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Level of Financial Literacy Among

Minimum Wage Earners in Las Piñas City:
A Comparative Analysis

An Accounting Technology Research

Presented to the Faculty of the
College of Business Administration and Accountancy
University of Perpetual Help System DALTA, Las Piñas City

In Partial Fulfillment of the

Requirements for the Degree
Bachelor of Science in Accounting Technology

DIAZ, Emilyn Ann A.

ILAWAN, Allory Joy
ITEM, Rouneth
RADOMES, Angielou D.

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CHAPTER 1

Introduction

Financial literacy helps individuals make more assertive and efficient

decisions in the monetary context of their lives. According to Organisation

for Economic Co-operation and Development (2011), financial literacy is a

combination of awareness, knowledge, skill, attitude and behavior necessary

to make sound financial decisions and ultimately achieve individual financial

wellbeing.

Poor households do not have much valuable physical assets to depend

on. For their subsistence, they rely on the labor of their household members

and their productivity in employment and other activities that generates

income. It is commonly believed that mandating higher legal minimum

wages is needed to help the poor earn a level of income that would allow

them to have healthy and dignified lives. To get themselves out of poverty,

they need to increase their work hours and productivity, a key factor for

higher wages.

Let’s start to think about, how does financial literacy affects the daily

lives of workers earning minimum wages?

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Background of the Study

Annual Poverty Indicators Survey of Philippine Statistics Authority

(2018) stated that two in three heads of poor families have at most an

elementary education. Heads of the families belonging to the bottom 30%

income stratum tend to be less educated compared to heads of families in the

upper 70% income stratum. The bottom 30% of all families in this report

represents the poor families. Two out of three (65%) family heads belonging

to the bottom 30% income stratum had at most an elementary education.

Millions of Filipinos experiencing poverty, and struggle every day with

what food to eat. Beyond that, many minimum wage earners are still looking

for higher wage income because of high inflation rate. They can’t even eat

the right amount of food, can’t buy homes, save for their child’s education

and invest for retirement and health.

The latest Family Income and Expenditure Survey (FIES) conducted by

the Philippine Statistical Authority (2017) found that each Filipino

household allots 42.8% of its monthly income to food expenses. Considering

the total monthly take home of a minimum wage earner, he has a monthly

budget of P4,444 for food. Divide this by the number of days in a month and

it will show that a family with only one breadwinner will only have a P148

allotment for an entire day’s meals.

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According to the Associated Labor Unions-Trade Union Congress of the

Philippines (2017), Metro Manila experienced the fastest and biggest erosion

rate of purchasing power. In October 2017, the buying power of the P512

minimum wage is at P362.80.

Philippines ranks 68th on a worldwide financial literacy index (2017).

Based on the study of the Asian Development bank (2017), Philippines

doesn’t have a national strategy for financial education. During these days,

advocating financial literacy is very important. But why? It enables the

Filipino workers to provide for their family’s basic needs and family’s

expenses and to budget their monthly salary and be able to make ends

without the need get into debt. Financial education can be an advantage for

an individual to know what to prioritized in terms of budgeting, saving and

investing for the future.

The purpose of the study is to promote awareness to Filipino people most

specially to the minimum wage earners to be responsible on how they can

spend their money wisely. And how can financial education can help the rise

from poverty.

As we all know, not all Filipinos are financially literate. Consequently,

the main reason why this study was chosen is, to educate the Filipinos on

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how you can use financial literacy as a key to guide you to create a precise

plan in handling your money, achieve financial freedom in no time.

Thus, the proponents decided to have a study entitled “Level of Financial

Literacy Among Minimum Wage Earners in Las Piñas City: A Comparative

Analysis”, a research on how financial literacy helps the Filipino workers

achieve satisfactory life despite of earning minimum wage and got this

aligned with all their necessities including food, home, clothing and

education.

