By Dr. Johnny Noet Ravalo
INQUIRER.net
Al was already borrowing money on January 6, so early into the year. When he started working at P7,500 a month over a decade ago, he did not save despite having his living expenses fully covered. Today, he makes double that - not counting non-monetary benefits - and he still has no savings.
Grace sends money to her relatives every so often. Although something is better than nothing, the amount she remits really pales in comparison to what she earns. Grace doesn’t spend for her living expenses but she pours much of her income on cellphone loads.
Al and Grace are “kasam-bahays”. We could debate whether their problem is that they cannot save (capacity), do not want to save (willingness) or do not know how to save (awareness). That debate though would be for another time.
For now, what is on my mind is their saving habit: should employers take a pro-active role in developing the saving habits of their kasam-bahays?
If there is something I know quite well, it is that financial planning is not an inborn talent but more of an acquired discipline. Saving is difficult because it constantly tests our resolve and challenges our ability to react to changing market conditions.
The reality is that very few of our kasam-bahays have a saving plan. Many of them manage their day-to-day cash without thinking longer-term. The challenge then is to show them the longer-term benefits of saving without severely constricting their present-day liquidity.
How then do we move forward?
I think it boils down to our our kasam-bahays wanting to save, not just in words but in deed. This is first a mindset issue because there may be a perception that the saving plan is just an ingenious way to avoid paying our our kasam-bahays their due in income. If it gets to this point, then everything else becomes counter-productive and the working relationship is contaminated by mistrust.
Knowing that cash is important to our our kasam-bahays, deducting part of their existing income will not be a good way to start. This saving will just be felt as a loss in day-to-day liquidity without any perceivable gains.
Perhaps employers may consider advancing the saving and treating this as part of their our kasam-bahays benefits. For example, instead of giving a straight increase in pay, the full-year equivalent of the increase can be invested as a time deposit and periodically rolled over within the year. The beneficial owner of the time deposit is still our our kasam-bahays and they get to see their money grow within the year without any direct loss in day-to-day liquidity.
For our our kasam-bahays who have young children, one variant of this would be something like a trust fund. The fund grows over time for the benefit of our our kasam-bahays without any risk that the money will be depleted as day-to-day expense. As the child gets good grades, give cash gifts to further boost the outstanding balance.
Hopefully, our our kasam-bahays will be encouraged to save part of their income once they see the benefits of their saving plan. Employers can match every peso they save up to some pre-determined limit.
As a community of stakeholders, banking associations may wish to get together and offer special programs for new savings from our kasam-bahays or even other targeted constituencies such as families of OFWs. Certainly, tie ups with government agencies may eventually be needed to formalize these programs. Whatever these arrangements may be, we all benefit from broadening the saving base, increasing our saving rate from its present levels and providing more for our respective futures.
We need to bring saving to the level of those around us. We can talk about financial literacy or great saving schemes but unless we can execute these into actual mobilized saving, I doubt if there is anyone out there that would consider great talk as a success indicator. We need to help ourselves and those around us, just as everybody else helps us in one way or another.
I don’t think we have to look very far. After all, everything starts at home.
Showing posts with label savings. Show all posts
Showing posts with label savings. Show all posts
Saturday, October 24, 2009
Friday, October 23, 2009
More OFW families turn to savings
By Michelle Remo
Philippine Daily Inquirer
MORE HOUSEHOLDS ARE NOW saving the money sent to them by relatives working abroad, a survey by the Bangko Sentral ng Pilipinas showed.
The quarterly survey involved 486 OFW households.
The BSP said that 39.9 percent of households receiving money from overseas Filipino workers said they were saving a a portion of the remittances—a significant rise from the 30.4 percent seen in in the third quarter of last year.
Also, in the second quarter of this year, only 38.3 percent of respondent-households engaged in savings.
BSP officials said the increase in OFW savings was a welcome development, explaining that the rise in bank deposits would provide the needed funds to support investments.
Amando Tetangco Jr., governor of the central bank, also said savings by OFWs would help secure the country’s future.
The survey also showed a year-on-year increase in the number of households that allotted money for investments.
OFW households that engaged in investment activities in the third quarter stood at 7.6 percent of respondents, up from 7.4 percent in the same period last year.
The percentage number of OFW households that invested, however, was lower than the 8.3 percent reported in the second quarter.
Analysts said the global economic turmoil, which led to concerns about job security among OFWs, forced many households to save more.
Rather than invest the money sent in from abroad, people were forced to place their cash securely in banks, fearing the risks brought on by the crisis. This risk aversion could have led to the quarterly drop in the number of OFW households that engaged in investment activities.
