OBJECTIVES

AT THE END OF THIS CHAPTER, YOU SHOULD BE ABLE TO:

 DEFINE FINANCIAL LITERACY;
 ASSESS LEVEL OF PERSONAL FINANCIAL
LITERACY USING SET OF STANDARDS
AND QUESTIONS;
 CHARACTERIZE FINANCIAL LITERACY IN
THE PHILIPPINES; AND
 START PRACTICAL STEPS TO DEVELOP
PERSONAL FINANCIAL LITERACY.
 THE ABILITY TO USE
KNOWLEDGE AND SKILLS
TO MANAGE ONE’S
FINANCIAL RESOURCES
EFFECTIVELY FOR LIFETIME
FINANCIAL SECURITY.
 ENABLES PEOPLE TO
UNDERSTAND AND
APPLY KNOWLEDGE
AND SKILLS TO ACHIEVE
A LIFESTYLE THAT IS
FINANCIALLY
BALANCED,
SUSTAINABLE, ETHICAL
AND RESPONSIBLE.
REPUBLIC ACT 10922 (ECONOMIC
AND FINANCIAL LITERACY ACT)
MANDATES DEPED TO
“ENSURE THAT ECONOMIC
AND FINANCIAL EDUCATION
BECOMES AN INTEGRAL PART
OF FORMAL LEARNING.”
STANDARDS FOR DEVELOPING
UNDERSTANDING OF FINANCIAL LITERACY
EARNING INCOME
INCOME EARNED OR RECEIVED BY PEOPLE
DIFFERENT TYPES OF JOBS AS WELL AS DIFFERENT FORMS
OF INCOME EARNED OR RECEIVED
GOVERNMENT PROGRAMS THAT AFFECT INCOME
TYPES OF INCOME AND TAXES
LABOR MARKET
BUYING GOODS AND
SERVICES
 SCARCITY, CHOICE AND OPPORTUNITY
COST
 BASICS OF BUDGETING AND PLANNING
 MAKING A SPENDING DECISION
 PAYMENT METHODS, COSTS, AND
BENEFITS OF EACH
 BUDGETING AND CLASSIFICATION OF
EXPENSES
SAVING
 CONCEPT OF SAVING AND INTEREST
 HOW PEOPLE SAVE MONEY, WHERE PEOPLE CAN
SAVE MONEY, AND WHY PEOPLE SAVE MONEY
 THE POWER OF COMPOUND INTERESTS
 PRESENT VERSUS FUTURE VALUE
 SAVING FOR RETIREMENT
USING CREDIT
CONCEPT OF CREDIT AND THE
COST OF USING CREDIT
WHY INTEREST RATES VARY
ACROSS BORROWERS
CONSUMER PROTECTION LAWS
FINANCIAL INVESTING
CONCEPT OF FINANCIAL
INVESTMENT
CALCULATE RATES OF RETURN
HOW DIVERSIFICATION CAN
REDUCE RISK
PROTECTING AND INSURING

