Worrisome Savings Data – Part 1
Posted on July 23rd, 2012 under Wealth of Advice
By Francisco J. Colayco
Recently, there was an article in a business newspaper that wrote about worrisome savings data. I will quote part of the article here and will send the comments of our CFE Team next time.
“FILIPINO households are saving less despite higher incomes, a worrisome trend considering that those who are not setting money aside are also cutting back on important items such as education.
Citing data from the triennial Family Income and Expenditure Survey (FIES), the National Statistical Coordination Board (NSCB) said real per capita annual savings had fallen and the share of savings to family income also shrunk over the years: 16.4% in 2003, 14.8% in 2006, and 14.9% in 2009.
This meant that for every P100 in income, P15-16 went to savings, NSCB Secretary-General Romulo L. Virola said in a report posted on the agency’s Web site. “[I]ncome is not evenly or equitably distributed across all families in the country. Therefore, many of us either do not have savings or have been able to save less than 15% of our income,” he said.
Two out of three Filipino families were able to save and out of every P100 earned, they kept P23-25. Non-savers, meanwhile, spent 14-15% more than what they earned between 2003 and 2009, allotting more for food. “This is similar to past findings from poverty analysis that the poor spend proportionately more on food than the non-poor,” Mr. Virola said.
Non-savers also spent more on alcohol and tobacco while sacrificing education as it seems they “could no longer afford to send their children to school” or “that higher education is no longer the priority that it used to be. Among non-savers, the share of education spending declined to 2.62% in 2009 from 2.67% in 2006.
Sought for comment, University of Asia and the Pacific economist Peter Lee U said the data was a cause for worry, adding that the finding on non-savers sacrificing education needs further investigation.
Data also showed that households headed by females saved consistently higher versus male-dominated households, with the former spending less on food, non-durable furnishing, clothing and footwear and the latter spending less on recreation, special family occasions, gifts and contributions.
For non-savers, households headed by females spent more on personal care and contributions while male-headed households spent more on alcohol, tobacco and durable furnishing.
- Households headed by singles had similar saving patterns with households headed by married people, but the former spent less on food, fuel, light, water, education, non-durable furnishing, house maintenance and repair. Households of married couples spent less on recreation, alcohol, gifts, and contributions.
Non-saving households headed by singles had a narrower deficit than those headed by married people — 15% versus 16% — which could explain why fewer people are tying the knot, Mr. Virola said.
‘Clearly, the challenge for those of us not on the Forbes List is how to spend our money more wisely — less on non-basic expenditures so that we will have more for essentials…,’ he said.”
Here are our Colayco Foundation team comments on the Worrisome Savings Data
Guita T. Gopalan, Managing Director says:
In the Colayco Foundation’s many years of advocating financial literacy and financial freedom, we have observed that the savings problem affects all income classes regardless of whether they are earning six figure incomes or are living on a street sweeper’s salary.
Through the generosity of partners, we at Colayco Foundation are able to give training to low income earners: factory workers, tricycle drivers, janitors, etc. In these events we have noted that despite very limited income, families spend for recreation. In many cases, we’ve found families neck deep in debt but still spending on ‘wants’. While in terms of ratio, recreational spending is small compared to spending on necessities, it is a behavior which keeps them in a cycle of debt and financial insecurity.
The most alarming reality is that the financial behaviors of low income households are pretty much the same with their middle and high income counterparts. There is a savings problem, a huge debt problem and ultimately an inability to achieve wealth among Filipinos.
More next week.
Our next Pera Mo, Palaguin Mo Workshops are on July 27 and August 4. Check out www.colaycofoundation.com or call 6373731 or 6373741.