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Mastering Money

The study examines the critical importance of financial literacy and effective money management practices for achieving financial stability and reducing stress. It highlights the global challenges of low financial literacy rates, particularly in emerging economies and specific regions like the Philippines and Davao City, where individuals struggle with managing finances and accessing formal financial services. The research aims to identify local financial behaviors and needs to provide practical recommendations for enhancing financial resilience among residents.

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7 views3 pages

Mastering Money

The study examines the critical importance of financial literacy and effective money management practices for achieving financial stability and reducing stress. It highlights the global challenges of low financial literacy rates, particularly in emerging economies and specific regions like the Philippines and Davao City, where individuals struggle with managing finances and accessing formal financial services. The research aims to identify local financial behaviors and needs to provide practical recommendations for enhancing financial resilience among residents.

Uploaded by

fe condino
Copyright
© © All Rights Reserved
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Empowering Financial Futures: A Study on Financial Literacy and

Management Practices

Chapter I

“Wealth consist not in having great possessions, but in having a few wants.” –
Epictetus

Money management is not merely about accumulating wealth, but about achieving
a balanced and secure life, as suggested by the philosopher Epictetus. In a world
where financial stability often dictates the quality of life, understanding and
managing personal finances has become increasingly crucial. Effective money
management encompasses a wide range of practices, including budgeting, saving,
investing, and debt management, all of which contribute to an individual's overall
financial health. This study delves into the various aspects of financial literacy and
effective money management, aiming to provide individuals with the knowledge and
skills necessary to navigate their financial journeys successfully. By mastering these
skills, individuals can reduce financial stress, make informed decisions, and
ultimately, achieve both their short-term and long-term financial goals.

Financial literacy is a critical issue worldwide, affecting individuals across all


socioeconomic levels. Despite significant advancements in financial education,
many people globally still lack a basic understanding of financial principles, which
hinders their ability to make informed financial decisions. According to the
Organisation for Economic Co-operation and Development (OECD), a substantial
portion of adults in developed and developing countries alike demonstrate low levels
of financial literacy. This lack of knowledge contributes to poor financial planning,
increased debt levels, and financial instability. In countries such as the United
States, the United Kingdom, and Canada, financial literacy programs have been
implemented with varying degrees of success. Studies have shown that while these
programs can improve financial knowledge, there remains a gap between
knowledge and actual behavior. For instance, Lusardi and Mitchell (2014) found that
even in high-income countries, individuals often struggle with concepts such as
interest rates, inflation, and risk diversification. This suggests that financial education
must go beyond imparting knowledge and focus on changing financial behaviors and
attitudes.

Furthermore, in emerging economies like India and Brazil, rapid economic growth
has not been matched by a corresponding increase in financial literacy. Many
individuals in these countries face challenges related to limited access to financial
services, low levels of income, and cultural factors that influence financial behaviors.
Research by Agarwalla et al. (2015) in India highlights the urgent need for targeted
financial literacy programs that address the unique financial challenges faced by
different demographic groups. Overall, the international landscape of financial
literacy underscores the need for a comprehensive approach that includes
education, access to financial services, and behavioral interventions. By learning
from successful initiatives worldwide, policymakers and educators can develop more
effective strategies to enhance financial literacy and promote financial well-being
globally.

In the Philippines, financial literacy rates remain relatively low, with many Filipinos
struggling to manage their finances effectively. The prevalence of informal lending
systems, coupled with limited access to formal financial services, exacerbates these
challenges. According to Wiranatakusuma et al. (2024), there is a need for more
targeted and effective financial literacy programs to improve financial resilience
among low-income populations. Additionally, Balaza et al. (2021) highlight the
importance of integrating financial literacy into the K to 12 social studies curricula in
the Philippines, particularly in the context of the COVID-19 pandemic. Their study
emphasizes that early education in financial management can lay a strong
foundation for future financial stability, underscoring the critical role of educational
institutions in promoting financial literacy. Furthermore, Banagan et al. (2021)
conducted a cross-sectional factor analysis among graduate students and
professionals, revealing significant gaps in financial management literacy. Their
findings indicate that even among more educated populations, there is a critical
need for enhanced financial education programs to ensure comprehensive
understanding and effective financial practices.

In Davao City, financial literacy presents a significant challenge, despite the city's
economic growth and development. Many residents continue to struggle with
managing their finances effectively, which is evident in various sectors of the
population. The reliance on informal sources of credit, such as “5-6” money lenders,
and the lack of structured financial education contribute to a cycle of debt and
financial instability for many households. Sucuahi (2021) highlights the determinants
of financial literacy among micro-entrepreneurs in Davao City, revealing that many
micro-entrepreneurs lack the necessary financial knowledge to manage their
businesses and personal finances effectively. This gap in financial literacy often
leads to poor financial decisions, such as taking on high-interest loans or failing to
save for emergencies, further exacerbating their financial vulnerabilities.

Similarly, Grate et al. (2021) conducted a study among government employees in


Davao City, identifying significant gaps in financial literacy even among educated
populations. Their findings indicate that there is a critical need for enhanced financial
education programs to ensure comprehensive understanding and effective financial
practices across different demographics. The city's efforts to embrace digital
financial services, such as the partnership with GCash for a cashless transformation,
demonstrate a move towards improving financial access and literacy (Davao Life,
2022). However, the digital divide and varying levels of financial literacy pose
challenges to the widespread adoption and effective use of these services.
Furthermore, DavaoStart (2023) provides a comprehensive list of financial and
lending institutions in Davao City, highlighting the availability of financial services.
Despite this, the limited financial literacy among residents hinders their ability to fully
utilize these services to improve their financial well-being. The economic impact of
the COVID-19 pandemic has underscored the importance of financial resilience.
Many households in Davao City faced financial hardships due to job losses and
reduced incomes, highlighting the need for effective money management skills and
financial literacy education. This study aims to address these local challenges by
exploring the specific financial behaviors and needs of individuals in Davao City. By
identifying the factors that influence financial literacy and money management in the
region, the research seeks to provide practical recommendations that can help
residents achieve financial stability and resilience.

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