Pinoys still fall short on financial literacy

CEBU, Philippines - Although Filipinos’ awareness on money matters has improved slightly in recent times, the financial literacy rate in the country is still considered fairly low.

In an interview, Rizalina Mantaring, the president and chief executive officer of Sun Life Financial Philippines, said the Philippines still has a long way to go in achieving inclusive financial knowledge. Sun Life, an insurance company, is engaged in surety business.

Inclusive refers to a state where all kinds of citizens– ordinary or professional – understand and know how they can apply financial planning in their lives to achieve an economically secured future.

“A lot of Filipinos still don’t understand that they need to prepare for their future,” Mantaring noted, adding that majority of them believe the bank is the safest place where they can save their monetary resources.

She explained that when people are asked as to what investment that gives the best returns, most of them would suggest savings account and time deposit as the top answers, which are not even investments. Other than the traditional banking, people must be educated on the value of insurance and financial market investments.

While it is true and proven that savings accounts are essential for immediate and emergency needs, the value of money being placed in these investment choices decreases because of inflation (a four to five percent rate) –but only given an interest rate of one percent.

“After 10 years, mauubos na ang value nun. Ang time deposit ok naman yun for immediate needs. But don’t forget also to invest for retirement and education for your kids,” the top insurance executive said, stressing that one’s money has to grow faster than inflation.

Mantaring and other company officials were in Cebu recently to introduce their new brand ambassador, actor Piolo Pascual.

Yuppies on investing

On the other hand, the company also revealed that more and more young people (aged below 30) are starting to realize the need to invest for their future.

Mantaring advised young employees that it is not enough to just work for money but they should go beyond earning by letting their money work for them. And one way to do that is to invest.

Young urban professionals or the yuppies are usually motivated to invest because of personal reasons that include the need to plan for marriage, buy properties or car, gain material things and for the least motive, they get to learn it from seminars on financial management.

The volatile or unstable nature of the financial market is what usually keeps individuals from investing. “Generally, the Philippine population is more conservative than other people in other countries.”

Currently, the Sun Life executive said a bulk of the investment is still in bond funds and investment instruments that guarantee high interest rates. However, a significant growth of prospective investors in the equities market is seen as domestic and foreign expenditures are also increasing, she said.

In a recent interview, Rolan H. Enriquez, a chief financial advisor from another insurance company PhilAm Life, also expressed the same idea that the stock market is becoming attractive to investment savvy people because of high returns.

“You know, investors really love high returns,” Enriquez said, though warning them the risk in equities is high and that they should always link their financial decision to their money goals. “That’s the rule of thumb. What risk can you really afford?”

Mantaring echoed the rule of thumb as she advised: “Understand what you need throughout your life and plan properly. Make sure you match where you put your money with your needs. That’s very important.”

She further stressed, “Plan, because you only live once.”

Industry updates

A gradual increase in the number of insurance products have been observed in the industry but traditional ones still dominate in terms of total sales. The Unit Linked Insurance Plan accounts 90 percent of the total products sales. ULIP is a product offered by insurance companies that – unlike a pure insurance policy – gives investors the benefits of both insurance and investment under a single united plan.

While the manufacturing sector is also now taking steps to prepare for the Asean integrated economy, Mantaring said the financial service industry is not yet affected because of variation in terms of regulation in different countries.

“Wala pa sigurong (impact) because the industry has to be harmonized pa.Iba-iba kasi ang capital requirement and licensing requirement (sa mga insurance companies) in various countries.”

In the Philippines, the Sun Life CEO said P500 million is the minimum capital requirement by regulators for insurance firms to be able to operate here, saying their company’s assets already exceeded the capital obligation. The integration in financial services, investments and banking sector may not take place until next year but it will still take years for regulators to set rules and plans for the industry which is now being done, she noted.  (FREEMAN)