Vicente D.

Trinidad High School

CHAPTER 1

INTRODUCTION AND REVIEW OF RELATED LITERATURE

Introduction

Family is composed of group of people that lives

together and share resources for the common benefit. It

is the smallest unit of the society that possesses an

economic characteristics such as allocation of budget

and financial management to obtain needs, wants and

servicing of financial obligation that requires

financial freedom.

Households are the central decision making units in

most societies. While demographers tend to focus on

aggregate fertility rates and economists on gross

national product, the family, not the nation, makes

decisions about spending, number of children, migration,

education, and the roles assigned to parents and

children within the household. Thus an understanding of

household decision making is critical to an

understanding of the relationship between economic

development and demography (David Canning, 2017).

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While financial freedom is generally conceptualize

as the ability and the opportunity to save, invest and

use money in the mainstream economy.But many families

struggle with saving money an achieving financial

freedom. Thus it is important to build family’s

financial freedom to enhance their well-being in an

economy in which low incomes and unstable employment are

becoming commonplace and families are having to do with

less.

It is in the context that the researchers decided

to study about financial freedom among selected families

in Barangay Malabbac. In this way, the researchers can

fully determine their financial allocation and level of

financial freedom .

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Review of Related Literature

A review of previous studies on Financial Freedom

is necessary to enable us to have a view of different

scholars and reporters. The knowledge so obtained will

be useful to go in depth and find out the unknown and

unexplored areas. The earlier studies made on Financial

Freedom and related areas are briefly reviewed here.

Many authors have dealt extensively on the subject of

Financial well-being of Families. To our humble

knowledge, this is almost the first research work

concerned with Financial Freedom in Barangay

Malabbac,Iguig,Cagayan. Hence the researcher has made an

attempt to review the various studies on this subject

which are published in various journals, books and

reports.

Randell Tiongson (2015) stated that “Financial

Freedom simply means the ability to achieve your goals

while still being able to enjoy life and having to worry

about where your next influx of money’s going to come

from and not having to worry about how you’re going to

provide for your loved ones”, Tiongson also added that

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“its not based on how much money you have, it depends on

how you make money work for you.

Kris Krohn (2015) defined “Financial Freedom as a

residual income which exceeds your expenses”. He added

that if your expenses is Php6,000.00 or Php20,000.00 or

Php50,000.00 then you must know exactly how much income

you need to create to cover those expenses like: food,

utility, clothes, shelter, etc.

Sandi Bragar (2019) in her article “The true

meaning financial freedom” stated that Financial freedom

means more than having ample resources to do the things

you want to do. It means having the power to make your

own financial decisions without being manipulated by

another. We can work toward financial freedom for all by

educating ourselves and talking more with others about

how to make money decisions with confidence, clarity and

intention.

Grant Sabatier (2019) in his book “Financial

Freedom: A Proven Path To All The Money You Will Ever

Need” stated that financial freedom means different

things to different people and need vastly different

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amount of money to feel free. However, you can still

determine what financial freedom means to you and set

that as your goals. He breaks down financial freedom

into seven levels that each have a profound impact on

most people’s lives when they can reach them.

(1)Clarity, when you figure out where you are and where

you want to go. (2)Self-sufficiency, when you earn

enough money to cover your expenses on your own.

(3)Breathing room, when you escape living paycheck to

paycheck.(4)Stability, when you have six months of

living expenses saved and bad debt, like credit card

debt, repaid. (5)Flexibility, when you have at least two

years of living expenses invested. (6)Financial

freeedom, when you can live off the income generated by

your investments forever so work becomes optional.

(7)Abundant wealth, when you have more money than you’ll

ever need.

Wanjiku (2017) In his study “Factors affecting

household income” stated that occupation have an effect

on household income. That people who engage in business

activities and those who are employed were noted that

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they had higher income than those who only depend on

farming activities.

