them comfortably above the national average household income of RM6,141, according to data from Khazanah Research Institute (KRI).
Yet, they are struggling to save more than RM100 a month despite only having one child who hasn’t started school.
Both Nurjehan, who is a senior public relations executive and Aref, a journalist, work in KL while they live in Serdang so they spend quite a bit on their daily commute.
Half their monthly earnings is spent on a combination of their utility bills, insurance for the three of them, repayment on Nurjehan’s Perodua Alza car loan and financing renovation work to their three-bedroom condo.
Add to that childcare expenses — nursery cost alone takes up a huge RM750 chunk — groceries and the occasional dining out at a PappaRich family restaurant or even McDonalds, and the two say they end each month with just RM110 for their nest egg, which sometimes is spent helping out Nurjehan’s retired parents.
Being based in the Klang Valley, their experience is actually not uncommon.
Sole breadwinner S. Thanaraj, 31 supports his wife and infant daughter with his RM5,800 a month salary as a mechanical engineer for a US-based company in the city. This still places the family above the national household median income of RM4,585 based on the same KRI report.
With tightly controlled spending, he can save approximately RM290 a month. But sometimes, he has to shell out for urgent fixes, such as to keep the family’s sole car, a 1997 Honda Accord, running.
“Sometimes, I don’t get to save anything but we get through difficult months with my savings I keep from bonuses received at the end of the year,” Thanaraj told Malay Mail Online.
Even when they married in 2014, the newlyweds had to forego his dream honeymoon holiday due to budget constraints.
“I thought of going to Bali but the plan never did materialise as a trip there was well above my budget when I checked then,” he said.
Thanaraj’s wife, K. Deepa, 30, stopped working as a medical imager after giving birth earlier this year. The couple decided that it was cheaper for her to be a full-time homemaker after discovering babysitters charge nearly the same amount her salary would contribute to the household monthly.
“The cost of sending a child to a babysitter is almost RM1,500 for a [month] and so we decided that Deepa should stop work to look after our daughter,” he said.
While Thanaraj allocates about RM100 for entertainment, he said it was nothing luxurious apart from the occasional outing to the movies or eating out at a restaurant.
“My wife cooks most days and it is rare [that] we eat out and when that happens, it is a form of luxury for us,” he added.
With a joint monthly income of roughly RM15,000, luxuries come by more often for Amar Zulkifli, 28 and wife Aznah Abas, 29, who indulge in the occasional weekend getaway to nearby resorts, such as in Sepang, to entertain the children or take their parents out for dinner.
But with three children aged four, three and three-months-old, whatever they save now goes into the kids’ future education fund, which sometimes doubles up as their emergency fund.
“No, the amount we save is not enough,” Amar told Malay Mail Online.
“We save RM500 for each of our kids. Initially I planned to save RM1,000 for each of them. We hope that the money will assist our kids’ tuition fees, but now we are not sure if the amount will be enough when the time comes since things are getting more and more expensive.
“This savings also works as our emergency bank,” he said.
To cut down on their monthly spending, Amar, who runs a creative agency in the city, and Aznah, who works as a bank executive, have been looking for cheaper alternatives when shopping for their children and often make purchases online, such as for diapers.
While they may not be able to save as much cash in hand as they would like, Amar and Aznah try to systematically grow their assets.
The couple live in a cheaper rental while they rent out the house they bought together in order to pay off the loan. They also rent out the first car they bought together for similar reasons.
“Why does my cost of living not tally with reported inflation?”
To clarify, the KRI report cited above marked the findings of 2014, which is the most recent available.
Statistically, the national average on inflation and wage growth have been positive since, which has brought on much confusion among folks who feel the pinch despite positive news.
Dr Yeah Kim Leng, professor of Economics at Sunway University Business School, told Malay Mail Online that the problematic perception arises because there is still a big gap in lifestyle between living in the city compared to rural areas despite the positive national average, and that affects the weighting of the national averages.
“The Consumer Price Index [used to determine inflation] of course is just an average basket of goods consumed by average households. But cost of living depends on the living area, and varies to lifestyle,” he said.
“You have to look at the difference in urban and rural CPI.”
According to the Department of Statistics, the year 2014 marked a CPI increase of 3.2 per cent between January to December, in other words, an inflation of 3.2 per cent.
The median salary and wage growth rate for the same year was 4.9 per cent.
For 2015, inflation was at 2.1 per cent while median salary and wage growth was 6.5 per cent.
While it all sounds great, the story is very different once you zoom in on the data.
The year-on-year comparison (statistics of the month compared to the same month the previous year) for each month in 2015 from June onwards CPI increase in Johor, Selangor and Kuala Lumpur at a fluctuation of above 3 per cent.
To give a clearer image, the national average year-on-year CPI in December 2015 increased by 2.7 per cent while Kuala Lumpur specifically saw a 3.5 per cent increase, whereas December 2014 saw a 2.7 per cent increase nationally with Kuala Lumpur increasing at a much smaller gap at 2.9 per cent.
Salary and wage growth medians, when broken down by state, showed that Kuala Lumpur did not grow in 2015 but stagnated at RM2,200, the same figure posted for 2014.
“Will it get better for my family?”
Yeah stresses that the main factors that affect young families in the city will remain housing and childcare.
“I think it’s getting tougher, especially those with wage and income that have become stagnant. Even though wage has been rising 5 to 6 per cent per annum nationally, it’s not keeping pace,” Yeah said.
“What needs to be done is for the government to ensure that wage and income growth keep pace with cost of living.
“Those living in urban areas looking to provide for their children will have a tough time, and it will be a deterrent for people to start a family,” he added.
Yeah pointed out that inflation this year has shown signs of easing, with the latest official data indicating inflation was “at a 16-month low” in July, rising at a benign rate of 1.1 per cent year-on-year.
However, even if the inflation rate is lower this year, it only means that things are getting more expensive, at a slower rate. And the question remains if salaries and wages will increase to catch up with the lagging data.
“Of course most businesses don’t want to set their salaries based on their location’s CPI, so they will follow the national average CPI to justify a lower increase,” Yeah said.
Malay Mail Online recently ran a report on how even the CPI’s weightage system itself does not necessarily reflect the reality of the current situation.