SMART CENTS: A Workshop and Guide to Empowering Humanistas' Career and Financial Goals

Understanding Financial Literacy

The ability to manage personal finances effectively, including budgeting, saving, investing, and making informed financial decisions.

THE BASICS AND THE IMPORTANCE OF FINANCIAL LITERACY

According to the ABWA Team (n.d.), financial literacy refers to the knowledge and skills a person should possess in managing their finances effectively. It encompasses the ability to understand and apply various financial skills, including how to manage money, such as earning, budgeting, spending, saving, investing, and borrowing responsibly. Embodying this value allows a person to make wise and well-informed decisions about financial matters and other related aspects of their life and future. Financial literacy empowers you to take command of your finances and navigate the difficulties and opportunities that emerge. It is a crucial element in achieving financial health, as poor financial decisions can lead to debt, while wise money management ensures financial stability, security, and success (Tamplin, 2023).Furthermore, financial literacy is an essential life skill, particularly for students, as it prepares them for real-world economic responsibilities. Learning about finances early helps students make informed decisions and avoid common financial pitfalls that could lead to debt and financial struggles (ABWA Team, n.d.). Gaining knowledge of fundamental financial concepts enables students to build healthy financial habits that contribute to a successful economic future. Additionally, it empowers them to manage their money effectively and take control of their future rather than being dictated by their finances.In the Philippines, a Bangko Sentral ng Pilipinas (BSP) study (2021) found that only 25% of Filipinos are considered financially literate, highlighting the need for early financial education. The Philippines ranks at the bottom 30 percent of the countries surveyed in terms of financial literacy, with results showing that only two (2) percent of Filipino adults correctly answered all six (6) basic financial literacy questions (Cacnio & Romarate, 2024).

“The best investment you can make, is an investment in yourself... The more you learn, the more you’ll earn.” —Warren Buffet

BUDGETING 101

A budget is a plan that helps you track where your money goes. There are many ways to practice budgeting, and you can even create your own that fits your needs and lifestyle. One of the most common is the 50/30/20 Rule, a simple way to manage your income:

  • 50% Needs: Essential Expenses

  • Half of your income should be allocated to necessities—expenses that you must cover regardless of circumstances. These include:

  • Utility bills

  • Rent or mortgage payments

  • Health care

  • Groceries

  • If an expense is something you truly cannot live without, it falls into this category. Additionally, minimum payments on credit cards or loans are considered essential financial obligations.

  • 30% Wants: Non-Essential Spending

  • Set aside 30% of your income for discretionary expenses—things that enhance your lifestyle but are not necessary for survival. These include:

  • Subscriptions

  • Supplies for hobbies

  • Restaurant meals

  • Vacations

  • These are expenses made by choice, providing enjoyment and entertainment rather than fulfilling basic needs.

  • 20% Savings and Debt Repayment:

  • The remaining 20% should be directed toward future financial security, such as savings, investments, or paying off debts. These include:

  • Build an emergency fund.

  • Contribute to a retirement account.

  • Save for major financial goals.

  • Pay off debt beyond the required minimum.

Information Source: Budgeting basics: The 50-30-20 rule (UNFCU, n.d.)

Budgeting Strategies:

  • Track your income and expenses

  • Cut unnecessary expenses, differentiate your needs and wants

  • Invest in things and activities that will make you financially literate

  • Set realistic spending limits for different categories

Strategies to Avoid Unnecessary Expenses:

  • Create shopping lists to prevent impulse buying.

  • Set financial goals to maintain focus on priorities.

  • Evaluate your past financial activity and what you can do to improve it.

Information Source: My Ipon Diary: A Simple To Use Savings Diary To Help You AchieveYour Financial Goals (Tan, 2018)

THE IMPORTANCE OF SAVINGS

Types of Savings:

  • Emergency Fund: 3-6 months’ worth of expenses for unexpected situations.

  • Short-Term Savings: Planned purchases like gadgets or travel.

  • Long-Term Savings: Future goals like homeownership or retirement.

Where to Save Money:

  • High-yield Savings Accounts or Traditional Savings Accounts:

  • High-Yield Savings Accounts: Offer higher interest rates, leading to more earnings on your savings.

  • Traditional Savings Accounts: Provide lower interest rates but may have easier access.

  • Time deposits: Higher interest rates but restrict withdrawals before the specific dates of maturity.

  • Cooperative banks: Community-based savings and membership.

  • Investing: Allocating resources to grow wealth over time.

  • Investing helps money grow over time. While savings protect money, investments make it work for you. It involves some risk but can be rewarding if done wisely.

How to Build Good Credit:

  • Pay bills on time.

  • Avoid maxing out credit cards. Keep credit utilization low.

  • Use credit only for necessary purchases.