In a recent visit to Taiwan, I was able to attend a gathering of OFWs where a group discussed the importance of financial literacy. While listening to the session, I realized that more people should learn some basic concepts of financial literacy.
First, you need to save a part of your income for emergencies. One never knows when a medical emergency can come and wipe out whatever cash you have on hand. We have seen high-income earning individuals who suddenly have to stop working due to medical or other types of emergencies. Without an adequate emergency fund, life becomes quite hard for the individual and the family. People often do not prepare for such eventualities or worse do not even contemplate about these occurrences. Preparing for these emergencies is something everyone should learn. Apart from medical insurance, it is wise to save about 20 percent of your monthly income for medical and other emergencies. In this way, one can partially prepare for the said emergency.
Second, you need to learn the value of investing and passive income earning. Most people depend on active income or the income you earn from work (salary), business or other income generating activity. This income source depends on your actions. If by some circumstance you are unable to work or do business, then this income source ends. Passive income is income from sources where you do not need to constantly do actions to earn. Investments in funds, such as mutual funds or other income generating instruments can allow one to earn passively. There are investments that may need monitoring, such as stock options and the like. If you have saved enough money one can invest in land, which you can resell or lease to others.
Third, one needs to be more frugal. In local parlance, “ipon muna wag iPhone” is a good mantra. Before buying things nice to have one must stick to the need to have. OFW’s in general sometimes are easily tempted to buy luxury items instead of saving for the future.
Fourth, one needs to avoid getting hooked by scams. Time and time again, we hear several of our fellow Filipinos fall for get-rich-quick scams who offer high return for investments but end up losing a large chunk of their money. We must remember that the getting rich often takes time and when offers are too good to be true then it often is a scam.
There is truly a need for more organizations to teach financial literacy.