Family Structure

Smaller families have an exponential effect on the

size of extended families. Let us consider, for example,

two extended families: A and B. In family A, both the

mother and father come from families with 6 children,

and they and their siblings each have 6 children. In

family B, the mother and father come from families of 2

children, and they and their siblings each have 2

children. Now consider you are a child in family A. You

have 5 siblings, 10 aunts or uncles (excluding spouses),

and 60 first cousins. By contrast, in family B you have

1 sibling, 2 aunts or uncles (excluding spouses), and

only 4 first cousins. Now consider that the extended

family functions for many as an important source of

support, especially when resources are needed quickly

and would otherwise be unavailable. This occurs, for

example, when a child is sick and needs money for

medicines, or when a house burns down or is flooded and

must be replaced. The extended family can provide

housing, food, and often temporary employment during

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hard times. Finally, it is the extended family that

provides for the elderly, the chronically ill, and the

aged. When an individual has 60 cousins and 10 aunts and

uncles, the likelihood that someone will be able to help

him or her out is high. However, with only 4 cousins and

2 aunts or uncles, this safety net may be much more

difficult to find. This is especially true as internal

migration increases and family members move to the city

in search of jobs. Smaller families may be less able to

help when they buy food instead of growing it, when their

housing is much more limited, and when their own cash

needs fully consume their earnings.

A major impact of economic development and health

improvements is longer life expectancy and an increased

need for provision for old age. Yet in most societies

the children, often the male children, are those who

provide for their parents in their old age. As families

become smaller, become more mobile, and rely

increasingly on a cash economy, it whether this filial

responsibility will continue to be met is unclear.

Indeed, in countries such as Japan, where the demands of

a modern economy have overtaken the tradition of

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parental care, this issue is now posing a considerable

problem. If countries wish to address the forces that

undermine the trend toward smaller families and gender

equality among children, they must develop alternative

institutions that will provide for saving, insurance,

and public provision of old age benefits.

Thus to counter the loss of the extended family and

to meet the new needs generated by development, other

structures must be put in place that provide a financial

safety net for individuals facing temporary economic

setbacks, and that provide access to the small-scale

savings and capital that the extended family

traditionally offers. In the industrial world, such

structures are represented by social security systems,

pensions, insurance, and banks and credit unions that

provide both saving opportunities and credit for

business investments. In developing countries such

institutions are typically available only to the rich,

and the poor or near poor who need them most have no way

to access these safety nets. This is of particular

concern, because recent evidence suggests that without

this type of safety net, the near poor will often suffer

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from cyclical financial setbacks, such as bad weather or

bad luck, and be pushed into a permanent state of

poverty.

Allianz (2014) in her study “Changing Families,

More stressed in money” revealed that only 30% of what

the financial services firm termed “modern” families

feel a high degree of financial security, vs. 41% of

traditional families made up of a mom, dad, and their

offspring under 21. The nontraditional families were

also more likely to say they live from paycheck to

paycheck and less likely to feel knowledgeable about how

to reach their goals. To be sure, there are basics that

are the same for all households. Everyone should have an

emergency fund equal to at least three to six months of

living expenses. Everyone needs health insurance. And,

of course, you ought to be saving regularly for

retirement, ideally in a 401(k) or IRA.From there,

though, your needs are largely shaped by your

household’s unique structure. For those of you who don’t

fit the nuclear family mold, the story that follows—the

last in a three-part series about the impact of

demographic changes on how families manage their money—

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offers solutions to the most common challenges you’re

likely to face.

Aniceto C. Orbeta Jr. (2005) in his study “Poverty,

Vulnerability, and Family size: Evidence from the

Philippines” revealed that additional child leads to an

average reduction in saving rates of about 0.36% or

income minus expenditures and an insignificant change

for expenditures on durable furniture, education and

health which have benefits over the longer term added

back. The study also shows that families are not able to

maintain per capita income , per capita expenditures and

per capita savings as family size increases.

An article in Mercer (2019) states that spendable

income is that portion of base salary that is used to

purchase goods and services. As the size of a household

increases, the amount of money spent on goods and

services increases, but at a decreasing rate. In other

words, a family may spend more on goods and services

with the addition of more children, but the percentage

of additional costs for each child becomes less.

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David Canning et.al (2017) in his article “The

Family and Economic Development” stated that a reduction

in family size can contribute to the social and economic

development of both the country and of the individual

family. For example, consider a child’s ability to

access education, and thus become more productive in a

formal economy. Children from large families are more

often denied access to schooling, because the family

cannot afford to educate so many children purely from

the parents’ incomes, and to survive may require the

child's current contribution to the household. In

economic terms, as the size of the family increases, the

costs of schooling, both direct and in terms of other

income forgone, increase, leading to lower school

attendance for children from large families. This is

particularly true for female children, because their

traditional role has been to care for their younger

siblings and help their mother with other household

chores. Large families have a strong incentive to keep

their older children at home, thereby denying them the

future benefits of an education.

