Spending like an OFW
During his 40-year career as a bank robber, “Willie” Sutton stole an estimated $2 million. When asked by a newspaper reporter why he robbed banks, he replied, “Because that’s where the money is.” The same could be said about overseas Filipino workers (OFWs).
A portion of a generation of children grew up without full-time mothers and fathers who went abroad because “that’s where the money is.” OFWs are “heroes of the republic” because of the money they send home. Obviously, remittances of the OFWs are tracked religiously because of the amount. Every “financial literacy” speaker has a passport full of Middle East countries’ stamps because of the money.
While an important part of the Philippine economy, the spending habits of OFWs can give an interesting picture about the nation and its finances.
There is no question that OFW remittances are the financial lifeblood of many Filipino families, particularly two decades and more ago. The money that they sent home provided the necessities of life for millions and educated children that otherwise would not have had much opportunity. Homes that would have never been built were constructed from the sacrifice that OFWs made for their families and the nation. Countless small informal businesses existed only because—after the family’s needs were met—there’s family savings from remitted funds.
In 2008, a study by the Asian Development Bank reported that beneficiaries of the remittances spent for food, utilities and other household operations, personal care, and communications and transportation. That study showed that 60 percent reported that they were able to save money. Eighty- seven percent kept their savings in banks. Proving also that all those financial literacy seminars did change lives for the better, and life insurance was the most popular financial instrument.
There were some interesting differences in spending habits. For those families where the OFW experience was intended to be for a limited time, large capital expenditures for homes and a family business were the priority. For those that planned to be career OFWs, after basic needs were met, the money went for bigger television sets, the electric keyboard, and for computers and other gadgets.
While many think of the OFWs as some unique class, the only thing different about them is their source of income. Their spending habit reflects most everyone’s spending habit.
If you get a big bonus or make a big commission, you might use that money to buy a car or put a down payment on a condominium. If you get a salary increase, you might head to the mall to buy the newest gadget.
I see the money management of the OFWs as a reflection of the bigger picture of the Philippine economy. For example, the Philippine stock market is only now becoming an investment vehicle for OFWs as companies introduce investing in mutual funds. Like everyone else, once OFWs provide for basic needs, health care and education were next. Then came the house and lot. A small business might be next on the list after buying the “luxuries” to make life more fun and enjoyable. Along the way, some funds are put away for the future and a rainy day.
Personal spending is like eating the Food Pyramid. You start at the bottom and work your way up to the chocolate sundae. And at the top is direct investment in the Philippine Stock Exchange.
E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.
Comments