1. 1.

THE LEVEL OF FINANCIAL LITERACY OF MINIMUM WAGE EARNERS IN DAVAO

CITY An Undergraduate Thesis Presented to the Faculty of the College of Accounting
Education Submitted By: Ricky James D. Dayot Paolo Vic T. Elarcosa John Carlou J. Perez
Katherine S. Uy (14-026)
2. 2. ABSTRACT The government of the country still regulates the minimum wages in every
region with different amounts in accord to the industry needs. The industries which are
covered by the labor code law tend to adopt the constitution in paying of salaries or wages
as compensation. There is a minimal amount of inducement to be legally provided with the
approval of the authorized personnel. Generally, the intent of this study is to determine the
level of Financial literacy of minimum wage earners in Davao City in spending strategies. In
this regard, they may know more the functional tool of being aware about basic cash
management. Through the use of scientific approach relevant in this thesis, financial
management and decision-making theories applied, minimum wage earners parlance’
resources and the usage of questionnaires dealing with the concern of the respondents. This
thesis seeks to improve the insufficient way of managing financial affairs of minimum earners
in numerous ways for the betterment of wisely dealing cash funds. By raising awareness and
understanding to the minimum wage earners. This aims to contribute sufficient and
appropriate solutions to solve blind-minded individuals pertaining money against cognizant.
Keywords: Financial literacy, minimum wage earners, Davao City
3. 3. Chapter 1 INTRODUCTION Rationale of the Study It has been observed that more
individuals when it comes to money are accountable of their own financial security and
confronting, for the enhancement of understanding as to economic phenomema, with ever
more complex financial mechanisms. Individuals, nowadays, are facing in a circulation of
newly outsourced investment products and the financial markets burst out its complexity..
There are now an expansion beyond national borders on the opportunities in investment,
allowing individuals in a broad range of assets and currencies to invest. Though, as the
financial crisis has made clear, it becomes very hard to navigate this type of financial system,
and the consequences of mistakes can be devastating. The need to decide, economically,
must have an understanding about financial matters. The results of an improved saving
behavior and decision making, is because of having a programs on financial education,
much can be done to improve these programs' effectiveness (NBER, 2008). According to
Alan Greenspan (2010, para. 2), “The generation and economic problem today is then said
to be due to unaware about financials. Financial education plays a key role in improving the
lives of individuals. Financial Planning has become not just a convenience but also an
essential survival tool. Contextually, the standard of living does not matter but it is somehow
and somewhat strategic techniques on knowledgeable individuals persist and endeavor in
the accurate way of everyday living (Jacob, 2000).
4. 4. In the records of Department of Labor and Employment, there is a variety of numbers of
Minimum Wage Earners in Davao City, which includes salesperson, construction workers,
security guards, and other low-income earners. These earners need to learn about broad
definition of money on every errand for their guidance. People are usually guided as to their
attempts to budget, to outlay or to save their money up to the utmost financial management
(IFAC, December 2012). Very few low-income earners elect to take a course that will
improve financial literacy and after all, people cannot be constrained to sit down and
concentrate long enough to learn what they must know to look out for themselves (Dr.
Mandell, 1999). The study regarding low-income earners shows how knowledgeable and
functional they are in the future choices and decisions on managing money. The continuous
involvement of minimum wage earners on their ability to make economic financial decisions
pertaining money affairs caught the attention of the researchers to conduct a study. This
eagerly induces researchers to enlighten and to aware their minds about the monetary
refinement of minimum wage earners as their bases for future economic actions.
OBJECTIVE OF THE STUDY This study determined the level of Financial literacy of
Minimum Wage earners in Davao City for spending strategies. Specifically, this study sought
 to arrive at the following objectives: 1. To determine the characteristics of minimum wage
earners according to: 1.1 Sex 1.2 Educational Attainment
5. 5. 1.3 Civil Status 2. To find out the level of financial literacy of the Minimum Wage Earners
in Davao City in terms of: 2.1 Budgeting 2.2 Saving 2.3 Investing 3. To find out the significant
difference of the financial literacy of Minimum Wage Earners when analyzed according to
their characteristics. Statement of Hypothesis Ho: There is no significant difference in the
level of financial literacy of Minimum Wage Earners when analyzed according to their
characteristics. Significance of the Study This study provided information on the Minimum
Wage Earners knowledge about economic matters in Davao City as the basis for spending
strategies. This study will benefit the following: Municipality of Davao. The City Hall’s office
will use this information as the basis for setting the minimum payroll for Davao Minimum
Wage Earners. Construction Workers. The result will provide information to get more money
from their small earnings, which includes spending strategies. Security Guards. The findings
will give guidance to secure their funds in disbursing. Salesperson. The study will guide and
inform this earner in managing financial affairs.