Theoretical Framework

This study was sustainably associated with the following theories:

Annamaria Lusardi and Olivia Mitchell (2014) stated that it is essential

to provide basic financial education to allow people to better navigate

economic crisis. Financial decision making must be further enriched to

incorporate the fact that financial knowledge is a form of human capital.

Moreover, they also stated that increasing the financial capabilities of the

population is a desirable and socially beneficial goal.

The Russia Financial Literacy and Education Trust Fund (2013) stated

that savings and investments by individuals are as vital to personal financial

well-being and security as to a healthy economy. People with savings are

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better able to weather economic shocks such as a loss of income, to build

assets for the future, and are less reliant on credit to cover unexpected

expenses.

Conceptual Framework

In this study, it is intended to illustrate the significance between the level

of financial literacy and the socio-demographic profile of minimum wage

earners. The figure 1 illustrates the independent and dependent variables of

the study.

Socio-demographic Level of Financial

profile of Literacy:
minimum wage
earners:  Budgeting
 Sex  Investing
 Age  Saving
 Civil Status
 Educational
Attainment

Figure 1: Conceptual Framework of the Study

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Statement of the Problem

The continuous rising cost of living in the Philippines is one of the

problems faced by most of the minimum wage earners. Prices of foods,

housing, electricity, water, medical care, tuition and other house expenses

are getting high. Minimum wage earners find it difficult to manage and cover

all the expenses for their necessities. Minimum wage earners find

themselves in a financially difficult position, often trapped in debt and

poverty. Financial literacy can make a difference in the knowledge of the

minimum wage earners on making good financial decisions. The way to

financial freedom and to get out of poverty requires the development of good

financial habits.

The study sought to answer the following questions:

1. What is the socio-demographic profile of the respondents in terms of:

1.1 Sex

1.2 Age

1.3 Civil Status

1.4 Educational Attainment?

2. What is the level of understanding about financial literacy of the

selected minimum wage earners in terms of:

2.1 Budgeting

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2.2 Investing

2.3 Saving?

3. Is there a significant difference in the level of understanding about

financial literacy on minimum wage earners when grouped as to

profile?

Objectives of the Study

The main objective of the study is to know the level of financial literacy

among minimum wage earners.

Specifically, the research will be conducted around the following

objectives:

1. To determine the socio-demographic profile of the respondents in

terms of:

1.1 Sex

1.2 Age

1.3 Civil Status

1.4 Educational Attainment

2. To determine the level of understanding about financial literacy on

selected minimum wage earners in terms of:

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2.1 Budgeting

2.2 Investing

2.3 Saving

3. To determine if there is significant difference in the level of

understanding about financial literacy on minimum wage earners

when grouped as to their profile.

Significance of the Study

This study will provide useful information about financial literacy to the

minimum wage earners. This study will seek awareness for them to come up

new ideas that will improve their understanding in terms of budgeting,

investing and saving. This study is specifically beneficial to the following:

Minimum Wage Earners

The study may help address and promote awareness regarding with

financial literacy on how they can manage monthly income.

Employees

This study may enlighten them to raise awareness and better

understanding on how to budget their salary, to invest and learn to save

for the future plans of the family.

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Student

This study may help them to properly enhance their knowledge on

how the financial literacy may affects their future endeavor.

School

This study also beneficial to the academe, to educate students the

importance of financial literacy.

City of Las Piñas

The City Hall’s office will use this information as the basis for

setting the minimum payroll for Las Pinas wage earners.

Future Researchers

This study is also beneficial to inspire future researchers to further

develop the study and serve as a basis for their upcoming works.

Hypotheses

Ho1: There is no significant difference in the level of understanding

on financial literacy between male and female.

Ha1: There is significant difference in the level of understanding on

financial literacy between male and female.

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Ho2: There is no significant difference in the level of understanding

on financial literacy between young adults and middle-aged adults.

Ha2: There is significant difference in the level of understanding on

financial literacy between young adults and middle-aged adults.

Ho3: There is no significant difference in the level of understanding

on financial literacy between single and married.

