PH millennials carry more debts than their older peers

Filipino investors are among the best in the region when it comes to saving and tracking expenses but a significant portion—mostly the millennials or young adults—are at risk of being debt-strapped, based on the latest Manulife Investor Sentiment Index (ISI) survey.

Despite being cautious in managing their finances, more than four in 10 Filipino investors carry debt, with the proportion being higher among those under 35, the research indicated.

The regional research was based on 500 online interviews in Hong Kong, China, Taiwan, Japan, Singapore, Malaysia and the Philippines as well as 500 face-to-face interviews in Indonesia.

Respondents were middle class to affluent investors, aged 25 years and above who were the primary decision makers of financial matters in the household and owned investment products.

Apart from daily living expenses, a large share of the debt incurred by Filipino investors represent outlays for their children’s education, medical expenses and discretionary expenses, indicating the relevance of wealth management products to help in wealth accumulation and disciplined financial management, Manulife said.

Despite strong day-to-day financial discipline, the relatively high levels of personal debt (excluding mortgages) could jeopardize their long term financial security, it said.

The percentage of Filipino investors who carry debt was estimated at 41 percent—the second highest proportion in the region after Malaysia. Most (41 percent) have relatively small amounts of debt ranging from P5,000 to P24,999, 7 percent have debts of P500,000 or more.

A third of respondents cited daily living expenses as the main factor contributing to their debt, which could indicate that investors’ ability to save regularly may rely on the  use of credit to pay for day to day living expenses, the research said.

The mean debt level incurred by millennials, or Filipino investors below the age of 35, is P291,582 higher than the debt levels of those in the 35-49 age bracket (P207,428) or those over 50 (P143,958).

Manulife’s survey is designed to track investor attitudes toward financial planning across eight markets in the region, to better understand investors’ needs and identify areas for increased financial literacy.

“Encouragingly, the survey found that Filipino investors are among the best in Asia in terms of their savings and expense tracking behaviors. Almost all investors surveyed (99 percent) track their expenses regularly and manage to save part of their income each month—both of which are key indicators of good financial discipline,” Manulife said.

The survey also found that Filipinos are effective savers, with 46 percent of investors who have set a target saving amount and starting to save early before the age of 30.

“This may explain why an overwhelming majority of investors (91 percent) claim they will have sufficient savings to meet their financial needs in five years time,” Manulife said.  Of those who have set a target saving amount, an overwhelming 74 percent expect to meet their goal in one to four years, which could indicate that Filipino investors are setting short term targets, Manulife said.

In addition, while Filipinos are prudent savers, more than 80 percent regret some investment decisions, suggesting they are unable to effectively invest their savings for the long term.

In addition, while the survey suggests that Filipino investors have good financial management, 80 percent of investors wish they have done better investment planning. In particular, a third of investors wish they have done more research on their investments, while a quarter regretted holding too much cash instead of investing and another quarter regretted not speaking to a financial planner.

This was seen as an indication that despite good financial discipline and regular savings habits, investors are failing to effectively invest their savings to generate returns. This was supported by the fact that Filipino investors park 26 percent of their savings in deposits or in investments with no specific purpose, indicating an opportunity to set a clear long-term plan to make the best use of their savings.

“While it’s positive that Filipinos demonstrate good financial discipline, effective financial management is about much more than just tracking your expenses and saving regularly. Investors also need to ensure they are managing their day-to-day spending to avoid falling into debt, and that they have clear plans to get the most out of their savings in the long run,” said Ryan Charland, Manulife Philippines president and chief executive officer.

“It’s always important to listen to family when making important financial decisions, but investors should consider seeking advice from experts who will be able to advise on how best to maximize return on investment. There are a wide range of investment solutions to choose from and it’s important to find the right product to suit your needs” he added.