Financial

Literacy
The National Endowment for Financial Education defines financial
literacy as " 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 choice, discuss money
and financial issues without (or despite) discomfort, plan for the
future, and respond competently to life events that affect everyday
financial decisions, (In charge Education Foundation, 2017).
To put it simply is " 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:

1. knowledge of financial Products (e.g., a stock vs. a bond, fixes vs.

adjustable-rate mortgage.
2. knowledge of financial Concepts. ( e.g., inflation compounding
diversification ,credit scores ):
3. having mathematical skills or numeracy necessary for effective finanacial
education making; and
4. being engaged in certain activities such as financial planning .
 Public and private institutions alike have recognize the need for
financial literacy to be incorporated in the school curriculum.
Financial Education and advocacy programs 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.
otherwise as known as " Economic and Financial Literacy Act."
mandates DepEd to ensure that economic and finacial education
becomes an integral part of formal learning."
 The Council for Economic Education the leading
organization in the United States that focuses on the
economic and financial education of students from
kindergarten through highschool developed six standards
gearing toward deepening students' understanding for
personal finance through an economic perspective. The
standard and key concept are summarize in the table below.
STANDARDS AND KEY
CONCEPTS OF
PERSONAL FINANCE
THROUGH AN
ECONOMIC
 Standard Concept
- Scarcity, choice, and opportunity cost
- Factors influence speeding choices such
as advertising, peer pressure, and spending
• Buying Goods and
choices of others.
Services
- Comparing the cost and benefits of
spending decisions
- Basic of budgeting and planning
- Making a spending decision
 Standard Concept
Payment methods, cost, and benefits of
each
• Buying Goods and - Budgeting and classification of expenses
- Satisfaction, determinants of demand,
Services
cost of information search, choice of
product durability - The role of the
government and other institutions in
providing information for consumers
Standard Concept
• Concept of saving and interest
• How people save money, where people can
• Saving save money and why people save money -
• The role of financial institutions plays as
intermediaries between saver and borrowers
• The government agencies such as the Federal
Deposit Insurance Corporation ( FDIC) play in
protecting savings deposits
Standard Concept
• Roles of markets in determining
• Saving interest rates
• The mathematics of saving
• The power of compound interest
• Real versus nominal interest rates
• Presents versus future value
Standard Concept
• Financial regulators
• Saving • The 6 determining the value of
the person's saving overtime
• Automatic savings plans,:
rainy-day" funds
• Saving for retirement
 Standard Concept
• concept of credit and the cost of using
credit
• why people use credit and the sources
• Using Credit
of credit
• why interest rates vary across
borrowers
• basic calculations related to borrowing
(principal, interest, compound interest)
 Standard Concept
• credit reports and credit scores
• behaviors that contribute to strong
• Using Credit credit reports and scores
• impact of credit reports and scores on
consumers
• consumer protection laws
 Standard Concept
• consumer protection laws
• concept of financial investment
• Financial Investing • variety of possible financial
investments
• calculate rates of return
 Standard Concept
• how markets cause rates of return to
change in response to variation in risk
• Financial Investing and maturity
• how diversification can reduce risk
• how financial markets react to
changes in market conditions and
information
 Standard Concept
• concepts of financial risk and loss
• insurance (transfer of riskthrough risk
• Protecting pooling)
and Insuring • managing risk
• identity theft
• life insurance products
• how to protect oneself against
identity theft
 Benefits
of
Financial Literacy
Financial literacy is a crucial skill that everyone should possess. Here are
some of the benefits of being financially literate:
1. Better Money Management: Financial literacy helps individuals
understand how to manage their money effectively. It enables them to
create a budget, track their expenses, and make informed decisions about
saving and investing.
2. Improved Financial Planning: With financial literacy, individuals can set
realistic financial goals and develop a plan to achieve them. They can
prioritize their spending, save for emergencies, and plan for long-term
financial security.
3. Debt Management: Financial literacy equips individuals with the knowledge
to manage their debts responsibly. They can understand the implications of
borrowing, make informed decisions about loans and credit cards, and develop
strategies to pay off debt efficiently.
4. Increased Confidence: Being financially literate boosts confidence in
making financial decisions. Individuals feel more empowered and in control of
their financial lives, leading to reduced stress and anxiety about money.
5. Better Investment Decisions: Financial literacy helps individuals understand
different investment options, such as stocks, bonds, and mutual funds. It
enables them to make informed investment decisions based on their risk
tolerance and financial goals.
6. Protection Against Scams: Financial literacy educates individuals
about common financial scams and frauds. They become aware of red
flags and can protect themselves from falling victim to fraudulent
schemes.

