Filipino financial know-how, much like the general state of the Philippine economy and infrastructure, is still in a developing state. The average Filipino family often struggles with the idea of savings – exhibiting a rate of less than 20%, in fact.
Investments are also a mostly strange concept, with the market not flourishing as well as it should. Insured Filipinos are few as well, with less than 20% of household heads having some insurance.
In addition to the confounding financial planning state of Filipino families, only 10% prepare sufficiently for retirement. A study by the Social Security System (SSS) places 70% of retirement-age Filipinos rely on shelter and support from their children.
Income seems to be a relative non-issue, as many will attest to knowing somebody who was well off financially, yet failed to plan accordingly for their future. These stories of squandered opportunities are surprisingly common in a society that sees abundant employment from BPOs and OFWs earning considerably more.
This leaves the behavioral and cultural component as the deciding factor. Filipino spending habits on average far exceed the amount they leave for savings. Shopping malls dotting every major city in the country shows improvement on Filipinos’ spending power, yet any similar increase in savings have yet to be seen. In this situation, behavior and culture overpower financial common sense.
Planning for security
The outlook isn’t entirely bleak for young, salaried citizens who want to secure their and their family’s financial future. To start, earning more and spending less improves cash flow, making way for plenty of savings.
Debt management, or better yet, elimination is also necessary. Credit cards and the like prove very costly due to interest rates, and attract people into spending money they don’t have. Not having to pay debt makes room to allow significant portions of income for savings.
Have an open, honest talk with your family about finances. Communicate to them that you need to plan for your future as well, not just theirs. For those who have growing families, Manulife Philippines encourages them to consider protecting their loved ones from unexpected financial burdens with insurance for estate planning needs. Conveying these ideas with love and respect let your family know how seriously you are planning for their futures.
Financial planning may come across as a pessimistic view on life, especially through Filipinos’ happy-go-lucky sensibilities. But reality will set in sooner or later, and having a firm financial cushion to fall on will make you glad you went against the cultural grain.