P T ER 4 Y
CHA ITE RAC
C IA L L
FIN A N
OBJECTIVES
1. Define financial literacy;
2. Assess level of personal financial literacy
using set of standards and questions;
3. Characterize financial literacy in the
Philippines; and
4. Start practical steps to develop personal
financial literacy.
Financial Literacy
“The ability to read, analyze, manage, and
communicate about the personal financial
conditions that affect material well-being.”
- The National Endowment for Financial
Education
Financial Literacy
It includes the ability to discern financial
choices, discuss money and financial issues
without (or despite) discomfort, plan for
the future, and respond competently to life
events that affect every day financial
decisions, including events in the general
economy
Financial Literacy
It is the ability to use knowledge and skills
to manage one’s financial resources
effectively for lifetime financial literacy as:
Financial Literacy
1. Knowledge of financial products (e.g. a stock
vs. a bond, fixed vs. adjustable rate mortgage):
2. Knowledge of financial concepts (e.g. inflation,
compounding, diversification, credit scores):
3. Having the mathematical skills or numeracy
necessary for effective financial decision
making: and
4. Being engaged in certain activities such as
financial planning.
Republic Act 10922 otherwise known as
the “Economic and Financial Literacy Act”
mandates DepEd to “Ensure that economic
and financial education becomes an integral
part of formal schooling
The Council for Economic Education 6
standards
1. Earning income
2. Buying goods and services
3. Saving
4. Using Credit
5. Financial Credit
6. Financial Investing
7. Protecting and Insuring
Earning Income
Income earned or received by people
Different types of jobs as well as different
forms of income earned or received.
Benefits and costs of increasing income
through the acquisition of education and skills.
Government programs that affect income.
Types of income and taxes.
Labor market.
Buying goods and services
Scarcity, choice, and opportunity
Factors that influence spending choices, such as
advertising, peer pressure, and spending
choices of others.
Comparing the costs and benefits of spending
decisions.
Basics of budgeting and planning.
Making a spending decisions.
Buying goods and services
Payment method, costs, and benefits of each
Budgeting and classification of expenses
Satisfaction, determinants of demand, costs of
information search, choice of product durability
The role of government and other institutions in
providing information for consumers.
Saving
Concept of saving and interest.
How people save money, where people can save
money, and why people save money.
The role government agencies such as the
Federal Deposit Insurance Corporation (FDIC)
play in protecting savings deposits.
The role that financial institutions play as
intermediaries between savers and borrowers.
Role of markets in determining interest rates.
Saving
The mathematics of saving.
The power of compound interest.
Real versus nominal interest rates.
Present versus future value.
Financial Regulators.
The Factors determining the value of a person’s
savings over time
Automatic savings plans, “rainy-day” funds
Saving for retirement.
Using Credit
Concept of credit and cost of using credit.
Why people use credit and the sources of credit.
Why interest rates vary across borrowers.
Basic calculators related to borrowing
(principal, interest, compound interest).
Credit reports and credit scores.
Behaviors that contribute to strong credit
reports and scores
Using Credit
Behaviors that contribute to strong credit
reports and scores.
Impact of credit reports and scores on
consumers.
Consumer protection laws.
Financial Investing
Concept of financial investment.
Variety of possible financial investments.
Relevance and calculation of real and offer-tax
rates of return.
The role of government and other institutions in
providing information for consumers. How
markets cause rates of return to changes in
response to variation in risk and maturity.
Financial Investing
How diversification can reduce risk.
How financial markets react to changes in
market conditions and information.
Protecting and Insuring
Concept of financial investment. Concepts of
financial risk and loss.
Insurance (transfer of risk through risk pooling)
Managing risk
Identify theft
Life insurance products
How to protect oneself against identify theft.
The Benefits of Financial Literacy
One’s level of financial literacy affects one’s
quality of life significantly. It determines ones
ability to provide basic needs, attitude toward
money and investment, as well as one’s
contribution to the community.
The Benefits of Financial Literacy
Financial literacy enables people to understand and
apply knowledge and skills to achieve a lifestyle
that is financially balanced, sustainable, ethical,
and responsible.
The Benefits of Financial Literacy
Increased personal financial literacy affects one’s
financial behavior. These changes in behavior pay
dividends to society as well. People who work,
spend, save, borrow, invest and manage risk wisely
are less likely to require a government rescue.
The Benefits of Financial Literacy
Financial literacy does not totally eliminate the
need for a social safety net because even the most
prudent individual can encounter financial
difficulties. But taking responsibility for one’s
financial life cultivates proper decision-making
skills and discipline.
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:
Financial Literacy in the Philippines
1. World Bank study in 2014 estimated 20 million
Filipinos saved money but only half had bank
accounts.
2. Asian Development Bank (ADB) study in 2015
revealed that PH does not have a national
strategy for financial education and literacy.
Financial Literacy in the Philippines
3. 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.
Financial Literacy in the Philippines
4. 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.
Financial Literacy in the Philippines
5. Ten years after discovery of the stock market,
still less than one percent of PH population is
invested in it.
6. More than 80% percent of the working middle
class have no formal financial planning.
Financial Literacy in the Philippines
Because of these findings, public and private
sectors alike have recognized the need to
strengthen financial education in the country. Last
November 27-28, 2018, more than 1000 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.
Developing Personal Financial Literacy
6 major characteristic types in how people view
money (Incharge, 2017)
1. Frugal
2. Pleasure
3. Status
4. Indifference
5. Powerful
6. Self-worth
Developing Personal Financial Literacy
6 major characteristic types in how people view
money (Incharge, 2017)
1. Frugal - Frugal people seek financial security
by living below their means and saving money.
They rarely buy luxurious items; they save
money instead. They save money because they
believe that money will offer protection from
unprecedented events and expenses.
Developing Personal Financial Literacy
6 major characteristic types in how people view
money (Incharge, 2017)
2. Pleasure – Pleasure seekers use money to bring
pleasure to themselves and to others. They are
more likely to spend than to save. They often live
beyond their means and spend more than they earn.
If they are not careful and do not change, they may
fall into deep debt.
Developing Personal Financial Literacy
6 major characteristic types in how people view
money (Incharge, 2017)
3. Status - Some people use money to express
their social status. They like to purchase and “show
off” their branded items.
Developing Personal Financial Literacy
6 major characteristic types in how people view
money (Incharge, 2017)
4. Indifference - Some people place very little
importance on having money and would rather
grow their own food and craft their own clothes. It
is as if having too much money makes them
nervous and uncomfortable.
Developing Personal Financial Literacy
6 major characteristic types in how people view
money (Incharge, 2017)
5. Powerful - Powerful people use money to
express power or control over others.
6. Self-worth - People who spend money for self-
worth value how much they accumulate and judge
others based on the amount of money they have.