CONCEPTS OF FINANCIAL RISK

AND LOSS
INSURANCE
HOW TO PROTECT ONESELF
AGAINST IDENTITY THEFT
THE BENEFITS OF
FINANCIAL LITERACY
Basic financial literacy
helps people become
self-sufficient and achieve
financial stability.
Financial literacy
also empowers
people.
Helps reduce the
risk of becoming a
victim of fraud.
FINANCIAL LITERACY IN
THE PHILIPPINES
 WORLD BANK STUDY IN 2014 ESTIMATED 20
MILLION FILIPINOS SAVED MONEY BUT ONLY HALF
HAD BANK ACCOUNTS.
 ASIAN DEVELOPMENT BANK (ADB) STUDY IN 2015
REVEALED THAT PH DOES NOT HAVE A NATIONAL
STRATEGY FOR FINANCIAL EDUCATION AND
LITERACY.
 IN 2016, BSP RELEASED THE NATIONAL STRATEGY FOR
FINANCIAL INCLUSION, STATING THAT WHILE
INSTITUTIONS STRIVE TO BROADEN FINANCIAL
SERVICES, FINANCIAL LITERACY SHOULD ALSO
COMPLEMENT SUCH INITIATIVES.
 AS PER STANDARD & POOR’S (S&P) RATINGS
SERVICES SURVEY LAST YEAR, ONLY 25% OF FILIPINOS
ARE FINANCIALLY LITERATE. THIS MEANS THAT ABOUT
75 MILLION FILIPINOS HAVE NO IDEA ABOUT
INFLATION, RISK DIVERSIFICATION, INSURANCE,
COMPOUND INTEREST, AND BANK SAVINGS.
TEN YEARS AFTER DISCOVERY OF
THE STOCK MARKET, STILL LESS
THAN ONE PERCENT OF PH
POPULATION IS INVESTED IN IT.
MORE THAN 80% OF THE
WORKING MIDDLE CLASS HAVE
NO FORMAL FINANCIAL PLAN.
BECAUSE OF THESE FINDINGS,
PUBLIC AND PRIVATE SECTORS
ALIKE HAVE RECOGNIZED THE
NEED TO STRENGTHEN FINANCIAL
EDUCATION IN THE COUNTRY.
DEVELOPING PERSONAL
FINANCIAL LITERACY
 ONE’S ATTITUDE ABOUT MONEY IS HEAVILY
INFLUENCED BY THE PARENTS’ ATTITUDE
AND BEHAVIOR ABOUT THE MONEY.
 THE ATTITUDES YOU FORMED EARLY IN LIFE
PROBABLY AFFECT HOW YOU SAVE, SPEND,
AND INVEST TODAY.
 FRUGAL

PLEASURE STATUS
SIX MAJOR
CHARACTER
ISTIC TYPES
IN HOW
PEOPLE
VIEW
SELF- MONEY INDIFFE
WORTH RENCE

POWERFUL
FRUGAL
 FRUGAL PEOPLE SEEK FINANCIAL
SECURITY BY LIVING BELOW THEIR
MEANS AND SAVING.
 THEY SAVE MONEY BECAUSE THEY
BELIEVE THAT MONEY WILL OFFER
PROTECTION FROM UNPRECEDENTED
EVENTS AND EXPENSES.
PLEASURE
PLEASURE SEEKERS USE MONEY TO
BRING PLEASURE TO THEMSELVES
AND TO OTHERS.
THEY OFTEN LIVE BEYOND THEIR
MEANS AND SPEND MORE THAN
THEY EARN.
STATUS
SOME PEOPLE USE
MONEY TO EXPRESS
THEIR SOCIAL STATUS.
INDIFFERENCE
SOME PEOPLE PLACE VERY
LITTLE IMPORTANCE ON
HAVING MONEY AND WOULD
RATHER GROW THEIR OWN
FOOD AND CRAFT THEIR OWN
CLOTHES.
POWERFUL
POWERFUL PEOPLE USE
MONEY TO EXPRESS
POWER OR CONTROL
OVER OTHERS.
SELF-WORTH
PEOPLE WHO SPEND MONEY FOR
SELF-WORTH VALUE HOW MUCH
THEY ACCUMULATE AND TEND TO
JUDGE OTHERS BASED ON THE
AMOUNT OF MONEY THEY HAVE.
DEVELOPING PERSONAL
FINANCIAL LITERACY
SPENDING PATTERNS
FIXED VS VARIABLE
EXPENSES
NEEDS VS. WANTS
SPENDING PATTERNS
INDIVIDUALS HAVE DIFFERENT
SPENDING PATTERNS.
BEFORE ONE CAN COME UP WITH
A FINANCIAL IMPROVEMENT
PLAN, ONE NEEDS TO ANALYZE
HIS/HER SPENDING HABITS?
 2 COMMON SPENDING PATTERNS
HABITUAL SPENDING
OCCURS WHEN ONE SPENDS OUT OF A HABIT, WHEN
ONE BUYS THE SAME ITEM DAILY, WEEKLY, OR MONTHLY.
IMPULSIVE SPENDING
OCCURS WHEN ONE MINDLESSLY PURCHASE
ITEMS THAT HE OR SHE DOES NOT NEED.
FIXED VS. VARIABLE EXPENSES

