On Financial Literacy

By: Jean Paolo G. Lacap

At long last, I, together with my Junior Managers and Entrepreneurs’ Society of the Philippines (JMESP) students and the CBA Honor Society (HONSOC) officers, were able to push through the first ever Financial Literacy Seminar specifically on topics on Mutual Funds and Stock Market last January 21, 2015 at Angeles University Foundation. Through a good friend from UP, I was able to invite two great young “financial souls” – Sir Floi Wycoco and Sir JB Noynay, both Filipino financial literacy advocates.

          The literacy rate in the Philippines is very high as compared to other countries  but when it comes to financial literacy, I guess we are quite backwards. Here’s my post analysis from Sir Floi’s and Sir JB’s financial literacy presentations.

Sir Floi's Presentation on Mutual Funds

On Education and Saving

In a typical Filipino family, education is considered an important asset. Filipinos generally believe that education is the primary key to unlock the family from social ills such as poverty. They believe that having a good education makes anyone affluent, and I generally agree with that idea! What is sad about the Filipino mentality with regard to education is, they see education as a vehicle to become an employee to earn a living instead of looking it in a much bigger view.

One of the most neglected topics among Filipinos, young and old, is financial awareness particularly on saving and investing. Most of us, if we have spare cash, we either use them to buy things we want and/or sometimes save them, typically in a bank. We see banks as institutions in which it can safeguard our hard-earned money. We typically see saving in a bank as a better way to secure the future. We often give less consideration in investing our money in other ways such as in mutual funds or in the stock market. Thus, we often forget the possible impact of inflation on our saved money. For example, if you save Php100,000 in a bank, and let say the interest on saving is 1% (which is the normal rate) per annum, your money after 1 year will be Php101,000 (Php100,000 x 1.01). Let’s assume the inflation rate today, roughly 4.5%. By simply looking the figures, the inflation rate is bigger that the interest on saving which means, after a year, you are losing 3.5% (4.5% - 1%) or Php3,500 of the value of your money! Thus, in order for us to offset the negative impact of inflation, saving should be translated to investment or simply S = I (saving equals investment), a basic concept in economics.

Facts and Figures

Let’s get some facts first. Based on the data presented by Mr. Floi Wycoco in the Financial Literacy Seminar held last January 21, 2015, only 20% of the Filipinos have savings account. Only 234,854 retail and institutional accounts invest in mutual funds. And only 221,927 retail and institutional accounts invest in Unit Investment Trust Fund (UITF). These figures reflect the low level of involvement of Filipinos in investing. Comparing to other neighboring Asian countries, our country has low level of participation in investing activities.

What would be the possible reasons why Filipinos are afraid to invest, whether in mutual funds and/or stock market? One reason is basically taking risk. Filipinos generally believe that investing their money in mutual funds and/or stock market is too risky. Another is, they believe that investing is only for financial geniuses! They see mutual funds or stock market as something that is alienating, something that utilizes jargons that are unimaginable! And the last is the fact the most Filipinos wants instant return that’s why some fall into traps of illegal multi-level marketing / pyramiding scams! These illegal “investment” activities typically offer inconceivable return or quick cash in a lesser span of time! And what is the solution to all these problems and reasons? FINANCIAL LITERACY!

Sir JB and Sir Floi during the Seminar's Open Forum

Advocacy on Financial Literacy

Today is the right time for every Filipino to attain financial freedom through financial literacy advocacies. I am very glad that there are Filipino groups such as The Global Filipino Investors (TGFI) that promote financial literacy among Filipino families here and abroad and among Filipino students and youth. It is also the right time to support this kind of advocacies. As what Sir Floi said “Financial education is what we need to become a better nation.” This is also a challenge on my part as a business educator of this country. I need to take part of this call.

While writing this article, I realized that one of the things that business educators tend to forget, how to teach business students to be financially equipped through actual/practical applications of financial concepts like mutual funds and stock market participation. It is quite sad that our exposure to these investment concepts is quite less as compared with other countries abroad. But definitely, I still believe that it is not yet late to support and advocate financial literacy. This is one of the keys to help our economy flourish. As what Sir JB said in his presentation, "When you invest in stocks, you are investing in the Philippines. You are contributing to the economy of the country.” Start opening our doors to financial literacy and have an open mind to investing either in mutual funds or stock market. Start learning! Attend legit financial literacy seminars! Let’s make this country a better nation, one step at a time!

L-R: Nicole Demerin (JMESP President), Me (JMESP Adviser), Sir JB, Sir Floi, Dr. Anne Tungcab (CBA HONSOC Adviser), Darriel Mendoza (CBA HONSOC President)