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  • Financial Literacy Statistics

    05 October 2020


    FINANCIAL LITERACY STATISTICS ESSENTIAL STATISTICS ON FINANCIAL LITERACY

    Money is an essential part of daily living--with it, a person’s needs and wants can be secured. However, having money is not enough. In the face of the ever-changing economy, people’s ability to properly manage their finances and make smart and effective decisions with their money offers more benefits than simply increasing their cash for spending. This is what makes financial literacy important.

    What is financial literacy?

    Financial literacy is defined as the ability to understand and apply various financial skills and concepts effectively. This includes understanding how money is made, how it is managed and budgeted, and how it is invested. Having a high level of financial literacy allows you to make sound financial decisions that affect your life, both in the short and long term. 

    Aside from getting a better grasp of basic financial concepts, financial literacy enables you to make better judgments as a consumer, such as deciding which purchases are valuable and what you can cut back on to save money. Financial literacy also helps you recognize and avoid abusive financial practices such as predatory lenders and other fraudulent practices.

    In developing economies, the level of one’s financial literacy can make all the difference in uplifting their economic status and empowering their financial decisions.

    Financial-Literacy-Statistics-Infog

    The State of Financial Literacy

    Standard & Poor’s Global Financial Literacy Survey identifies four key terms in their assessment of financial literacy levels among respondents: interest rates, interest compounding, inflation, and risk diversification.

    The paper revealed some interesting insights: only 1 in 3 adults worldwide are considered financially literate. According to the study, the factors that have the most impact on financial literacy levels are:

    • educational attainment
    • socio-economic class
    • gender
    • income bracket
       

    For advanced economies, higher GDP per capita is tied to higher financial literacy rates. Developing economies, meanwhile, do not share the same association. Instead, Standard & Poor found that national policies related to education and consumer protection have more say in affecting levels of financial literacy.

    A separate study conducted by the World Bank revealed that in developing countries, having a bank account is linked to higher levels of financial literacy. With the World Bank reporting that 1.7 billion adults remain unbanked, figures from the Standard & Poor study show that only a percentage of account holders are financially literate despite nearly half of them opting to save through their accounts.

    How Financial Literacy Can Affect People’s Lives

    The effects of financial literacy—whether in higher or lower levels—can easily influence an individual’s life. The US National Financial Educators Council surveyed adults aged 35 to 54, with 5.2% of respondents being denied a job due to their financial profile and 26.3% having employers looking up their financial background as a requirement for being hired or given a promotion.

    The organization also found that HR professionals cited “financial worries” as a contributing factor to on-the-job employee stress.

    While this outlook may seem grim, there are still silver linings. The National Financial Educators Council cites a study that parents educating their children on financial matters has a weak but clear impact on their future financial behaviors.

    In developing economies, the World Bank reported widespread interest in learning finance-related topics such as interest rates, insurance, budgeting, and the like. Finally, Standard & Poor found that aside from promoting financial inclusion, having access to an account or line of credit can help deepen one’s financial literacy.

    The Cycle of Financial Literacy

    As the studies have shown, having access to financial tools and institutions can make an impact on financial inclusivity as a whole, as well as the financial literacy of individuals. Tools like life insurance, investments, and hybrid products can empower individuals on their journey in several ways:

    • Firstly, having access to and utilizing these tools can jumpstart a more conscious thought process that takes financial decision-making into consideration across all aspects of one’s life.
    • Secondly, it allows people to take a more active role in their financial journey by putting into practice the five key components of financial literacy: earning, saving and investing, spending, borrowing, and protecting.
       

    In improving your own financial literacy, the opportunity to further empower and raise the following generations becomes easier, allowing for a positive cycle of financial literacy.

    Financial Literacy in the Philippines

    Financial literacy in the Philippines is still low, with Bangko Sentral ng Pilipinas (BSP) claiming that only 2% of adult Filipinos can answer all questions on financial literacy correctly. On an optimistic note, BSP and many other organizations are pushing efforts to improve the country’s levels of financial literacy.

    Projects like the Economic and Financial Learning Program, Financial Education Expo, and Financial Learning Campaign for Overseas Filipinos and their Beneficiaries aim to reach various sectors of society—from students to OFWs and other underserved sectors—and bring awareness and education to elevate their financial literacy.

    The Importance of Financial Literacy

    The level of one’s financial literacy can influence a person’s daily living on both personal and societal levels. Being able to understand and apply essential and complex financial concepts is tied to many factors like socio-economic status, income, educational attainment, and even gender.

    It is crucial to not only overcome obstacles to financial literacy but also to foster the habits, perspectives, and environments to ensure a more positive cycle of financial literacy.

    To get a head start on your financial journey, check out our blog for more resources on personal finance, or browse our range of life insurance plans that can fit a variety of needs.

    Did you know?

    You can buy a life insurance at any BPI branch nationwide! Talk to a bancassurance sales executive now!

    RECOMMENDED PRODUCTS

    Life Ready Plus

    Protection

    Get the power to protect yourself and your family with an affordable life insurance plan. Life Ready Plus is easy on the budget, but offers coverage of up to 30 times your yearly payment to support the financial needs of your loved ones.

    The plan gives you fast access to coverage and benefits and can match your long-term financial goals when maintained within an appropriate term.

    Philam Life Vitality

    Critical Care Max

    Health

    Critical Care Max will help you make more memories by providing financial aid during the early stages of a critical illness. This unit-linked life and health insurance plan offers assistance on your recovery. You can build a health fund that grows over time, depending on your chosen investment, to pay for other medical costs.

     

    In addition, it comes with a hospital confinement benefit that will replace lost income due to hospitalization. This daily cash benefit may also come with optional benefits like cash payout for surgery-related expenses, allowance for consultation fees, and many others.

    Philam Life Vitality

    Build Estate Plus

    Life Protection

    Let your loved ones enjoy the fruits of your labor even when you’re no longer around. Build Estate Plus is a unit-linked protection plan that will cover your estate taxes after your passing so that you can ease your family’s burden.

    It doubles as an investment savings fund that builds Account Value as you pay. It is also integrated with AIA Vitality that provides additional upfront coverage of 20% to your policy and add-ons.

    Philam Life Vitality

    CRITICAL CARE PLUS

    Health

    Be in good hands in times of sickness. Let Critical Care Plus, a unit-linked health and life insurance plan, take care of you with financial aid in case of a major illness, so you can focus on getting better and spending more time with your loved ones.

     

    It even gives you more benefits for having good health through the AIA Vitality program that adds 20% upfront coverage and supplemental benefits on your policy. 

     

     

    Philam Life Vitality
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