The BSP said it would promote financial literacy among OFWs and their households. It had conducted road shows in various countries, educating OFWs about investments and savings. The BSP likewise conducted seminars on the same topics among families of OFWs.
“We want OFWs and their families to become financially sophisticated,” Tetangco earlier said.
In the first half of the year, remittances sent to the Philippines amounted to $8.5 billion, up 2.9 percent from that in the same period a year ago.
The government reported that $16.4 billion in remittances were sent in last year.
Remittances could post a decent single-digit growth for the full year 2009, the BSP said.
Philippine Daily Inquirer
MORE HOUSEHOLDS ARE NOW saving the money sent to them by relatives working abroad, a survey by the Bangko Sentral ng Pilipinas showed.
The quarterly survey involved 486 OFW households.
The BSP said that 39.9 percent of households receiving money from overseas Filipino workers said they were saving a a portion of the remittances—a significant rise from the 30.4 percent seen in in the third quarter of last year.
Also, in the second quarter of this year, only 38.3 percent of respondent-households engaged in savings.
BSP officials said the increase in OFW savings was a welcome development, explaining that the rise in bank deposits would provide the needed funds to support investments.
Amando Tetangco Jr., governor of the central bank, also said savings by OFWs would help secure the country’s future.
The survey also showed a year-on-year increase in the number of households that allotted money for investments.
OFW households that engaged in investment activities in the third quarter stood at 7.6 percent of respondents, up from 7.4 percent in the same period last year.
The percentage number of OFW households that invested, however, was lower than the 8.3 percent reported in the second quarter.
Analysts said the global economic turmoil, which led to concerns about job security among OFWs, forced many households to save more.
Rather than invest the money sent in from abroad, people were forced to place their cash securely in banks, fearing the risks brought on by the crisis. This risk aversion could have led to the quarterly drop in the number of OFW households that engaged in investment activities.
The BSP said it would promote financial literacy among OFWs and their households. It had conducted road shows in various countries, educating OFWs about investments and savings. The BSP likewise conducted seminars on the same topics among families of OFWs.
“We want OFWs and their families to become financially sophisticated,” Tetangco earlier said.
In the first half of the year, remittances sent to the Philippines amounted to $8.5 billion, up 2.9 percent from that in the same period a year ago.
The government reported that $16.4 billion in remittances were sent in last year.
Remittances could post a decent single-digit growth for the full year 2009, the BSP said.
Tuesday, September 8, 2009
No savings at 30?
INQUIRER.net
Q: I just turned 30 years old and realized I have been working for almost a decade and have little to show for it. I'm ashamed to say that I don't have much savings. Although I work, there doesn't seem to be enough left to set aside. What should I do?
A: Working is one of life's simple joys. With it, we can put to use our talents and learn more about the industry we are in and its impact in the economy. By working, we can meet new friends and contribute to society. Plus we get to earn from working which can help provide for our families' needs.
Because we cannot predict the future and cannot be assured of a job forever, it is important to save money. This will tide us over should we lose our jobs, or get sick, or the time comes when we need to retire from active work.
At 30, you should start saving for your future now, and more so since you weren't able to start earlier. Ideally, saving should have been a habit begun while still a child. This would then become a well-ingrained habit throughout life. But do not worry, it's not yet too late. The important thing is you have realized how important it is to save, and commit to do so beginning today.
You actually raised an interesting question: How can you save when there doesn't seem to be enough left for savings? This is a dilemma most people face. How can you save when all your take-home money is used up by the end of the month (and may even be living on credit until the next pay day)?
The answer is quite simple. Instead of waiting until there is money left after paying your bills and other expenses, do it the other way: Save first before spending a single peso from your take-home pay. This is what financial experts mean when they say “Pay yourself first.” It means treating savings as a bill which you have to prioritize over any other bill or expense. By doing this, you will be able to stash away money for your savings which would otherwise have been spent on something you think you need but actually can live without.
You may think it's easy to say but hard to do. The truth is, saving can be done by anyone. Here are five easy steps on how to build up your savings easily:
1. As soon as you receive your salary, take out a certain percentage, start with 5%, and put this in an envelope you will mark “Savings.” Live on what is left of your salary.
2. Do not touch your savings if funds are running low a few days before your next payday. Instead, adjust your spending so that your funds will be enough until payday.
3. Open a separate savings account in the bank and deposit the funds you have set aside in your “Savings” envelope.
4. Deposit to your savings account every payday to ensure that the money earmarked for your savings will not be spent.
5. Once you have built up your savings a little bit, transfer some of it to a time deposit so it can earn a higher rate of interest. Later on, you can also move some of your funds to a mutual fund or unit investment trust fund so it can possibly earn even more interest. These investments have a risk attached to them, so discuss first with the bank or financial advisor if these are right for you.