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Alex Morrell and Andy Kiersz (2017) on their

article “Seeing How The Highest And Lowest Earners Spend

Their Money Will Make Yu Think Differently About Rich

Vs. Poor” stated that low-income Americans spend a

significantly larger proportion of their money in

housing while high-income Americans spend a much higher

proportion on insurance and retirement expenses. On

average, Americans spend the bulk of their money in three

areas: Housing, transportation, and food. However, the

low-income group isn’t simply “Poor” people, though

their expenditures are indeed much lower than the

highest-income group.

According to the results of the recent annual

Consumer Financial Survey (CFS) of the Banko Sentral ng

Pilipinas (BSP), the Philippines remain a consumer-

spending driven economy. In a way, the Filipinos

themselves help prop up their nation’s economy through

their ways of spending. That simply means, each spoonful

serving of food, bottle of beer consumed, and every tick

of a taxi meter ran goes a long, long way of helping

boost the economy. The survey reported that the average

income of a common Filipino family stood at PHP 20,000.00

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and, salaries and wages are the main sources of household

income. Below is the typical Filipino family’s surveyed

distribution of budget expenditures from a PHP 20,000-

average monthly income. The survey also showed that a

quarter of Filipino households own and retain expenses

on a motor vehicle; and, more than half of Filipinos own

motorcycles. The reason could be the ease of maintenance

of motorcycles, and the ideal mode of transport in

maneuvering thoroughfares midst heavy traffic. The most

popular mode or source of motor vehicle loans that

Filipinos avail is thru in-house financing.

Erin Curier Et.al (2016) in their study “Household

Expenditures and Income” showed that for a typical

family of four (two earners and two children), while

median household income increased by about $10,000

between 1996 and 2014, annual expenditures also

increased by about the same amount, driven largely by

higher spending for core needs: housing, food, and

transportation. Although the absolute change in income

and expenditures was similar, this family had less slack

in its budget in 2014 than in 1996, as its expenditure

to income ratio grew from 71 percent to 75 percent. As

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with housing, households in the lower income group spend

significantly less in absolute dollars, but much more as

a share of their income, on transportation than did those

in the middle- or upper-income groups. Further,

transportation costs increased in recent years for

households at the bottom, while this spending was more

stable for the other income groups. Lower-income

households spent nearly 16 percent of their income on

transportation in 2014, up from 9 percent four years

earlier. In contrast, households in the middle spent

about 11 percent of their income on transportation in

2014, while those at the top spent 8 percent.Though

systemic economic conditions, such as recessions or

stock market changes, affect trends in consumer

expenditures, individual households also make decisions

about how to spend their discretionary dollars. In 2014,

households across the income distribution spent much

more on groceries than on eating out, but, predictably,

those in the top third spent much more on food away from

home than the other groups. Households at the top also

spent more than others on entertainment, including pets

and pet care, media equipment and services, admission to

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events such as movies or plays, and toys for children.

Typical households at the top spent $380 a month on

eating out and entertainment. Conversely, households in

the bottom third, which had significantly less slack in

their budgets, devoted very few resources to these two

categories— about $128 a month.

The Philippine Statistics Authority (PSA) reported

that at the end of the second quarter of 2018, food

expenditure stood as 41.5 percent of total household

expenditure.In the Philippines, more than half of family

members are identified as dependents, based on

Philippine Statistics Authority’s (PSA) July 2018

overall dependency ratio of 57.7 percent.Families in

Western countries like the United States and United

Kingdom spend around 10% of their monthly expenditure on

food.This means that the total family income is mostly

spent on food and less spending is made for clothing and

other basic service necessities such as housing,

electricity, water and other social services such as

health and education. Families with highest poverty

incidence such as those in the fishing and agriculture

sectors are hardest hit as high inflation rate remain

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unabated, making the daily survival of poor Filipino

families hard to address, more so with increasing family

size.