Ha3: There is significant difference in the level of understanding on

financial literacy between single and married.

Ho4: There is no significant difference in the level of understanding

on financial literacy between undergraduate and college graduate.

Ha4: There is significant difference in the level of understanding on

financial literacy between undergraduate and college graduate.

Scope and Limitations

This study targets minimum wage earners which includes construction

workers, sales person, service crews, and security guards. This study will be

conducted at Las Piñas City. The respondents of the study will be composed

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of 50 individuals who are minimum wage earners. Furthermore, this study

focuses only on the level of financial literacy among minimum wage earners

in Las Piñas City.

Definition of Terms

The following key concepts and terms in this study are defined conceptually

and operationally for better understanding of the study.

1. Financial literacy. It is a combination of awareness, knowledge, skill,

attitude and behavior necessary to make sound financial decisions

and ultimately achieve individual financial wellbeing. It is the main

variable of our study.

2. Minimum Wage Earners. Refers to a worker in the private sector paid

the statutory minimum wage. It is basically referring to the workers

or laborers which earns the lowest wage rate per day.

3. Budgeting. It is the process of creating a plan to spend your money.

It is the first independent variable that used in financial literacy.

4. Investing. It is how you make your money grow or appreciate for long

term financial goals. It is another way of saving money and it is the

second independent variable that is used in financial literacy.

5. Savings. Refer to money you put aside for future use rather than

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spending it immediately. Refer to the earned in a given period of time

and it is the last independent variable that also used in financial

literacy.

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CHAPTER 2

Review of Related Literature and Studies

This section presents a discussion of related literature and studies that

have significant contribution in the development of the study.

Many Filipinos seen still financially illiterate

The level of financial literacy among Filipinos remains alarmingly low

because of poor childhood education that continues until their adult years. In

a study of World Bank Organization (cited in Inquirer, 2015), Filipino adults

could correctly answer only three out of seven financial literacy-related

questions covering basic numeracy, computing compounding interest,

fundamentals of inflation and investment diversification. Only 2 percent of

Filipino adults answered all questions about financial literacy correctly. The

study also showed that Filipinos lack specific knowledge to make informed

financial decisions.

People who began saving in childhood shown better attitudes in saving,

and tend to outperform their peers who did not develop the habit early in the

areas of choosing financial products and services, monitoring expenses and

planning for retirement.

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The Central Bank of the Philippines believes that people who are

financially literate can be more effective in contributing to the Philippine

economy. The central bank pointed to a growing body of literature indicating

that a financially literate population was able to make better financial

decisions, have higher levels of savings and diversified investments, and

were more competent in managing debt. The best way to nurture sound

financial culture and behavior among future adults is to start practical

financial management lessons at a young age.

Financial literacy affects spending and saving habits

The World Bank Organization (cited in Inquirer, 2015) said its recent

baseline survey on financial inclusion in the Philippines showed most

Filipino families’ incomes were eaten up by basic necessities every month.

This represents a significant hurdle in the amount of savings Filipino families

can set aside. About 55 percent of families were making every month mostly

covered expenses. Only half of the families keep their cash in banks. World

Bank Organization (2015) stated the survey results meant officials should

focus on financial literacy education. Interventions may include getting

financial literacy into the basic education curriculum. As per Mylenko

(2015), “The area of financial education came into light after the global

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financial crisis. It became really clear that a lot of the reasons for the

malfunction came from lack of awareness of risks.”

Philippines: Knowledge about Money Can Boost Financial Inclusion

Financial literacy is the most important component of the Philippines

financial inclusion policy. The Philippine financial literacy program is

comprehensive; it covers all sectors from policymakers, regulators,

microfinance providers down to the clients. It is a continuing activity for

many government institutions.

When the Philippine Department of Finance launched its Microfinance

Program in 1995 and Microinsurance Program in 2010, it involved all

stakeholders and invited their representatives to nationwide meetings in all

16 regions of the country to contribute to the details of the program.