One other important thing to do is to make a budget or spending plan. Write your projected income and expenses and see where you can cut down on spending. For instance, look at how you spend for your lunch every day. If you regularly buy food, think of bringing baon lunch to work. The excess funds freed (maybe about P500 a month) may then be added to your savings.
What can you use your savings for? It can be money for your retirement. You might think that at 30, retirement is so far away. However, saving for it now can make your money grow faster for you even if you put in only a small amount of money regularly. It is due to compound interest, which lets your money earn interest on top of money that has already earned interest.
Your savings can also be your emergency fund. This should be equal to three to six months' (even more) worth of expenses, which should be helpful when sudden unforeseen events occur: a job loss, an illness, etcetera.
Savings is doable. Start today and keep at it for a long long time.
*Disclaimer: Readers are solely responsible for their own investment decisions and should thus conduct their own research and due diligence and obtain professional advice. INQUIRER.net will not be liable for any loss or damage caused by a reader's reliance on information obtained from our web site. INQUIRER.net receives no compensation of any kind from companies or industries or funds that are mentioned here.
Q: I just turned 30 years old and realized I have been working for almost a decade and have little to show for it. I'm ashamed to say that I don't have much savings. Although I work, there doesn't seem to be enough left to set aside. What should I do?
A: Working is one of life's simple joys. With it, we can put to use our talents and learn more about the industry we are in and its impact in the economy. By working, we can meet new friends and contribute to society. Plus we get to earn from working which can help provide for our families' needs.
Because we cannot predict the future and cannot be assured of a job forever, it is important to save money. This will tide us over should we lose our jobs, or get sick, or the time comes when we need to retire from active work.
At 30, you should start saving for your future now, and more so since you weren't able to start earlier. Ideally, saving should have been a habit begun while still a child. This would then become a well-ingrained habit throughout life. But do not worry, it's not yet too late. The important thing is you have realized how important it is to save, and commit to do so beginning today.
You actually raised an interesting question: How can you save when there doesn't seem to be enough left for savings? This is a dilemma most people face. How can you save when all your take-home money is used up by the end of the month (and may even be living on credit until the next pay day)?
The answer is quite simple. Instead of waiting until there is money left after paying your bills and other expenses, do it the other way: Save first before spending a single peso from your take-home pay. This is what financial experts mean when they say “Pay yourself first.” It means treating savings as a bill which you have to prioritize over any other bill or expense. By doing this, you will be able to stash away money for your savings which would otherwise have been spent on something you think you need but actually can live without.
You may think it's easy to say but hard to do. The truth is, saving can be done by anyone. Here are five easy steps on how to build up your savings easily:
1. As soon as you receive your salary, take out a certain percentage, start with 5%, and put this in an envelope you will mark “Savings.” Live on what is left of your salary.
2. Do not touch your savings if funds are running low a few days before your next payday. Instead, adjust your spending so that your funds will be enough until payday.
3. Open a separate savings account in the bank and deposit the funds you have set aside in your “Savings” envelope.
4. Deposit to your savings account every payday to ensure that the money earmarked for your savings will not be spent.
5. Once you have built up your savings a little bit, transfer some of it to a time deposit so it can earn a higher rate of interest. Later on, you can also move some of your funds to a mutual fund or unit investment trust fund so it can possibly earn even more interest. These investments have a risk attached to them, so discuss first with the bank or financial advisor if these are right for you.
One other important thing to do is to make a budget or spending plan. Write your projected income and expenses and see where you can cut down on spending. For instance, look at how you spend for your lunch every day. If you regularly buy food, think of bringing baon lunch to work. The excess funds freed (maybe about P500 a month) may then be added to your savings.
What can you use your savings for? It can be money for your retirement. You might think that at 30, retirement is so far away. However, saving for it now can make your money grow faster for you even if you put in only a small amount of money regularly. It is due to compound interest, which lets your money earn interest on top of money that has already earned interest.
Your savings can also be your emergency fund. This should be equal to three to six months' (even more) worth of expenses, which should be helpful when sudden unforeseen events occur: a job loss, an illness, etcetera.
Savings is doable. Start today and keep at it for a long long time.
*Disclaimer: Readers are solely responsible for their own investment decisions and should thus conduct their own research and due diligence and obtain professional advice. INQUIRER.net will not be liable for any loss or damage caused by a reader's reliance on information obtained from our web site. INQUIRER.net receives no compensation of any kind from companies or industries or funds that are mentioned here.
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