Financial literacy crucial to tapping millennials

MANILA, Philippines -  The robust economic growth enjoyed by the Philippines in recent years is fueling the spending power of the country’s young, consumption-driven workforce.

But while millennials are earning more today, numerous studies paint a gloomy picture of this generation, which is loosely defined as those born in the 80’s and 90’s,  when it comes to financial literacy.

Armed with the knowledge that financial literacy is vital in harnessing the wealth of the younger generation, insurance provider Philam Life (Philippine American Life and General Insurance Co.) launched a financial literacy campaign tailored  for the increasing number of millennials having a rocky relationship with their finances.

According to a study conducted by Philam Life, 96 percent of Filipinos are concerned about their own and their family’s health, however, only 16 percent of them are prepared to pay for medical costs in case they are diagnosed with a critical illness.

Early this year, Philam Life began travelling to different cities in the country to promote its Live Ready campaign, which aims to educate Filipinos, particulary millennials  about financial planning.

Philam Life senior financial advisor Paul Jesse Vicente said while the financial literacy campaign targets to educate all age groups of Filipinos, it is the young adult group   that is greatly in need of financial education on how to save and adopt prudent spending habits.

Vicente described millennials  as a “sandwich generation” – the age group that bears more financial responsibilities as they have to support the previous generation, particularly their parents, who failed to prepare for their retirement.

“They’re (millennials) supposed to take care of their family, their kids and at the same time their  parents, who weren’t able to prepare for their retirement,”Vicente said.

“This is what makes this generation the best target for  the financial literacy campaign, since there is still time to help them prepare for their retirement,”  Vicente added.

Philam Life said that among Filipinos, there is a rising  number of senior-dependents or those  retirees who depend on their children for financial help. This is a problem that has emerged due to the lack of education on financial planning tools and concepts, since this topic is hardly ever taught in primary and secondary education in the country.

“With financial planning, we can start the virtuous cycle of financial literacy and ensure that everyone achieves their goals and dreams,” Philam Life said.

Financial planning teaches individuals to be responsible when it comes to their finances, and instills the discipline needed in order to keep track of their financial goals.

“Done right, financial planning ensures financial security now and in the future, even if the unexpected happens,” the insurance company said.

This will also educate Filipinos on the different type of goals that they should set particularly, short term goals, medium term goals and long term goals.

Short term goals refers to a person’s basic needs, or the monthly living expenses that need to be paid. Examples of these are food, rent, amortization, transportation, utility bills, among others.

Philam Life noted that setting up an emergency fund should also be a part of an individual’s short term goal.

“Ideally, three to six months worth of living expenses should be set aside in case something unfortunate happens like loss of a job or disability,” Philam Life said.

In contrast, medium term goals are those you want to achieve in one to five years like buying a house or a car, while long term goals are those that take longer than five years to achieve.

“The mindset of Filipinos today is that when they receive their salaries, spending comes in first before the saving,” Vicente said.” “The financial industry advises that Filipinos should save first and spend whatever is left after putting their savings aside,” he said.

Through its Live Ready campaign, Philam Life aims to create financially literate Filipino families and build a financially stable nation.

Philam Life was established in 1947. The company will celebrate its 70th year in the business this June. The insurance provider is a member of AIA Group Ltd., the largest independent publicly listed Pan-Asian life insurance group.