It formulated a national strategy, consulting stakeholders every step of

the way and then launched the strategy along with the issuance of regulations

and memoranda of agreement for coordinated policies and programs. Indeed,

the financial literacy program should cover everyone, all from ages 5 to 100.

It had financial education in the schools, lectures for overseas Filipino

workers who, as a group, remit US$28 billion annually, and lectures on

financial market for young people who make up 1.3 million employees of

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the BPO (Business process outsourcing) sector who, as a group, generate

about US$25 million in revenues annually. Financial literacy should include

a listing of financial (stocks, bonds, insurance and mutual funds) products

available in the market because these should compete on equal footing with

consumer products for the investor’s money.

This financial literacy program succeeded, financial stability is

enhanced because stakeholders make rational decisions and manage their

funds and businesses well. They are also protected from fraudulent

transactions and dubious deals. Regulators, with the assistance of local

governments, can check on the activities of regulated entities. Clients who

are well informed of their rights can access the alternative dispute

mechanisms offered by regulators to settle complaints.

Philippines Ranks Low in Financial Literacy

According to Ann (2017) Financial Literacy plays a very significant part

in a country whereas it helps in the growth and development of one’s

economy. A country should not just focus on building skillful workers but

must also have a knowledge on financial literacy and management in order

to maintain and sustain financial markets. With the absence of financial

literacy, a country may be prone to high debts, mortgage defaults or

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insolvency. In addition to that, Courtney Gebuildig, executive president of

Public Affairs at McGraw Hill Financial, financial literacy is one of the key

strategies in building stronger, more accessible and sustained markets around

the globe. In fact, countries with high economic growth are the ones who

have high financial literacy rate.

Moreover, according to the Financial Literacy Survey Standard and

Poor's research, Philippines is at the bottom 30 of the countries with lowest

financial literacy rate with only 25%. Meaning, there are only few people in

the Philippines who are financially literate. In Southeast Asia, Singapore has

the highest financial literacy rate of 59% and Cambodia with the lowest

financial literacy rate of 18%. Meanwhile, China only scored 28% though

the country has high credit card market. This is because they do not focus on

the financial literacy of the people. According to the executive managing

director and head of Asia-Pacific for Standard & Poor's Rating and Services,

Matthew Bosrock, it is very important to understand the concept of inflation,

interest and other key terms and the practice of financial literacy are the core

of economic development

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Philippines’ Financial Literacy Program

According to the Commission on Filipinos Overseas there are different

Financial Literacy Programs and Campaigns here in the Philippines. One of

it is the “Kaalamang Pinansyal Tungo Sa Kaunlaran” or “KAPIT KA!”. It is

a Financial Literacy Program that aims to educate the migrants and other

participants on proper management of their finances through savings,

budgeting, financial planning and investments. KAPIT KA also aims to

provide knowledge for the enhancement of the financial standing of the

migrants and guide them towards reaching their financial goals. This training

module covers the following topics: Knowing your Financial Standing, The

Right Formula of Saving, Financial Fitness Quiz, Preparation of Personal

Income and Expense Tracker (PIET), Prioritizing your Expenses, 10

Commandments to be Financially Literate, Preparing your Dream Matrix,

and Oath of Financial Literacy.

Another Financial Literacy Program and Campaign is the "Peso Sense

Philippine Financial Freedom Campaign". It was launched by the Bangko

Sentral ng Pilipinas in the year 2013 and was implemented by the

Commission on Filipinos Overseas and overseen by the United Nations

Development Programme (UNDP). It is a nationwide Financial Literacy

campaign that is designed in order for the Filipino beneficiaries of domestic

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and international remittances to improve productive expenditure, and

improve the capacity for saving. It has been formulated to give knowledge

on the proper financial literacy and management and improve financial

acumen of every Filipinos.

