This chapter reviews existing literatures and studies that are related to the study. The reviews begin with the financial literacy of people in the Philippines, what they know about personal finance, and the impact of knowing the methods of personal finance in their lives. This part of the research is to strengthen the ideas and concepts of our study.
The concepts and how you understand personal finance management
We could simply call personal finance as all financial decisions and everyday activities that a person could do. Budgeting household incomes and expenditures, savings, investments, mortgages, insurance and all other decisions that require money are included in our financial decisions. The most significant factor of personal finance management is financial planning, which involves analyzing the financial position and setting of short-term and long-term goals. In Philippines, and also in other countries, this might be future retirement fund, life insurance, etc. But for all of this, there is also a need on financial literacy, which would support our understanding in various financial services and make financial decisions.
Looking into all approaches towards personal finance might seem complicated for an individual without financial education, as such person usually does not understands the way of managing (planning, saving, investing and borrowing if needed) money.
Figure: Equation of personal finance ((Klimavičienė, Jurevičienė 2008)
This figure simplifies all the approaches and might help individuals manage these processes without intermediaries (banks, lending corp, other financial institutions) intervention. It could be easy and so simple to raise the public’s awareness to the...
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...you allow to spend on various items. Crucial part of budgeting – to have a goal in mind (e.g. paying out mortgage quickly, new car, retirement fund, etc.) as it helps physiologically and gives more control to consumer on his day-to-day decisions.
Saving and Investing
Saving is a big part of personal finance management and it requires high financial literacy skills. Lusardi, A. (2010) has indicated how important it is as people need to save money in order to have emergency and retirement funds. Ability to invest correctly and gain highest returns is the most difficult part of personal finance management, as it needs very high level of financial literacy. Past research show that the Philippines is somewhat low in investment numbers and needs to improve. It can be done with various financial literacy education programs or introduction with more financial instruments.
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