Investing 101 for OFWs
This is a feature by Pru Life UK on how overseas Filipino workers can invest their hard-earned money.
MANILA, Philippines - Figuring out a savings plan is already quite a challenge for the overseas Filipino worker (OFW) who prioritizes sending money for household needs, children’s education expenses and debt payments.
However, investing money is a foreign concept in itself for Filipinos who grew up practicing only an "earn-spend" culture in their money cycle.
Many Filipinos work in a different country in the hope of earning bigger gains, but a smarter move is to make your earnings work for you by investing. Managing your money wisely may get you to celebrate your permanent homecoming sooner.
Investing earnings may not be a priority for OFWs for now, as the 2012 Q1 Consumer Expectations Survey (CES) conducted by the Bangko Sentral ng Pilipinas (BSP) reflects that only 8.5% of OFW households allocate money for investment.
Things are looking up however as the study likewise signals an increasing awareness among OFWs on the need to save and invest, as the number of investing OFW households has increased from 6.4% in the previous quarter, and those that allocate money for savings register 42.7% in the first quarter of the year.
The lack of financial know-how for OFWs and Filipinos in general inhibits utilizing resources more effectively and recognizing options and opportunities money-wise, and investing is an area that should be studied and explored for hard workers abroad.
Pru Life UK Senior Vice President and Chief Marketing Officer Belle Tiongco said investing is simply making your money work for you.
"It's putting your money in an instrument or investment vehicle that will allow it to grow. It's important to invest because money left unattended will not grow, and the steward is tempted to spend, spend, spend," she said.
Tiongco further explained how investing money allows effective stewardship of resources. "Money is not like a plant or seed that you throw on the side of the road and by some miracle sprouts. Money needs to be managed for it to keep growing," she said.
Horror stories and misinformation
The biggest hindrance for OFWs to invest are the many horror stories that run the circuit – pyramid scams, people making wrong choices and losing everything they have worked for.
"It is understandable that OFWs want assurance that their money will grow," Tiongco said. "They’ve made a lot of sacrifices for the money that they have; even individuals who made the wrong choices before them probably had the same concerns."
Basic investing guidelines
There is no one simple way to invest, but Tiongco said there are guidelines OFWs can follow to make their money work for them.
1. There is no "one size fits all" investment option that is applicable to everyone. We have different financial needs, requirements and behaviors, and there is no generic investment option that will work for everyone.
2. It all depends on your level of "risk tolerance." One of the biggest problems when investing is that OFWs tend to ask if growth is a "sure thing."
Tiongco said: "If I were an OFW, and already a full nester, I'd probably be more conservative with my funds, so I'll put them in investment instruments that are on the low risk side."
"On the other hand, if I were just starting out, and I'm single and more adventurous with my funds, I can choose to invest in equities and see my investments gain value in the long term."
3. Identify your goals and timeframe. Your financial needs and goals should also be identified according to where it falls in your investment timeframe. Short-term investments mature quickly and are usually ideal for those who recognize and understand trends in the investment market. It is also for those who will need to get back their money in the next six months to one year.
Long-term investments are ideal for those who wish to set aside and grow their money for their retirement, or for their young children’s college education. These have a relatively lower risk, but seeing the yield of your investment takes time. So be patient, and remember your goals.
4. If it is too good to be true, it probably is. If you do a quick web search of all the horror stories that plague those who want to invest, one common denominator is that most of these people who lost their savings in investments were offered big returns in a short time.
According to Tiongco, this is the most important rule to follow when you are starting out to invest. "For investments to grow, it takes time. A lot of time. So if the promises seem too great, it most probably is."
5. Seek counsel. The best thing that OFWs can do is to seek help from stable and trusted financial institutions on getting started in investing.
"Look for good advise, which you can get from certified financial planners and also from certain bank personnel and investment or wealth advisers," Tiongco said.
She noted that there is a way for OFWs to start investing even while still stationed outside the country, because there are Philippine banks that offer investment instruments in their locations.
Getting enough information
It all still boils down to financial literacy, which Tiongco hopes that the government will address real soon.
"We really have a serious lack of financial education here in the Philippines. The fact that we are not a savings-focused nation is already a problem, what more not having enough knowledge to go about investing," she said.
The government can do much in the area of education, teaching OFWs about their duties, options and opportunities when it comes to money or funds, and in providing free financial advice to those working abroad.
And if there is one vital piece of information Tiongco wants to share with OFWs investing-wise, it is this: "Be patient and careful. Pay your taxes and be compliant. When investing and making your money work for you, these are the biggest contributing factors. Do not shortcut. It will all be worth it in the end."
Pru Life UK is a subsidiary of Prudential plc, a United Kingdom-registered company. Pru Life UK and Prudential plc are not affiliated with Prudential Financial, Inc. (a US-registered company), Philippine Prudential Life Insurance Company, Prudentialife Plans, Inc. or Prudential Guarantee and Assurance, Inc. (all Philippine-registered companies).
Pru Life UK is a life insurance company and is not engaged in the business of selling pre-need plans.
Pru Life UK is a member of the Philippine Life Insurance Association.