“What Do Filipinos Spend their Money on?” (2017) an

article stating that Filipinos put high priority on food

and beverages consumed at home, racking up an average of

a little more than a third of their monthly income, while

clothing expenses took the least priority. It is

therefore interesting to note that Filipinos prefer to

survive spending their money on food rather than having

more clothes on, pun unintended.

Heather W. (2016) saving money for you and your

loved ones should be one of your top priorities in life.

By saving money today, you will be able to improve your

life in the future. There is nothing more important than

having a peace of mind and not worrying about your life

in later years because you don’t have savings. Thus, you

can start saving now for your family and reap the fruit

of your sacrifices at the right time.

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Theoretical Framework

With quantitative method, the theoretical framework

guides the path of research design (Grant and Osanloo,

2012). At the crux of our research question is the level

of financial freedom of the selected families and also

to look at the financial allocation of these families on

the listed aspects. Supporting our inquiry and guiding

this research study is the theory of Gammuri and Czentry

(2005) “Pooling Theory of household behavior” which is

built upon the idea of a unitary household function. The

household decision making is done by a single head and

the finance is functioning as one. We tends to look

deeper into the economic well-being of the families as

to their behavior, the model/theory “Pooling theory of

Household Behavior” is the theoretical Framework guiding

this study

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Research Paradigm

Input Process Output

1.What is the profile
of the family
respondents in terms
of:

1.1 Family structure

1.2 Number of family

member

1.3 Occupation

1.4 Family Income

1.Determined
2.What is the the financial
financial allocation
Determing the
of the family level of allocation of
participants in terms financial the family
of participants.
freedom among
2.1 Food selected
2.Determined
families in
2.2 Clothes the level of
Barangay
2.3 Shelter financial
Malabbac,Iguig
freedom the
2.4 Health ,Cagayan
family
through
2.5 Utility bill participants
questionnaire-
2.6 Education of belong.
based survey.
children

2.7 Others

3.What is the level of

financial freedom of
the family
participant?

4.Is there a
significant difference
between level of
financial freedom when
group according to
variables?

Figure 1

The figure 1 shows the flow of the research wherein it

used input-process-output. The input consists of the

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question that the researchers want to answer. The

process shows the tool/ways that the researcher will

utilized in gathering the data and the output presents

the possible outcome of the research.

Statement of the problem

The primary concern of this study is to determine

the level of financial freedom among selected families
in Malabbac,Iguig,Cagayan.

Specifically, the study attempted to answer the

following questions:

1.What is the profile of the family respondents

in terms of:

1.1 Number of family member

1.2 Occupation

1.3 Family Income

2.What is the financial allocation of the family

participants in terms of:

2.1 Food

2.2 Clothes

2.3 Shelter

2.4 Health

2.5 Electricity/Water bill

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2.6 Education of children

2.7 Others

3.What is the level of financial freedom of the

family participant?

4.Is there a significant difference of level of

financial freedom when group according to variables?

Hypothesis

There is no significant different between the level

of financial freedom of the family participants when

grouped according to variables.

Significance of the Study

The findings of the study are hoped by the

researchers to be valuable to the following:

Families. The conduct of the study will provide them an

opportunity to achieve financial freedom.

Barangay Officials. The result of the study serves as

basis in conducting seminars regarding achieving

financial freedom.

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Researchers. The study will lead the researchers to a

better understanding to the topic and may conduct

another related study.

Future Researchers. Future researcher who would like to

study the same topic with broader scope may use this as

reference or one of their resources in enriching their

review of related literature.

Scope and Delimitation

The study was limited on determining the

financial freedom among selected families in Malabbac,

Iguig, Cagayan.It specifically focused on their

financial allocation and level of financial freedom.

To fulfill the objectives of the study, 50 selected

families will be utilized.

Definition of terms

The following terms were operationally defined to

facilitate understanding to the study:

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Family. Smallest unit of society that composed of group

of people that lives together and shares resources for

common benefit.

Finance. An aspect in family that provides fund in order

to meet the needs or wants.

Financial Freedom. Capability to financially meet the

beyond needs of the family in order to give satisfaction

to every family members.

Financial Allocation. Distributing of financial

resources in different areas of the family.

Financial Management. Financial management is the

process of wisely budgeting, spending, saving, and

investing the money you earn.

Occupation. Refers to the work/source of income og the

head of the family.

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