Enhancing Financial Capability and Inclusion in the Philippines - A

Demand-side Assessment

The World Bank Organization (2015) stated that two characteristics

which are strongly correlated with better scores on financial capability are

people’s educational attainments and their financial knowledge/literacy

levels. People with high educational attainment outperform their

counterparts with lower education in the areas of choosing financial

products, managing their daily finances, and in planning for old age

expenses. Therefore, people with high educational attainment have higher

understanding of financial literacy and it can increase their level of living

because they know how to manage money and choose the right savings and

investment for them. While people that has low level of understanding

financial literacy can lead to higher indebtedness and wrong choices of

investment. Financial education is very important nowadays. People should

know how to spend and save money in a right way. The World Bank

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Organization (2015) stated that, even if people possess knowledge of basic

financial concepts they may struggle to translate it into adequate actions.

People should really know how financial literacy can help them. Individuals

would not be able to choose the right saving and investment for themselves

if they are not financially educated. Financial educated person can choose

the right savings and investment and they will challenge financial institution

to develop financial products that truly respond their needs and that should

have positive effects on both investment levels and economic growth.

Financial education can help many people in managing and choosing the

right savings and investment that can help them in their future needs.

Financial literacy - Empowering people and promoting Financial

Inclusion

According to the 2014 MasterCard Index of Financial Literacy survey,

Philippines ranked at 8th place in Asia-Pacific Region and as one of the

fastest-growing economies in the region and at this point, the need for

financial literacy is very important. We need to help educate individuals to

understand basic money management, financial planning and investments so

that we can empower a larger portion of the population to be able to provide

for themselves and their families and invest in the future.

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Whereas according to Jaime E. Ysmael (2015), Financial literacy and

economic development go hand in hand which is true for emerging countries

such as the Philippines. It is very significant in ensuring the sustainability of

an economy in the future. With various market forces affecting global and

regional economies, we have to prepare ourselves and become

knowledgeable on financial issues and information that can empower us and

enable us to make the right financial decisions and protect our investments.

In the Philippines, massive capital and liquidity is generated by the

business-process outsourcing sector and overseas Filipino remittances,

which translate to spending and consumption. While this contributes largely

to domestic productivity, it should also translate into savings and investments

as a way to balance an individual’s financial portfolio. The need to venture

into astute financial investments must be emphasized if we want to maintain

a positive financial position. We can only achieve this if we are equipped

with the right amount of financial knowledge and information to avoid being

fooled by scammers.

That's why the need for financial literacy and education can avoid scams

and improve investments if we are financially literate—on a larger scale, it

can increase domestic savings rates and foster an environment of “financial

inclusion,” which can allow us to increase domestic productivity in a more

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sustainable manner and create a dramatic shift from being consumption-

driven to becoming an investment-driven economy. It also facilitates longer-

term thinking—improving on retirement planning, life insurance and pension

funds, which can strongly support the maturing portion of the population.

Financial Education in Asia

According to the study of Asian Development Bank Institute (2015),

Financial literacy has something to do with the economic development.

Therefore, having a knowledge regarding financial literacy can help not only

an individual but also the economic development. Philippines is one of the

strong country among the others but it doesn’t have a national strategy for

financial education & literacy. It has the BSP that actively develops and

implemented strategies for financial learning that can help every individual

to be aware of economic issues. A consumer that is knowledgeable in

financial literacy can confidently handle things when it comes to borrowing

they cannot be easily be fooled by a moneylenders or a loan shark. Though

there are established financial literacy program it is still not enough to cover

a large number of persons.

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An Analysis of the Effects of Financial Education on Financial Literacy

and Financial Behaviors

According to Jamie Wagner (2015) Financial education should increase

financial knowledge and also help people behave differently, to make better

financial decisions for themselves or their households. Hilgert, Hogarth, and

Beverly (2003) suggest that financial behaviors may be hierarchal and that

some behaviors may be more affected by financial knowledge. Financial

education can teach people or students on how to make good financial

decisions. Financial education should not only increase financial literacy but

it should also improve people’s financial behaviors.

