The unit of currency in Malaysia is the Malaysian Ringgit (RM) which is divided into 100 sen. Currency notes are in denominations of RM2, RM5, RM10, RM50, and RM100. Coins are issued in 1, 5, 10, 20, and 50 sen pieces.

Major hotels and larger establishments readily accept currencies such as US Dollars, Pounds Sterling, Euros, Deutsch Marks, Japanese Yen, and Australian Dollars. Travelers checks are accepted at banks, hotels, and large department stores. Foreign currencies can be readily exchanged for local currency at a bank or moneychanger. Major credit cards such as American Express, Mastercard, Visa and Diners Club are generally accepted at hotels, shopping centres and larger restaurants.

A service charge of 10% and government tax of 5% is added to bills in tourist-class hotels and restaurants. Tipping is not usually the custom in Malaysia.

The cost of living is relatively low compared to many other countries in Asia, and is a particularly attractive option for expatriates who are living on a pension or overseas income, especially those settling under the Malaysia My Second Home Programme, for whom remittances from abroad are not taxed.

It is relatively cheap to buy or rent a house or apartment in Malaysia, although the cost of housing is more expensive in central Kuala Lumpur. The following are examples of average monthly rental prices in Kuala Lumpur (the first price range quoted is for prime urban residential areas, the second for the suburbs):

Bungalow (detached house): RM4,500-15,000 RM1,70-8,000
Semi-detached: RM3,500-7,000 RM2,300-7,000
Terraced house: RM1,300-3,300 RM950-2,300
1-bed apartment/condo: RM1,100-2,000 RM1,300-1,800
2-bed apartment/condo: RM1,800-4,500 RM1,900-2,800
3-bed apartment/condo: RM3,000-7,500 RM1,500-4,000

Domestic help can be found at low cost through agencies or recommendations from other expatriates, and you can expect to pay around RM400 per month for a live-in Indonesian maid, or around RM800 for a Filipina. The minimum salaries of the maids are fixed by agreements between Malaysian Immigration and the countries of origin of the maids. Some expatriates also hire drivers and gardeners at relatively low cost. A typical monthly salary for an experienced driver is between RM1,000 and RM2,000.

Some expatriates do find the cost of utilities a little higher than in their home countries, and electricity bills in particular can soar if air-conditioning is used around the clock.

Motor vehicles are expensive in Malaysia due to the heavy import duties, but the cost is offset to some extent by the cheap petrol, which costs around RM1.20 a litre. Prices of locally produced cars start at around RM30,000 but most cost in excess of RM50,000, while for imported cars you can expect to pay at least RM70,000 and much more than this for many models. Some foreign car manufacturers assemble some of their models in Malaysia and these are cheaper than models which are imported fully assembled. For example, a locally assembled BMW 318 after taxes would be sold for around RM225,000, while an imported version would cost around 25% more.

Alcoholic beverages also bear heavy import duties and are therefore relatively expensive to buy in Malaysia. The lowest cost for a reasonable quality wine is around RM35 to RM40. However, again, this is offset by the lower cost of food and eating out. Dining out can be very cheap if you opt for food stalls or local non air-conditioned restaurants, where you can expect to pay less than RM10 per person for a substantial meal. Lunch in a 5-star hotel restaurant is likely to cost in the range of RM40 - RM100 per person, with cheaper special offers often available.

Prices for groceries are very reasonable, although the cost of some imported items can be high. Fruit and vegetables, meat and fish can be found at very low prices at the many outdoor markets. There are also supermarkets and hypermarkets throughout the country selling a wide range of local and imported goods. Typical prices are about RM3 for a loaf of bread, RM3 to RM4 for a litre of milk, about RM50 to RM95 for a kilogram of premium imported steak. Cigarettes are cheaper than most western countries costing around RM4.50 a packet.

The popular holiday resort island, Langkawi, and Labuan off the coast of Sabah, are duty free and many goods can be acquired cheaply there but there are restrictions on bringing them back to the mainland.

Added May 2007 by wsb6126: Some price adjustments:

1. Cigarette is RM7.40 now
2. Petro is RM1.92 / liter.

Actually the living cost in Malaysia is not cheap for Malaysians because they are generally getting a very low salary compared to the living cost. In another way of saying it, quality of living is low for Malaysians, with the salary they have.

For example: A new laptop in the UK costs around GBP600, but it costs around RM3000 in Malaysia. For a person that is making GBP2000 a month, buying a laptop is not a problem. But for a Malaysian making RM2000 a month, can you see how much that person is going to have to save before they can afford a laptop? That's why the quality of life is low. But no doubt, Malaysia is a heaven for expats who are getting good employment packages here.

Added March 2007 by C: I do NOT agree that the cost of living in Malaysia is cheap. I find that the cost of living in Malaysia is VERY expensive compared to many developed countries! Example: a person earning an average salary of RM1,500 per month. How many percent of your salary does it take to purchase a car (local made car)??? Can you ever purchase a car or any property?? How many percent of your salary to purchase a simple lunch at a food stall?? How much is a McDonald cheese burger and how many percent of it from an average monthly salary?? Do you have any RM1 stores around in Malaysia???? If you think and compare this you would realize that the cost of living in Malaysia is EXTREMELY expensive!! How much can a person with an average salary of RM1,500 save??? What is left at the end of the month??

Example: a person earning $1,500 per month and he pays only 90cents for a cheese burger. How many percent from his salary?? A brand new computer of the latest model cost only $600. How many percent is it from his salary?? There are lots of $1 stores around where he can shop and save.