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[KUALA LUMPUR] Malaysia’s middle class is feeling the squeeze – rising costs are eroding savings, insurance cover is thinning and buffers are wearing down, the recent RinggitPlus Malaysian Financial Literacy Survey (RMFLS 2025) indicated.

The financial strain is not unique as similar pressures are rippling through South-east Asia, where the middle class, once the region’s engine of growth, is showing signs of fragility in Singapore, Indonesia and Thailand.

Malaysia’s middle class is feeling the pressure, with just 23 per cent of households earning RM5,000 (S$1,530) to RM10,000 a month managing to save RM1,001 to RM1,500. This is down from 29 per cent in 2024, as rising living costs erode buffers.

Nearly four in 10 middle-income earners now save less than RM500 monthly, the survey indicated.

The survey was endorsed by the Financial Education Network (FEN) and supported by KAF Digital Bank, CIMB Foundation and Experian Information Services (Malaysia). FEN is an inter-agency platform bringing together key bodies such as the country’s central bank and the Ministry of Education to improve Malaysians’ financial literacy.

Siew Yuen Tuck, chief executive officer of RinggitPlus, said: “Higher-than-normal global inflation during and after the Covid pandemic was a major driver of lower savings among middle-income Malaysians.”

Still, 54 per cent of middle-income earners reported that their financial situation had improved in 2025, relative to the year before. “It’s too early to say that the middle class is really weakening,” he added.

To ease cost pressures, the government has boosted cash aid and set aside additional funds for subsidies on essentials such as rice and cooking oil. The middle 40 per cent of households (referred to as M40 in the survey) will also gain from expanded tax deductions for childcare, medical expenses and Employees Provident Fund contributions, while fuel subsidies remain in place.

Still, credit reporting agencies have cautioned that the middle class may be quietly slipping into “fragility”.

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Dawn Lai, CEO of Experian Malaysia, said: “Any weakening in financial resilience could translate into increased vulnerability to debt accumulation or late payments… the middle class can silently slip into financial fragility.”

She said specific default or delinquency figures were not provided, but that the segment is being monitored for potential stress.

Bank Negara Malaysia has also flagged household debt as a concern, with borrowings reaching RM1.65 trillion as at end-March 2025 – equivalent to 84.3 per cent of gross domestic product, placing Malaysia among the most indebted in Asia.

While impairments remain low at 1.1 per cent and most debt is asset-backed, governor Abdul Rasheed Ghaffour said the central bank is monitoring the situation for signs of strain.

Official data shows modest wage growth. Median monthly wages in the formal sector rose 5.5 per cent to RM3,000 in the first quarter of 2025. But economists note that inflation in recent years has outpaced pay gains, leaving households in the RM5,000 to RM10,000 bracket structurally squeezed.

The struggles of Malaysia’s middle class echo trends in South-east Asia.

In Singapore, 60 per cent of workers reported living paycheque to paycheque in 2024, ADP said. A Sun Life study found that 18 per cent of Singaporean retirees were caught off guard by unexpectedly high costs in retirement.

In Thailand, household debt has climbed to about 89 per cent of GDP – among the highest in Asia, the Bank of Thailand said.

In Indonesia, more than half the workforce remains in the informal sector, limiting access to formal savings and insurance, the World Bank noted.

Insurance coverage remains another weak link amid cost pressures. The survey found that rising premiums led 22 per cent of policyholders to downgrade or cancel plans in the past year, and 43 per cent of Malaysians remain without medical insurance; fewer than half hold life insurance or Takaful policies. 

Interestingly, Malaysia’s lower-income households and Gen Z are showing progress – 55 per cent of low-income Malaysians have begun retirement planning, while more Gen Z savers are setting money aside and turning to digital financial tools.

Government measures such as minimum wage hikes, targeted aid and petrol subsidies have helped lower-income households, with significant improvements in financial preparedness among Malaysians earning under RM2,000 a month.

Younger Malaysians are emerging as a bright spot – 40 per cent of Gen Z now save more than RM500 a month, up from 36 per cent last year. And the proportion of those who save nothing has fallen to just 11 per cent – the lowest of any generation.

Rafiza Ghazali, chief executive officer of KAF Digital Bank, said: “This generation is far more comfortable managing money with apps, robo-advisers and other artificial intelligence-powered tools – and that’s where digital banks can make a real difference.”