FINANCIAL LITERACY

Reporters:
Cerado, Fredisvenda Allyssa M.
Josol, Kum Hyeon S.
Venus, Jennifer G.
Yambao, Maribeth
Reality check:
 PERSONAL FINANCE &
FINANCIAL LITERACY are
nothing but knowing how to
keep what you earn and do more
with what you keep financial
literacy is understanding how
you can build your personal
wealth.
 What does it mean to be financially
literate?
In a nutshell, financial literacy means having
the ability to assess your financial situation so
you can make the right decisions about money on
a daily basis.
It  can help you manage your current life, while
preparing you for unforeseen expenses and
emergencies. It will also help you develop a
financial plan for the future. That way you won’t
be wasting your cash, or getting yourself into
debt, or taking unnecessary financial risks.
What is financial literacy?
▪ Financial literacy, financial knowledge and financial
education are used interchangeably in formal
literature and popular media. 
▪ Mandell (2009) defines financial literacy as “the ability
to use knowledge and skills to manage one’s financial
resources effectively for lifetime financial security.” 
▪ Huston (2010) explains that financial literacy is made
up of two elements: understanding and use.
Understanding financial literacy implies that a person
is knowledgeable about personal finance, and applies
such knowledge in dealing with one’s finances.
 What are the benefits of financial
literacy?
Alicia Rose Hudnett, owner of The Business of Your Life,
LCC
⚫ More control over your personal finances when you
understand financial basics, which can lead to more overall
confidence, as finances affect everyone’s life in every way.
⚫ More control means possibly less debt as you have a better
sense about the impact of debt on your budget, cash flow,
savings, credit report….
⚫ Understand the importance of saving and starting to save as
soon as possible, even if it’s just a small amount.
⚫ More likely to set financial goals for yourself and have the
desire to work toward those goals, which often means putting
off the wants of today to save for the needs of tomorrow.
Logan Allec, owner of Money Done Right
⚫First, the ability to recognize a bad financial deal. I’ve had
unscrupulous financial advisors try to talk me into financial
decisions that would benefit them and not me. Due to my
financial literacy, I knew to walk away from those deals.
⚫Second, the lower cost I pay for my bills since I make less
financial mistakes. Due to financial literacy, I know the
negative impact missing a credit card payment will have on
my monthly bills. I’ll make sure never to miss that payment
and will always try to avoid paying interest.
⚫Third, the peace of mind that comes from knowing I’m
planning for retirement. Retirement is not something that
worries me because I know how to create a plan that will
put me in the best possible position to be prepared for my
later years in life.
Steffa Mantilla, owner of Plantsonify
⚫Financially literate people are more secure consumers.
They’re able to purchase a house and plan for various
upgrades. If they’re financially secure, then they may
spend more for higher-end options since they know they
can afford it.
⚫Financially literate people are able to plan and have
enough saved for their retirement. They won’t need to pare
down their lifestyle in retirement and can continue to live
on the same plane they’re currently in. This would open
the door for more industry goods geared towards seniors.
⚫Financially literate consumers are also less likely to default
on payments.
 Financial Literacy in the Philippines
⚫ Last November 27-28, 2018, more than 1,000 leaders
decision-makers, influencers, and representatives from
public and private institutions, civic society, and the
academe gathered for the first ever Financial Education
Stakeholders Expo organized by BSP.

⚫ The Expo supports Republic Act No. 10922 which

designates second week of November as Economic and
Financial Literacy Week. It is also aligned with the
objectives of the Philippine National Strategy for
Financial Inclusion, particularly the pillar on Financial
Education and Consumer Protection.
 Financial planning teaches individuals to be
responsible when it comes to their finances, and instills
the discipline needed in order to keep track of their
financial goals.
Financial planning involves educating Filipinos on the
different types of goals that they should set: short-term,
medium-term, and long-term. Short-term goals involve
monthly living expenses that need to be paid, or the
person’s basic needs, including the setting-up of an
emergency fund.  In contrast, medium term goals are
those you want to achieve in one to five years like buying a
house or a car, while long term goals are those that take
longer than five years to achieve.
 To address the growing demand for more
investments in the country, the financial industry
advises that Filipinos should save first and spend
whatever is left after putting their savings aside.
Pinoys need to improve financial literacy
Lawrence Agcaoili (The Philippine Star) - July 14, 2020

"Data showed only 23% of Filipino adults have accounts,

while the most vulnerable sectors have no bank accounts
where social assistance could be quickly channeled.
Nearly half or 48% of adults have savings, but 68% of them
keep savings at home. More than a third of Filipino adults
are unable to meet regular spending needs, and resort to
loans to deal with emergencies...
Aside from lack of budget, Diokno, the BSP chief, said lack
of awareness and perceived high costs are often cited by
respondents as key reasons for not opening an account, not
saving, not using e-payments and not getting insurance...
Of the seven financial literacy related questions, Diokno
said Filipno adults were only able to correctly answer three
as they have little understanding of compounding interest;
the effect of inflation on the buying power of households
and investment risks, returns and diversification.
Survey results also shows that Filipino have a forward-
looking attitude, but scored low in daily money
management and long term financial planning... he added
the BSP is intensifying its digital literacy program to
enhance cybersecurity awareness and digital literacy of
Filipinos."
 Steps in Developing Personal
Financial Literacy
1. Become familiar with your household
finances. Know how much money you have coming in,
how much goes out, and where it goes.
2. Set a financial goal. Financial responsibility is easier
when you are working towards a goal. Decide to remodel
the bathroom, purchase a new vehicle, or upgrade your
television set. It does not matter what your goal is, just
that it is something you want for which you will have to
save.
3. Develop a budget and stick to it. Once you know
how much money you have coming in and going out,
and you have a financial goal, you will need to develop a
budget that allows you to save towards your goal. 
4. Discuss finances openly and honestly, and stay
involved. Generally, one spouse is in charge of the
finances, but that is no excuse for the other to not know
where the money goes, and be involved in financial
decisions. You do not have to know where every dime
your spouse spends goes, nor does he or she need to
know where every dime you spend goes, but you should
both be aware of your financial situation and be involved
in the big financial decisions.
5. Learn the difference between good debt and
bad debt. Not all debt is created equal. 
6. Avoid common money management
mistakes. There should be more money coming in
than there is going out. Oftentimes, simple things
people do or do not do, throws that balance out of
whack without them realizing it.
7. Educate yourself on personal finance. Look for
organizations in your community that can help you
learn more about personal finance, with articles,
activities, and classes.
8. Learn how to identify unreliable
sources of information. Even when using
information found on the internet, the same
basic rules apply.
9. Pass on the knowledge. There is always
more to learn in the way of personal finance,
so learn with your children to pass the
knowledge on to the next generation.