6. 6. DEFINITION OF TERMS The following are the definitions used in this study: Budgeting. A
plan for how much money you have and how much money you spend. COLA (Cost of Living
Allowance). It is an adjustment on wages, for the changes in the cost of living, to create
economic balance. Davao City. It is a city in Mindanao, Philippines and grouped, but
governed independently, with the province of Davao del Sur. The city covers about 182
barangays in totality, composing 11 administrative districts under three congressional
districts in all. Economic Decisions. A decision that depends on the economy that is currently
in place. Financial Literacy. It is the possession of knowledge necessary to understand
concepts related to money; refers to the ability of individual, for an effective judgment about
the usage and managing of their money, to make informed and effective decisions. Investing.
It is a commission of money or capital in order to acquire a financial return; to spend for
future advantage and devote for benefit.
7. 7. Investment. It is related to saving and deferring consumption; an act of putting money,
usually over a longer term, into something with the expectation to gain in return of the
invested amount. Minimum Wage Earners. Individuals, employees or workers receiving the
lowest or minimum wage fixed by legal authority or by contract as the least. Monetary
Matters. It is something in which money is concerned, such as financing, budgeting or
saving. Savings. A detailed plan to be use as a guideline for spending and saving of future
earnings and expenses.
8. 8. Chapter 2 Review of Related Literature Related Literatures Through reading of literature
and studies, this research has something to put up in the present study. This covers the
discussions regarding Minimum Wage Earners, financial education on budgeting, saving,
and investing, investment strategies and economic decisions. Minimum Wage Earners.
Since the seminal work of Stigler on 1946, economists know that the minimum wage can
have a positive impact on employment. For a longer period, it has been known that the
minimum wage can have a negative impact on employment (Benjamin et. al, 2012). The
Operation HOPE, Inc., A Global Fleader for Financial Dignity (2007) published its mission,
for the empowerment of wealth-less, on eradicating poverty in a way of establishing “silver
rights” or the right to financial literacy. The mission in expanding the economic opportunity for
the uninformed communities gives betterment of the financially viable quality of life for
individuals, families and communities. Wages and salaries are the compensation of the
workers equivalent to their work rendered. While business owners and workers are allowed
to have a stipulation on the amounts to be considered as salaries, these must not be then
lower than the minimum wage set by the Regional Tripartite Wages and Productivity Boards
(RTWPBs) in the Philippines. In the records of National Wages and Productivity Commission
under Region X1, provides integration under W.O. No. 16 into the basic
9. 9. wage of the P15.00 COLA; and a new COLA of P15.00/day trenching P5.00 upon
effectivity and P10.00 effective May 1, 2012. Thus, the daily income before of P286.00 Basic
 Minimum Wage Rates/day plus its New COLA as per wage order totaling P301.00 is the new
stipulated rate of a low-income garner can have. Financial Literacy. The Australia and New
Zealand Banking Group Limited (ANZ) in its survey defines financial literacy as the capacity
to make effective decisions from its core informed judgements regarding the use of money
and managing it(2008, p. 6). Early evaluations noted by Douglas Bernheim and a series of
co-authors, he suggest that the increasing participation in planned savings shall have a
workplace financial education initiatives (Bayer, Bernheim, Scholz, 1996; Bernheim, Garrett,
2003), while adult propensity to save has increased significantly in financial education
(Bernheim, Garrett, Maki, 2001). Moreover, the publication of Jumpstart Coalition (2012)
stated that the more education one has, the more his or her average income goes up.
Experience and understanding is the basis of knowing how, with some definitions merely
requiring familiarity. Still others, such as stated by Mandell (2007) and Lusardi and Tufano
(2008), emphasize a judgment and decision-making aspect of financial literacy. Lusardi and
Tufano also focus under debt literacy as one of the specific form of financial literacy. Moore
(2003) goes so far as one basis in providing an increased level of knowledge and other
aspects of financial literacy is the practical experiences obtain by an individual.
