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The Rise of the Middle Class Pinoy

Posted August 5th, 2016 in Articles by Corporate Communication

Do you collect gadgets, or take yearly vacations? Thinking of buying your first car—or maybe even your second? Perhaps you have a healthy savings account, or have extra funds to start your own business? Are you looking forward to getting married and growing a family? Are you more able to buy the things you need and want? If you answered yes to most of these questions, then you might be part of the country’s growing middle class.

 

Defining the Middle Class

While definitions differ based on country, a middle class family in the Philippines is generally seen as a family of five with a combined income ranging from PhP28,068, which is four times the poverty line to PhP70,170 which is 10 times the poverty line.1

In 2015, the middle class grew by another 5.8%, which is still lower than projected and slower compared to the previous year.2 Despite this, results from recent surveys conducted by the Banko Sentral ng Pilipinas (BSP) and the Philippine Statistics Authority (PSA) have shown that Filipinos in general have been steadily increasing their personal savings in the past few years.3

Income and Expenditures

BSP’s Consumer Finance Survey of 20125 shows that a typical Filipino household budget across all income classes spend most of their earnings on food and education, with housing and utilities coming in a close third. To illustrate a sample household budget using percentages taken from the survey, while applying an assumed middle-class monthly income of PhP40,000, a typical Filipino household’s budget distribution could look like this:

 

What Makes a Prudent Middle-Class Pinoy?

 Having an increased capacity to pay for needs and wants is good. But one should also create a sound financial plan and set aside for investments that protect and grow one’s wealth. Investment options like stocks, trust funds, and insurance don’t require a lot of assets, nor do they require you to learn a lot of technical knowledge if you deal with a certified broker, but its returns are promising. Today, these instruments have become even more accessible through internet portals and makes it even easier to manage. You can even buy insurance in malls.

Minor re-allocations of certain expense percentages show how it’s possible for a growing middle class family to factor in insurance and/or other financial protection tools into their monthly budget.

 

 

As of September 2015, only about 1/3 of Filipinos have some form of insurance protection.6 To ensure the continued financial stability of the growing middle class, the inclusion of life and medical insurance in their financial arsenal is important. This minimizes the risk of losing income due to death and other mitigating factors, like becoming disabled due to an accident.

The high cost of medical expenses is another concern that insurance helps manage. In 2013, the Philippine Statistics Authority (PSA) reported that Filipinos spent P526.3 billion in healthcare alone, which is 11% more than 2012, and has been rising steadily every year.7

 Still, even with these glaring statistics, life and health insurance still remains a non-priority for a lot of households in the Philippines. In fact, financial planners acknowledge that insurance is an important and often overlooked component of financial planning. Regardless, it is abundantly clear that the cost of paying insurance premiums doesn’t come close to how much you might lose without it.

 

What’s Next for the Middle Class?

Take advantage of your improving financial capacity by investing in something that’s a sure winner. Some insurance premiums add up to just a few pesos a day, but the peace of mind it brings is priceless. So consider Philippine Prudential’s life and medical insurance products today. For you and the ones you love.

 

Note: Computations presented in this article are for illustrative purposes only. For a more thorough and personalized computation, please consult with a certified financial planner. Or call us at 902-2300 for free financial advice.

References:

1Based on official Philippine Poverty Statistics released by the NSCB, a family of five needed P4,869 monthly income to meet food needs and P7,017 to stay out of poverty.

2http://www.philstar.com/business/2016/02/01/1548259/special-report-middle-class-reaping-fruits-fast-growing-economy; http://www.gov.ph/2014/07/30/2015-budget-message-of-president-aquino/

3https://psa.gov.ph/sites/default/files/attachments/hsd/pressrelease/TABLES%202A%20%26%202B%20Average%20Income%2C%20Average%20Expenditure%20and%20Average%20Savings%20of%20Families%2C%20by%20Per%20Capita%20Income%20Decile%2C%20Phils%202009%20%26%202012.pdf

4http://www.bsp.gov.ph/downloads/publications/2012/cfs_2012.pdf

5http://www.insurance.gov.ph/_@dmin/upload/reports/PR_MicroinsurancePenetration.pdf

6https://psa.gov.ph/national-health-accounts-press-releases

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