Financial literacy is still in it's infancy in the Philippines. The mindset of most Filipinos towards finances are bent towards the opposite way, a way going against building a solid financial foundation. Here are some of the most common misconceptions towards finances of most Filipinos:
1.) The meaning of assets.
What most people think: What they own are assets. Ownership.
What an asset really means: An asset is something that brings money into the pocket.
Two of the most common examples of this is owning a car and a house. A car and a house draws money out fast: fuel, maintenance, repairs, estate taxes, etc.. If you get caught up in the idea that owning these are turning them into assets, you'll be financially drained faster than you could ever think of. What turns these into assets depends on how you use them, not by merely owning them.
Knowing what asset really is could spell the difference in building a strong financial foundation and going down the drain.
2.) The concept of saving.
What most people think: Save to spend
What saving should be: Save to invest
How many people have you heard say that they are going to save up for a vacation, a gadget, or just clothes? Probably a lot. But have you ever heard somebody say that he's going to save up for emergency fund, insurance, and investment? Not that many. Ironic as it may seem but people save just to spend it later on.
Saving is not about accumulating money for something but rather either accumulating money for the rainy days or make money grow.
3.) Spending and ego.
What most people think: Who spends more is richer.
How should it be: Who saves more is richer.
Everybody wants to be rich or at least have more than enough to live a comfortable life. For many people, having more than enough is not enough. They want to show it off and feed their egos buy spending to show everybody that they have money. Spending is a habit and once it goes unchecked, it is stronger than controlling it.
Take care of the needs, put off the wants. Obviously your financial security is more important than feeding your ego.
4.) My grandpa's advice.
What most people think: What worked decades before still works now.
What works now: Information and adaptability
A very common example is putting money in the bank. Many people still think that by putting money in the bank it will grow, worse, some even think that putting money in the bank is investing. Banks work decades before because the interest rates are higher than the inflation rates. Inflation rates are higher tenfold than bank interest rates now.
Gone are the days where money grows in the bank. Several financial institutions are giving better returns than banks. Most of the people who made it big in this generation are people who were innovative and imaginative, not the kind of people who were stuck in the things of the past.
Financial literacy still has a very long way to go in the Philippines. Invest in knowledge, it is your greatest asset.
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