Who should use/read this Primer?
YOU are the primary user, especially if you are a person who is newly-employed whether in the Philippines or overseas. And your first task is to share this primer with YOUR FAMILY – your parents, your wife, your children or whoever will receive a share of your hard-earned income. This is because this primer requires you to do some exercises that need information from them. You may also have to make some important financial decisions while reading this primer. It is best that you make these decisions JOINTLY with them.
In short, this primer is for YOU and YOUR FAMILY.

Where does your money go?
You could say,
n• to your wallet
n•to your bank account
n•to your mother/father or relative/guardian
n•to your wife, if you are married
n•to all of the above

These are the immediate destinations of your money. Ultimately, however, your money actually goes to
n•Consumption
n•Protection
n•Savings & Investment
n•Taxes

What is “Consumption”?
You spend for Consumption items so that you can survive and advance in your work, at the very least, or enjoy some luxuries, at most. Except for education and information, once these items are consumed, you cannot get a return on your payments. They are lost forever. That is why they are called ‘consumption’.

Included in Consumption are expenses for your
n•Basic Needs – food, clothing, shelter, transportation, education, information, leisure
n•Non-Basic Needs – jewelry, expensive luxury items, cigarettes, alcohol, etc.

What is “Protection”?
These payments protect you and your family in case something untoward (for example, disease, an accident, or death) happens to you. Buying insurance is the main form of protection.

Payments for Protection include
n•Medical/Health Insurance (including PhilHealth)
n•Social Security System (SSS) or Government Service Insurance System (GSIS) contributions
n•Life, Accident, Disability Insurance
n•Non-Life Insurance – vehicle, property insurance (against fire, etc.)

What are “Savings and Investments”?
Unlike Consumption items, payments to Savings and Investments (S&I) are not “lost”. On the contrary, they accumulate and grow for future use. One way of looking at S&I is “payments to yourself” because they actually go to you (and your family) and no one else. If you put money into a Time Deposit Account in a bank, the money remains in your name. So you actually pay yourself. The bank just keeps the money for you. You still own it.

Under Savings and Investment are deposits or payments into your
n•Savings Account
n•Time Deposit Account
n•Long-Term Funds – trust, pension, investment
n•Real Estate – House and lot down payments, installments (not rental payments)

What are Taxes?
Taxes are payments you make to the government so that public goods and services can be provided to you and all other citizens of the country. The amount of taxes you pay are based on the amount of your income, your real property, and the purchases of goods and services that you make. OFWs are exempt from income tax but not from other taxes. All local employees pay all taxes.

Where SHOULD your money go?
We said previously that your money usually goes to consumption, protection, and savings and investments. But it need not go to those three main items in that order! In fact, the reverse is actually the IDEAL order of payments – Save, Protect Yourself and Your Family, before you Consume.

Why shouldn’t you spend your money first on basic consumption items such as food, clothing, and shelter?

The answer is that, in reality, salaried employees automatically save and protect themselves and their families before they even get the cash to spend for consumption. This is done through the automatic deductions made by their employer for social security (SSS/GSIS), health (PhilHealth), housing (PAGIBIG), and other benefits. (Make sure your employer is actually remitting these deductions to the appropriate agency. If they are, make sure you understand and use these benefits!)

The situation is different for OFWs whose employers do not deduct for nor provide savings and protection funds/instruments to them. They or their families have to look for these instruments (insurance, pension, housing, etc.) and diligently deposit into them. See Appendix A if you are interested in a technical description of insurance products and pension plans.

Why should you save and protect yourself and your family before spending for consumption?

The answer is because giving priority to consumption ahead of savings and protection deprives you and your family of the funds you may need TOMORROW if something bad (accident, death, or calamities) happens TODAY. It can also lead to poverty that is why the lack of savings is often used as an indicator of poverty. Those below the poverty threshold have no choice but to spend whatever cash they have on basic necessities. They have neither savings nor insurance protection. When a member of their family gets sick, they have nothing and no one to turn to.

Interviews with and case studies of OFW families have shown that those who save money regularly and protect themselves through insurance are the ones who lead more successful and balanced lives. Families who do not save lead difficult and miserable lives. They put all the years of toil by OFWs to waste.

Filipinos who opt to stay and work in the country can face the same dilemma if they do not save and protect themselves. To see a list of the country’s licensed and best performing insurance companies, visit the Philippine Insurance Commission’s website (www.insurance.gov.ph). The Insurance Commission is the government body that regulates the operations of insurance companies in the Philippines. Do not buy from companies who claim to be insurance companies but are not included in the list of licensed ones.

If your employer is already doing your savings and protection, why should you do more?

The answer is simple: The compulsory deductions that your employer is making are not enough. Benefits from the Social Security System (SSS), Government Service Insurance System (GSIS) and PhilHealth are very limited. You will always need to supplement these benefits with your own savings or insurance if you want to pay for medical expenses, housing, or your own retirement.

For OFWs, since your employers are not setting aside money for your savings and protection, then YOU really have to do it yourself.

So, how do you save, protect, and consume, in that order?

You and your family have to PLAN and BUDGET how you will collectively earn and use your FAMILY INCOME.

Case studies have shown a negative tendency among a number of Filipinos to assume that they can rely solely on OFWs’ income to support the whole family. On one hand, this puts enormous psychological and financial pressure on OFWs. On the other hand, it gives a false sense of security to those left behind so much so that some of them feel that it is no longer necessary to look for or to continue their work. This in turn further increases the pressure on the OFWs because they now really become THE ONLY source of family income.

To avoid this negative situation, the family has to PLAN and BUDGET the FAMILY INCOME, not just one member’s income.

The overall steps are:
n•  Set Family Goals Together
n•  Set a Time Frame for each Family Goal
n•  Discuss and Determine How Each Member will Contribute to the Family Goals
n•  Remind Everyone of their Commitment from Time to Time
n•  Find out if the Family is Moving towards its Goals or Not