The life insurance industry in the Philippines has been experiencing an uptrend the past few years. More and more people are becoming Licensed Financial Advisors for Life Insurance companies, which results in more people investing in insurance.
There is also an advocacy to make Filipinos more financially literate especially in the area of Insuring and Investing. Financial literacy is the ability to understand how money works in the world. Investing money is a part of that knowledge. Alan Greenspan has been quoted to say that “The number one problem in today’s generation and the economy is the lack of financial literacy.”
This is the case in the Philippines, where the majority of the people still think that banks are still the best place to keep their savings in. They know about the interest rate for their money in the banks for a regular savings account is only 0.25%, for time deposits 1.25%.
Factor in inflation, which is at around 5% a year, shows that people are losing money in banks. Less than 1% invest their money in the stock market, bonds, and mutual funds. The majority don’t even save, only 2 out of 10 Filipino households have a bank savings account.
With the current financial literacy program that insurance companies are now actively pushing, people are educated on why they should invest and how. We share with you the majority of the areas that one should plan and prepare for to ensure financial stability.
1. Income Protection. This can be achieved by investing in a life insurance policy. This will ensure that your income will continue for your family based on your standard of living even when you are no longer around. Many Filipino breadwinners don’t have life insurance coverage, they also have this wrong thinking that they are already insured based on the company’s group insurance coverage for them which is usually an accident insurance policy. This is the reason why so many families are left with nothing or get into debt when a breadwinner in the family has an untimely death. Life insurance coverage is the solution to this problem and investing in it should be a priority.
2. Education Funding. The price of getting your child through college is skyrocketing every year. Getting an education plan can ensure that you will have sufficient funds when you need them. This is a need because here in the Philippines getting a college degree is the norm. With tuition fees increasing at an alarmingly high rate every year, getting an education plan is a must for those who have kids.
3. Retirement Planning. Many Filipinos don’t have retirement plans and simply rely on their Social Security Pensions. This is not enough, especially for those who have a high standard of living. Getting around P5,000 to P7,000 a month is not sufficient for an employee who used to earn P15,000 a month as the minimum wage.
4. Living with Impaired Health. With the sedentary lifestyle, wrong diet and pollution that we get to face every day more and more people are being diagnosed with a critical illness as they age. Getting Health insurance ensures that you and your family are protected from the financial consequences that you may face when a critical illness strikes.
5. Investment and Fund Accumulation. This can ensure that you get the best possible returns on your capital which is better than keeping the money in the bank.
6. Estate Planning. This ensures that you can preserve your estate even when you are gone. With the high rate of estate taxes in the Philippines, this is one area as well that one needs to plan for. At the time of death, the Estate which includes all real property, bank accounts, stocks, cars, jewelry, and retirement benefits are all frozen subject to the payment of estate tax. This catches a lot of Filipinos by surprise, which is why so many lose money due to poor estate planning.
It is not too late for people to be financially literate and start planning where to place their investments. With the right education and financial advice, more and more Filipinos will be on the way to achieve financial literacy that can secure their future.