This is encouraging news. Right now we
are at the most money literate we’ve ever been, a confidence that
coincides with our burgeoning economy. However, a closer look at the
situation shows a sobering and not-very-pretty picture.
Without proper savings for retirement
to Asian Market Research, our “domestic savings as a percentage of GDP
declined from 19% in 1994 to 17% in 2000.” Now we stand somewhere
between 12% to 16% according, to NEDA. The TNS survey showed that 8 out
of 10 Filipinos do not have savings in case of emergencies, rating far
below that of our neighboring Asian countries like Singapore or
Malaysia. And with regards to having money for worst-case scenarios,
around only 14% of the population carry insurance.
What about those who do
save? Another study shows that Philippine banks hold over P5 trillion
in cash. One might think that’s an enormous amount of money saved, but
considering today’s low-interest environment (which as of this writing
stands at less than 3.6%), that money in your savings account is simply
languishing in the bank vault, being slowly overtaken by inflation.
paints a very bleak scenario of a typical working-class Filipino’s life
during the retirement age. Without proper savings for retirement, it is
likely that Pinoys will still be working past the age of 65. Worse, it
is also likely they will wind up partially or fully dependent on their
children or other relatives in order to get by. Of course, this is a
cultural aspect and an honorable one as well—many workers today grew up
providing and caring for aging parents—but that doesn’t make it any less
thorny for both the dependent and the provider. Because these children
are burdened with taking care of their parents, they save less and may
even be forced to become reliant on their own kids after they retire.
And the cycle continues.
Poor financial planning
this indicates is that while Filipinos today are becoming more aware of
the need to save for their future, we are not taking enough steps to
ensure that we’ll succeed. It’s not simply due to lack of income but
poor financial planning.
Average Pinoys are not aware of how
much they need to regularly set aside for important life events like
retirement and the education of their children, and as such wind up
spending money on non-essentials like gadgets and luxuries.
TNS study mentioned that Filipino households prioritize communication
and entertainment for their expenses: while only 65% of surveyed Pinoys
have access to something as essential as running water, 73% own mobile
Despite the current rise in financial awareness, a lot
more needs to be done. True, it starts with government efforts towards
job creation and pay equality. But above and beyond that, there should
be an organized and concerted effort to educate the populace on their
financial options. Moreover, Pinoys themselves should actively seek out
ways to be financially ready for their future. This includes seeking
extra means of income, saving every payday, buying investments and
financial instruments to make their money work for them, and most of
all, having a clear, solid, and measurable financial goal, particularly
when it comes to retirement and healthcare.
None of this is
easy. As a Pinoy worker, there’s a great temptation to just focus on the
present, on the near term, because that’s what’s easiest to see. But if
we want our lives to genuinely change, if we want that dream of a house
of our own and a comfortable life to come true, then we have to start
with changing our spending habits, instead of forging ahead and hoping
for the best.
When it comes to building wealth, as with anything, hope is not a strategy.
Money Matters asks: When it comes to planning your finances for the future, how prepared do you think you are?