AY 2020-2021

Ed. 110 – Building and Enhancing New Literacies Across the Curriculum

Module 4. Financial Literacy

Learning Outcomes:

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

Introduction

[Link]

The National Endowment for Financial Education defines financial literacy as

"the ability to read, analyze, manage, and communicate about the personal financial
conditions that affect material well-being. If include: 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" (Incharge Education Foundation,
2017). To put it simply, it is "the ability to use knowledge and skills to manage one's
financial resources effectively for lifetime financial security" (Mandell, 2009).
Meanwhile, Hastinas et al. (2013) refers to financial literacy as:

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.
Public and private institutions alike have recognized the need for financial
literacy to be incorporated in the school curriculum. Financial education and advocacy
programs of the public and private sectors have been identified as key areas in
building an improved financial system in the Philippines (Go, 2017). Republic Act

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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 learning."

The Council for Economic Education, the leading organization in the United
States that focuses on the economic and financial education of students from
Kindergarten through high school developed six standards gearing toward deepening
students' understanding of personal finance through an economic perspective. The
standards and key concepts are summarized in the table below.

[Link]

school-blac [Link]

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Standards Key Concepts

 Income earned or received by people
 income different types of jobs as well as different forms of income
earned or received
Earning  benefits and costs of increasing income through the acquisition of
income education and skills
 government programs that affect income
 types of income and taxes
 labor market
 scarcity, choice, and opportunity cost and services
 factors that influence spending choices, such as advertising, peer
pressure, and spending choices of others
 comparing the costs and benefits of spending decisions
Buying  basics of budgeting and planning
goods  making a spending decision payment methods, 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
concept of saving and interest
how people save money, where people can save money, and why
people save money
the role that financial institutions play as intermediaries between
savers and borrowers
the role government agencies such as the Federal Deposit Insurance
Corporation (FDIC) play in protecting savings deposits
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
 concept of credit and the cost of using credit
 why people use credit and the sources of credit
Using  why interest rates vary across borrowers
Credit  basic calculations related to borrowing (principal interest,
compound interest)
 credit reports and credit scores
 behaviors that contribute to strong credit reports and scores
 impact of credit reports and scores on consumers
 consumer protection laws
 concept of financial investment |
 variety of possible financial investments
 calculate rates of return
 relevance and calculation of real and after-1ax rates of return

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4.1 Benefits of Financial Literacy

One's level of financial literacy affects one's quality of life significantly. It

determines one's ability to provide basic needs, attitude toward money and
investment, as well as one's contribution to the community. Financial literacy enables
people to understand and apply knowledge and skills to achieve a lifestyle that is
financially balanced, sustainable, ethical, and responsible.
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.
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. Most of the responsibility for managing financial matters rests with the
individual. That responsibility is easier for adults to bear when they have learned the
basics of personal finance in their youth.

4.2 Financial Literacy in the Philippines

In his article "State of Financial Education in the Philippines," Go (2012

indicated several findings of researches with regards to the state of financial literacy
in the country including the following:
[Link] Bank study in 2014 estimated 20 million Filipinos saved money but only half
had bank accounts.
[Link] Development Bank (ADB) study in 2015 revealed that PH does not have a
national strategy for financial education and literacy.
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.
[Link] 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.
[Link] years after discovery of the stock market, still less than one percent of PH
population is invested in it.
[Link] than 80 percent of the working middle class have no formal financial plan.

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 1,000 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. The Expo is designed
to build an organized network of players that share the vision of a financially literate
citizenry and cohesively implement a variety of initiatives to achieve his vision. This
is in line with the BSP advocacy for financial education and Supports the BSP
mandates of maintaining price stability, financial stability, and efficient payments
system. It is the BSP's conviction that a financially educated Filipino is an empowered
Filipino who is able to make wise financial decisions that positively impact personal

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financial circumstances, and, consequently, contribute to inclusive and sustained

economic development.
The Expo supports Republic Act No. 10922 which designates second week of
November as Economic and Financial Literacy Week. It is also aligned with the
objectives of the Philippine National Strategy for Financial Inclusion. particularly the
pillar on Financial Education and Consumer Protection.

4.3 Developing Personal Financial Literacy

[Link]

One's attitude about money is heavily influenced by the parents' attitude and
behavior about money. The attitudes you formed early in life probably affect how you
save, spend, and invest today. Do you behave similarly or differently from your
parents about handling money?

There are six major characteristic types in how people view money (Incharge,
2017).

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.

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.

Status: Some people use money to express their social status. They like to purchase
and "show off" their branded items.

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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.

Powerful: Powerful people use money to express power or control Over others.

Self-worth: People who spend money for self-worth value how much they
accumulate and tend to judge others based on the amount of money they have.
Which characteristic closely resembles your attitude about money? Explain your
answer.

Spending Patterns

Are you prudent or have you been accused of spending money lavishly? Or are you
somewhere in between? Individuals have different spending patterns. Before one can
come up with a financial improvement plan, one needs to analyze his/her spending
habits. There are two common spending patterns: habitual spending and impulsive
spending. Habitual spending occurs when one spends out of a habit, when one buys
the same item daily, weekly, or monthly. Daily items may include water, rice, and cup
of coffee. Week items may be grocery items. Monthly items are the electricity and
Internet bills. Impulsive spending occurs when one mindlessly purchases items that he
or she does not need. Many people are often enticed by monthly sales at the malls
with the attitude that they may lose the items the following day.