FIXED EXPENSES
REMAIN THE SAME YEAR-ROUND.
VARIABLE EXPENSES
OCCUR REGULARLY BUT THE
AMOUNT YOU PAY VARIES.
 MONTHLY
TOTAL FIXED VARIABLE
FOOD

CLOTHING

GAS

MEDICINE

INTERNET
NEEDS VS. WANTS
FINANCIAL DISCIPLINE STARTS
WITH AN ABILITY TO RECOGNIZE
WHETHER EXPENSES ARE NEEDS OR
WANTS, AND FOLLOWED BY
ABILITY TO PRIORITIZE NEEDS OVER
WANTS.
NEEDS
ARE ESSENTIAL FOR SURVIVAL.
WANTS
ARE THINGS THAT YOU WOULD
LIKE TO HAVE BUT YOU CAN
LIVE WITHOUT.
NEEDS WANTS
PRACTICAL STEPS YOU CAN UNDERTAKE
TO ENHANCE YOUR FINANCIAL LITERACY

SETTING
FINANCIAL GOALS
DEVELOPING A SPENDING
PLAN
IMPORTANCE OF SAVING
 SETTING FINANCIAL GOALS
GOALS MAY BE SHORT, MEDIUM, AND LONG-TERM.
 SHORT TERM GOALS
CAN BE MEASURED IN WEEKS AND CAN PROVIDE INSTANT
GRATIFICATION AND FEEDBACK.
MEDIUM-TERM GOALS
SHOULD BE ACCOMPLISHED WITHINS ONE TO SIX MONTHS.

LONG-TERM GOALS
CAN TAKE YEARS TO ACHIEVE.
DEVELOPING A SPENDING PLAN
 TIME
AND EFFORT ARE NECESSARY TO BUILD A
SUSTAINABLE SPENDING PLAN.
3 EASY STEPS WHEN DEVELOPING YOUR
PERSONAL SPENDING PLAN
RECORD
REVIEW
TAKE ACTION
IMPORTANCE OF SAVING
BECAUSE NO ONE CAN
PREDICT THE FUTURE WITH
CERTAINTY, WE NEED TO SAVE
MONEY FOR ANYTHING THAT
MIGHT HAPPEN.
REASONS WHY SAVING IS
IMPORTANT
EMERGENCY BOLSTER
YOU SHOULD SAVE MONEY TO AVOID
GOING TO DEBT JUST TO PAY EMERGENCY
SITUATIONS.
RETIREMENT
YOU WILL NEED SAVINGS/INVESTMENTS TO
TAKE THE PLACE OF INCOME YOU WILL NO
LONGER RECEIVE WHEN YOU RETIRE.
FUTURE EVENTS
YOU NEED TO SAVE MONEY FOR FUTURE EVENTS
LIKE WEDDINGS, BIRTHDAYS, ANNIVERSARIES, AND
TRAVELS.
INSTABILITY OF SOCIAL SECURITY
PENSIONS FROM SOCIAL SECURITY SHOULD ONLY
SERVE AS SUPPLEMENTARY AND NOT THE PRIMARY
SOURCE OF INCOME AFTER RETIREMENT.
A LITTLE GOES A LONG WAY
SMALL CONSISTENT SAVINGS GO A LONG WAY
2 WAYS TO SAVE
SAVE BEFORE YOU
SPEND
SAVE AFTER YOU
SPEND WISELY
INORDER TO STICK TO THE SAVINGS
HABIT, YOU SHOULD:
1. COMMIT TO A MONTH
2. FIND AN ACCOUNTABILITY PARTNER
3. FIND A SAVINGS ROLE MODEL WHO IS
SUCCESSFUL WITH HIS/HER MONEY,
THROUGH TRIED AND TRUE SAVINGS
4. WRITE YOUR GOAL DOWN AND TRACK IT
5. AVOID TEMPTING SITUATIONS