Financial illiteracy among Pinoys is an issue that every sector has a stake in
Christmas bonuses are the much awaited news among employees The plan: Go to the mall with a shopping list once payroll releases the 13th month pay. Some would buy clothes, gadgets, gifts for loved ones. Others use the extra budget for annual home renovation and redecoration.
Filipinos generally want their hard-earned money to go to something tangible. Thus, the Filipino culture of spending. The sprawling shopping malls across the Metro are testaments to the Pinoy brand of consumerism.
Business tycoons who own shopping malls rely on the consumerist attitude of many Filipinos. The booming consumer sector is driven by the steady increase of remittances from OFWs (Overseas Filipino Workers) which amount to US$26 billion annually. The families of some 10 million OFWs are the most cash-rich spenders there are. Shopping malls and online stores also target employees of the BPOs (Business Process Outsourcing) as the industry continue to experience record growth estimated to reach US$25 Billion by end of 2018.
Pinoy financial illiteracy
But just because you have the money does not mean you have to spend it—all. In fact, spending isn’t exactly the purpose of year-end bonuses, much less the hard-earned money of OFW families who often scrimp on themselves so they can send money back home. Money isn’t there to be spent alone but also saved and invested.
According to Bangko Sentral ng Pilipinas (BSP) officer Patrick Dalman, financial education is a powerful tool to support individual well-being. ”With the ability to understand, select, and use financial services, individuals, especially OFWs, can take advantage of opportunities, and gain maximum benefit from participating in the formal financial system.”
Money, after all, can buy so much more than just a nice home, a flashy car, branded clothes, and the newest gadgets. It can buy peace of mind, too. “One of the best ways to spend your 13th month pay is to buy life insurance,” said Dalman. He added that a life insurance policy not only provides financial security, it also drives an individual to save a portion of the monthly salary to pay for the insurance premium. “While saving for your future, you can also get some form of peace of mind for you and your loved ones,” said Dalman.
'Just because you have the money, does not mean you have to spend it—all'
Spend. Spend. Spend.
Unfortunately, not many understand or want to understand the concept. Pinoys’ one-day millionaire mentality and living from paycheck to paycheck are just two of the very alarming signs of the state of financial literacy in the country.
According to a World Bank study, Filipino adults, on the average, can only answer three out of the seven financial literacy questions in a quiz. Questions include basic numeracy, computation of compounding interest, fundamentals of inflation, and investment diversification. Only 2% of Filipino adults have a grasp of these questions. The study emphasized how Filipinos lack the knowledge to make informed financial decisions, particularly with saving and borrowing.
To push for financial literacy, the government, through BSP and the Department of Education, has integrated the concepts of money management, savings, and basic economics into the elementary curriculum. Other agencies like the Social Security System (SSS) have come up with more investment options for people.
According to Luisa Paragas-Sebastian, SSS Assistant Vice President for Media Affairs, it has introduced investment packages to ensure sustainability of incomes beyond working age. Employees now have better options to save their 13th month pay for a second pension under the SSS Personal Equity Savings Option (SSS-PESO).
“The investment is stable and has fixed returns,” said Sebastian. She added that employees have an option to save from as low as P1,000 to a maximum of P100,000.
Employees can earn full interest from investments as the SSS-PESO investment program is tax free.
“Your money is secure since it is placed in sovereign-guaranteed investments. So, on top of your SSS benefits, SSS-PESO is another retirement benefit,” said Sebastian.
She said SSS-PESO is a good investment on top of the six benefits from the regular SSS contributions.
The returns from the investment package varies from 65% for retirement, 35% for medical, and educational and other emergencies.