BSP: Youth more financially literate
YOUNG adults in the country are more financially literate than middle-aged and senior Filipinos, a Bangko Sentral ng Pilipinas (BSP) study showed, suggesting fiNANCIAL EDUCATION PROGRAMS SHOULD ADAPT TO changing age priorities.
Using the 2018 BSP Consumer Finance Survey (CFS) as the primary data source, the central bank found that across the three age categories, young adults registered the highest financial literacy index of 0.742, higher than the middleaged and senior cohorts at 0.656 and 0.623, respectively.
The nationwide triennial survey examines the financial state of households, covering financial and non-financial assets such as savings, investments, debts, real property, income and expenditures.
The 2018 CFS surveyed 14,860 households. However, for this analysis, the central bank only considered households with at least P10,000 in annual income and at least P1,000 in annual expenditure, resulting in a final sample of 7,084 households.
They categorized the respondents as young adults (18 to 39 years old), middle-aged (40 to 59 years old), and seniors (60+).
The BSP said that higher income slightly increases financial literacy levels, and respondents with at least a high school education have significantly better financial knowledge and skills.
It noted that young adults are more likely to spend equal to or less than their annual income, whereas spending more than their annual income is less common for this group.
In contrast, middle-aged and senior individuals are less inclined to spend equal to or less than their income compared to young adults.
“It is possible that the older age groups have larger expenses, such as food, education of children, medicines and other consumption needs of the household,” the BSP explained.
Moreover, the central bank revealed that middle-aged individuals are less likely than young adults to have a loan-to-income ratio of less than 1, with which higher income levels also increase the likelihood of having a loan-to-income ratio below 1.
During middle age, BSP said that many people take out loans for significant purchases like homes, leading to higher loan-to-income ratios compared to younger adults. Those with higher incomes can borrow larger amounts due to their perceived ability to repay.
Furthermore, the central bank found that primarily young adults and middle-aged individuals have some form of deposit account with banks or non-bank institutions.
Among those queried, only 66 percent of these respondents disclosed the amount in their deposit accounts, and 79 percent revealed the amount of emergency cash they possess.
Most of the respondents who provided details about their accounts were in the middle-aged group (774 respondents), followed by the young adult group (759 respondents) and the senior group (270 respondents).
“We observed that in terms of the average amount of savings, the senior age group has the highest average amount of savings, followed by the middle-aged and young adult groups,” the BSP said.
“The savings of the senior age cohort could include the lump sum payment that they received when they retired, retirement benefits and savings made over the years,” it added.
The BSP observed that people’s financial behaviors vary with age and life stage, influencing whether they prioritize short-term or longterm financial strategies, noting that there’s a low importance given to retirement planning and saving.
“Financial programs and interventions could help address this issue by designing and implementing modules that focus on the value of planning for retirement,” the BSP said.
It emphasized that as individuals age and progress through different stages of life, their priorities, preferences, economic status and financial circumstances can change; hence, these changes can significantly influence people’s financial decisions and behaviors.
“Thus, such factors should be considered in the design of financial education programs to make them more effective and responsive to the needs of their target participants and learners,” it said.