One effect of financial education to financial literacy is to increase the

knowledge of people on financial aspects and to help the choose the right

decision on their savings and investments. Jamie Wagner (2015) suggest that

financial education is effective and is positively related to higher financial

literacy scores. Financial education is also positively related to answering

each individual question correctly.

Synthesis

Filipino families spend their income on basic necessities but only few

are able to covered their expenses and can still save money. Lack of

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knowledge about financial literacy can have a negative effect to a person

when financial crisis exists because they lack in financial education a person

cannot properly manage their finances.

Financial literacy is very important in a country because high

financial literacy can help the development of economy. Each country should

also focus on financial literacy a country is prone to high debts when it lacks

in financial education. Philippines financial literacy’s percentage is low

which means that only few Filipinos are financially literate that most of them

doesn’t have an idea on how they can properly manage their finances.

Philippines should establish programs that focuses on providing every

Filipinos a knowledge about financial literacy and let them fully understand

the language of financial literacy. Financial literacy will not only help the

individuals manage their financial decisions but it can also help in economic

development. An individual that has knowledge on financial education can

make the right decision on where to invest their money and saving. They will

know on how to spend and save money, be prepared for the future

unexpected expenses and can prepare for their retirement. They can also

avoid higher indebtedness and wrong choices of investment.

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Gap Analysis

Provided with the studies mentioned in this chapter, this might be the

time to start educating Filipino people on how to be financial literate. This

can be taken up in the academe, wherein the people starts to have an idea on

how to manage their finances at the very young age, for them to know the

importance of saving money. In this way, the new generation can practice

and train themselves to be financially upright and it can be a preparation

when they start to earn on their chosen career.

The government is also reliable on propagating knowledge to fellow

labor force on how to manage and budget their monthly salary. It can be a

form of company seminars and government awareness program. There’s a

lot of study stating that minimum wage in Metro Manila is not enough for a

Filipino family, to them to have a well-lived lifestyle but why is the

government still stick with the minimum wage rate? The government must

take this into consideration, educate the people on financial literacy, this can

be a key to lessen the poverty rate in the country.

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CHAPTER 3

METHODOLOGY

Research Design

The study utilized descriptive quantitative method in survey

questionnaire as a primary tool to obtain information that will help to

understand and answer certain problems formulated in the research and

achieve research objectives. Also, the study used comparative research

method to determine if there are significant difference exist in the level of

financial literacy among minimum wage earners.

Research Locale

There are total of 50 respondents in this study located at Las Pinas City.

In order to gather data relevant to the study, surveys, interviews and

observation from experiments were analyzed and evaluated.

Research Instrument

The proponents used an adopted questionnaire to provide the validity

and appropriateness of the answers. Suitable adopted questions were used in

creating the survey. The survey questionnaire will compose of total 20

questions which will be related to respondent’s awareness on financial

literacy. Respondent’s survey confidentiality was assured. We will provide

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them the option of being anonymous in an understanding that people may

hinder answering the survey.

The sampling plan will include 50 individuals who are minimum

wage earners with different jobs in Las Pinas City.

Data Gathering Procedures

The draft of survey questionnaire will be validated by faculty researchers

and faculty members. The researchers will distribute survey questionnaires

to chosen respondents and will be retrieved outright. The respondents were

given enough time to answer the questionnaire. After retrieving the

questionnaire, researchers will organize the results in each questions. The

data gathered was subject to interpret by using statistical tools.

Treatment of Data

When analyzing the data, the statistical tools used were follows:

1. T-test

This was used to measure the significant difference in the level of

financial literacy among minimum wage earners in terms of sex, age,

civil status, and educational attainment.

2. Analysis of Variance (ANOVA)

This was used to test the hypotheses and to determine the significant

difference in the level of financial literacy among minimum wage

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earners.

3. Percentage/Frequency

This was used to determine the ratio of socio-demographic profile of

the minimum wage earners in terms of sex, age, civil status, and

educational attainment.

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