Fixed vs. Variable Expenses

Fixed expenses remain the same year-round. Car payment is an example. Variable
expenses occur regularly bur the amount you pay varies. Electric and gas bills are
examples of these.

Which expenses are fixed and which are variable? Indicate the monthly Total. Put a
check mark on the corresponding type.
Monthly total Fixed Variable
Food
Clothing
Gas
Medicine
Internet

Needs vs. Wants

Financial discipline starts with an ability to recognize whether expenses are needs or
wants, and followed by ability to prioritize needs over wants. Needs are essential to
our survival. Wants are things that you would like to have but you can live without.
Such as new clothes or a new cell phone model. You want them but do not necessarily
need them. Too many wants can ruin a budget.

Needs Wants

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Enhance
Here are practical steps you can undertake to enhance your
financial literacy.
Setting Financial Goals
Setting financial goals is the first step to managing one's financial life.
Goals may be short, medium, and long-term. Short-term goals can be
measured in weeks and can provide instant gratification and feedback.
"I will ride on the LRT instead of taxi" and "I will bring lunch every day"
are examples of short-term goals. Medium-term goals should be
accomplished within one to six months. These goals provide
opportunity for reflection and feedback and require discipline and
consistency. Long-term financial goals can take years to achieve.
These include saving money for a down payment on a home child's
college education, and retirement. They may also include paying off a
car, student loans, or credit card debt.
Developing a Spending Plan Time and effort are necessary to
build a sustainable spending plan. Three easy steps are proposed
below when developing your personal spending plan:
1. Recording- Keep a record of what you spend.
2. Reviewing - Analyze the information and decide what you do.
3. Taking action- Do something about what you have written
down
Importance of Saving
Because no one can predict the future with certainty, we need to
save money for anything that might happen. Here are some reasons
why saving is important
Emergency Bolster. You should save money to avoid going to
debt just to pay emergency situations, like unexpected medical
expenses and damages caused by calamities or accidents.
Retirement - You will need savings/investments to take the
place of income you will no longer receive when you retire.
Future Events - You need to save for future events like
weddings, birthdays, anniversaries, and travels so as not to sacrifice
your fixed expenses.
Instability of Social Security- Pensions from social security
should only serve as Supplementary and not the primary source of
income after retirement. A Little Goes a Long Way -Small consistent
savings go a long way.
There are two ways to save:
1. save before you spend: and
2. save after you spend wisely.

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In order to stick to the savings habit, you should:

1. commit to a month;
2. find an accountability partner;
3. find a savings role model who is successful with his/her
money, through tried and true savings;
4. write your goal down and track it; and
5. avoid tempting situations (don't go to the mall to "hang out").

Summary
 Financial literacy is the ability to Use knowledge and skills to
manage one's financial resources effectively for lifetime financial
security.
 Financial literacy enables people to understand and apply
knowledge and skills to achieve a lifestyle that is financially
balanced, sustainable. ethical, and responsible.
 One's attitude about money is heavily influenced by the parents'
attitude and behaviour about money.
 Standards for developing understanding of financial literacy include
earning income. buying goods and services, saving. Using credit,
financial investing. protecting, and insuring.

Questions to Ponder

Evaluate
1. Differentiate among the following financial goals:
a. short-term
b. medium term, and
c. long-term financial goals.
2. Give at least 2 examples for each.
3. Interview at least 2 friends, 2 classmates, and 2 relatives. Explore their
financial behavior or spending and saving behavior and present data using any
of the following forms:
4. infographic b. meme c. cartoon

Written Exercises

Directions: Read the questions carefully. Choose the letter of the correct answer.
1. Otherwise known as the "Economic and Financial Literacy Act"
A. RA 10922 C. RA 10924
B. RA 10923 D. RA 10925
2. It is also considered as 8th Wonder of the World.
A. Tax return C. compound interest
B. Compounding tax D. income

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3. It is "the ability to read, analyze, manage, and communicate about the personal
financial conditions that affect material well-being.
A. Financial Literacy C. Financial services
B. Financial Education D. Financial Discipline
4. It is the most important characteristic in Financial development
A. Skills B. discipline C. action D. money
5. This step is the beginning of educating itself and thinking for the future needs.
A. Investing B. saving C. income D. buying goods
6. In 2016. ____________________ released the national strategy for financial
inclusion, stating that while institutions strive to broaden financial services,
financial literacy should also complement Such initiatives.
A. Standard & Poor's (S&P)
B. Asian Development Bank (ADB)
C. Bangko Sentral ng Pilipinas (BSP)
D. World Bank
7. ____________________ study in 2015 revealed that PH does not have a
national strategy for financial education and literacy
A. Standard & Poor's (S&P)
B. Asian Development Bank (ADB)
C. Bangko Sentral ng Pilipinas (BSP)
D. World Bank
8. The Expo supports _______________which designates second week of
November as Economic and Financial Literacy Week. It is also aligned with
the objectives of the Philippine National Strategy for Financial Inclusion.
A. Republic Act No. 10922
B. B. Standard & Poor's (S&P)
C. Asian Development Bank (ADB)
D. World Bank
9. _____________ study in 2014 estimated 20 million Filipinos saved money but
only half had bank accounts.
A. Republic Act No. 10922
B. B. Standard & Poor's (S&P)
C. C. Asian Development Bank (ADB)
D. D. World Bank
10. As per ___________________ 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.
A. Standard & Poor's (S&P)
B. B. Republic Act No. 10922
C. C. Asian Development Bank (ADB)
D. D. World Bank

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