7. Improved Financial Well-being: Ultimately, financial literacy leads to

improved overall financial well-being. It enables individuals to build
wealth, achieve financial independence, and have a secure future.
Financial Literacy
in the
Philippines
 In his article "State of Financial Education in the Philippines," Go (2017)
indicated several findings of researches with regards to the state of financial
literacy in the country including the following:

• World Bank study in 2014 estimated 20 million Filipinos saved money but only
half had bank accounts.
•Asian Development Bank (ADB) study in 2015 revealed that PH does not have
a national strategy for financial education and literacy.
• In 2016, Bangko Sentral ng Pilipinas (BSP) released the national strategy for
financial inclusion, stating that while institutions strive to broaden financial
services, financial literacy should also complement such initiatives.
• As per Standard & Poor's (S&P) Ratings services survey last year, only
25% of Filipinos are financially literate. This means that about 75 million
Filipinos have no idea about inflation, risk diversification, insurance
compound interest, and bank savings.
• Ten years after discovery of the stock market, still less than one percent
of PH population is invested in it.
• More than 80 percent of the working middle class have no formal
financial plan.
 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.
 Developing
Personal
Financial Literacy
 SIX CHARACTERISTICS MAJOR TYPES
1. Frugal:
Frugal individuals seek financial security by living below their means and saving
money.

2. Pleasure:
People with a pleasure-oriented view of money use it to bring enjoyment and
pleasure to themselves and others.

3. Security:
Individuals with a security-focused view of money prioritize financial stability and
safety.
 SIX CHARACTERISTICS MAJOR TYPES
4. Status:
Some people view money as a symbol of status and success.

5. Indifferent:
Individuals with an indifferent view of money may not place much
importance on it.

6. Worried:
People with a worried mindset about money may feel anxious or stressed
about their financial situation.
Spending
Patterns
 Are you prudent or have you been
accused of spending money lavishly?
Or are you somewhere in between?
There are two common spending habits Habitual
spending and impulsive spending.

•Habitual spending - occurs when one spend out of a habit,

when one buys the same item daily, weekly and monthly.

•Impulsive spending- occurs when one mindlessly

purchases items that he or she does not need.
FIXED VS. VARIABLE EXPENSES

•Fixed expenses remain the same year-round. Car

payment is one of example.

•Variable expenses- occur regularly but the amount you

pay varies. Electric and gas bills are examples of these.
NEEDS VS. WANTS

•financial discipline starts with an ability to recognize

whether expenses are needs or wants, and followed by
ability to prioritize needs over wants.
SETTING FINANCIAL GOALS
-setting financial goals is the first step to managing one’s financial life. Goals
maybe short, medium and long-term.

Short term goals

can be measured in weeks and can provide instant gratification and feedback. for
example: “ I will ride on the LRT instead of taxi” “ I will bring lunch everyday “

Medium term goals

should be accomplished within one to six months.

Long term financial goals- can take years.

Developing
Spending
Plan
 DEVELOPING A SPENDING PLAN
Three easy steps in developing your personal spending
plan
1. Record-Keep a record of what you spend.
2. Review-Analyze the information and decide what
you do.
3. Take action-Do something about what you have
written down.
 IMPORTANCE OF SAVING
Here are some reasons why saving is Important:
• Emergency Bolster
• Retirement
• Future Events
• Instability of Social Security
• Pensions
• A Little Goes a Long Way - Small consistent savings go a
long way.
There are two ways to save:
• save before you spend;
• and save after you spend wisely.
In order to stick to the savings habit, you should:
1. commit to a month;
2. find an accountability partner;
3. find a savings role model who is successful with his/her
money, through tried and true savings;
4. write your goal down and track it; and
5. avoid tempting situations (don't go to the mall to "hang
out").
The End