CHAPTER 4 :

FINANCIAL
LITERACY
OBJECTIVES:
At the end of this chapter, you should be
able to:

• Define financial literacy;

• Assess level of personal literacy using

set of standards and questions;
• Characterize financial literacy in the
Philippines; and

• Start practical steps to develop personal

financial literacy.
 FINANCIAL LITERACY
• The ability to read, analyze, manage, and
communicate about the personal financial
conditions that affect material well-being. It
includes the ability to discern financial choices,
discuss money and financial issues without (or
despite) discomfort, plan for the future, and respond
competently to life events that affect every day
financial decisions, including events in the general
economy. (Incharge Education Foundation, 2017)

• The ability to use knowledge and skills to manage

one`s financial resources effectively for lifetime
financial security. (Mandell,2009)
Meanwhile, ( Hastings, et al.(2013) ) refers to
Financial Literacy as:
• Knowledge of financial products
• Knowledge of financial concepts
• Having the mathematical skills or
numeracy necessary for effective financial
decision making; and
• Being engaged in certain activities such as
financial planning.
 Public and private institution alike have
recognized the need for financial literacy to
be incorporated in the school curriculum.
Financial education and advocacy program of
the public and private sectors have been
identified as key areas in building an
improved financial system in the Philippines.
(Go,2017)

Republic Act 10922

“Economic and Financial literacy Act”

• Mandates to DepEd to Ensure that

economic and financial education becomes
an integral part of formal learning.
Earning Income
Key Concepts:
• Income earned or received by people
• Different types of jobs as well as different
forms of income earned or received
• Benefits and Costs of increasing income
through the acquisition of education and
skills
• Government programs that affect income.
• Types of income and taxes
• Labor market
Buying goods and services
Key Concepts
• Scarcity, choice, and opportunity cost
• Factors that influence spending choices, such
as advertising, peer pressure, and spending
choices of others
• Comparing the cost of benefits of spending
decisions
• Basics of budgeting and planning
• Making a spending decision
• Payment methods, costs, and benefits of each
• Budgeting and classification of expenses
• Satisfaction, determinants of demand, cost of
information search, choices of product
durability
• The role of government and other institution in
providing information for consumers
Saving
Key Concepts:

• Concept of saving and interest

• How people save money, where people can save money, and
why people save money
• The role that financial institution play as intermediaries
between savers and borrowers
• The role government agencies such as the federal deposit
insurance corporation ( FDIC) play in protecting savings
deposits
• Role of market in determining interest rates
• The mathematics of saving
• The power of compound interest
• Real versus nominal interest rates
• Present versus future value
• Financial regulators
• The factors determining the value of a person`s saving over
time
• Automatic saving plans, ”rainy-day” funds
• Saving for retirement
Using Credit
Key concepts:
• Concept of credit and the cost of using
credit
• Why people use credit and the sources of
credit
• Why interest rate vary across borrowers
• Basic calculation related to borrowing
(Principal, Interest, Compound Interest)
• Credit reports and credit scores
• Behaviors that contribute to strong credit
reports and scores
• Impact of credit reports and scores on
consumers
• Consumer protection laws
Financial Investing
Key Concepts:

• Concept of financial investment

• Variety of possible financial investments
• Calculate rates of return
• Relevance and calculation of real and after
tax rates of return
• How markets cause rates of return to
change in response to variation in risk and
maturity
• How diversification can reduce risk
• How financial markets react to changes in
market conditions and information.
Protecting and Insuring
Key Concepts:
• Concepts of financial risk and loss
• Insurance (Transfer of risk through risk
pooling)
• Managing risk
• Identity theft
• Life insurance products
• How to protect oneself against identity
theft
Thank you!