10. 10. However, consumers often think that they know more than they actually do (OECD,
2005) – a common concluding acts that has been demonstrated not just concerning about
money, but in the range of knowledge and abilities as well across its course (Alba &
Hutchinson, 2000; Yates, 1990; Lichtenstein, Fischhoff, & Phillips, 1982). Finally, Lusardi
and Mitchell noted that some studies, as a component of financial literacy tests, have
explicitly included numeracy (Lusardi & Mitchell, 2007a, 2007b; ANZ Bank, 2008; NCEE,
1999). As explained considering numeracy relating to and in support of financial literacy, or
basic number skill (Lipkus, Samsa, &Rimer, 2001; Peters et al., 2006), to be a distinct
construction of financial capabilities. Budgeting. Budgeting plays a biggest key in managing
well the money as discussed by Caldwell in its article. Caldwell added that many people,
even just a simple term budget, are often turned off. However, budgeting can actually save
you money, and allow you to have more to spend by helping you to make the most of your
money. (Caldwell, 2013) In a wiseGEEK article, mentioned that oftentimes, flexibility is the
means to a succession on a well-budgeted and accounting of money matters. Payment of
those bills should be an inflexible element due to some certainty of expenses which are fixed
in amount. Furthermore, it added that money allocated for one purpose could not be
reallocated or another if flexible budgeting is improperly used or never have been
implemented. Jeremy Vohwinkle (2012) suggested creating a budget; take control of the
money so that it does not control you. He exerted also so as to spend too much
11. 11. money on one expense may make a shortage on another expense, which would yield
results that are less than expected. Saving. According to Dustin (2011), improper planning to
save money can be the reason that makes the next generation could be worst if the
generation previously becomes unproductive and thus only the individual or small community
scale are working. One generation saving money, factually, can’t undeniably make them
better off. Money, as explicitly stated by Dustin, is neither long-lasting good nor prosperity of
living in its broad sense. In an article entitled How and Why to save a Money (2001), it
expresses that if you want to achieve a huge financial targets from just a small knowing of
how and why then saving money is essential to be observe. It was suggested in the article
that it is important for an individual’s financial resources to make their investments wisely
protected for the improvement of their financial security in future times. Investing. In Daisy
Slan and Veniayetta Aikens study, it shows that the more you have to invest, the more
money you are likely to end up having. Moreover, Shamin Preeda insisted that proper
investment planning is more likely to have any chance of success in financial endeavors. The
most important helping tool specified by Shamin Preeda is to understand how economic
finances works in order to have a sound investment portfolio, and so thereby, individuals will
be familiar what are the various types of investing techniques. In the article of Canadian
Securities Administrators, it was stated that everyone defines money indifferently with the
 others—personal freedom, the individual's wants of life is one factor which senses of security
or the ability to afford
12. 12. the things. Having a proper and workable investment plan can help get where the
salaried individuals want to be. [Canadian Securities Administrators in an article Investing
Basics-Getting started, 3rd part] Investment Strategies. In an annotation of The Independent
Financial Portal (Financial Web) stating that investment strategy, to ensure the succession of
financial goals satisfaction, deals with the overall long-term guidelines that sets up and
attempt to implement financial solutions. Indifferent considerations on different background of
individuals affects the decision pertaining to investment strategiey. In deciding the
investment strategy of the investor during lifetime which is based on the financial periods,
commonly utilize is the 'life cycle approach' (“Investing your money,” 2003). Economic
Decisions. Since World War, economic theory of decision making was considered the major
paradigm in making decisions (Schoemaker, 1982; according to Plous, 2002). David Ingram
expresses that economic decision making is the fundamental basis to individuals’ desire
somehow, while minimizing costs, to ensure the maximization of benefits. This balancing act
is a skill that takes practice to master, and is referred then as maximizing value. [David
Ingram, Demand Media, 2012] Oftentimes, people usually want more things than they can
afford. This forces them to make economic judgements and decisions. Hallerbach and
Spronk (2003) emphasizes thoroughly in its study that most financial-economic decisions
made consciously, with unambigous and constant drive to do “good”, “better” or even optimal
decisions. Nevertheless, despite the availability of financial economic theory, many decisions
do not earn these type of qualifications in practice which could be valuable in future
judgements.
13. 13. Theoretical Framework The study was affixed in the research paper of Annamaria
Lusardi and Dr. Mandell (2009), National Financial Educators Council (NFEC), and
Jumpstart Coalition. This study was sustainably associated with the following theories:
Annamaria Lusardi (2007) stated that individuals need knowledge beyond the fundamental
financial concepts discussed above in order to make saving and investment decisions
competent. Furthermore, the relationship between risk and return of money is the basis to
strengthen individuals understanding. She noted that basic knowledge is the objective of any
designed policy to promote financial literacy. The NFECs Financial Literacy Standards were
developed to help individuals achieve a state of financial capability and implement the
learned money management lessons in the 'real world' so as to provide then clearer steps.
Through collaborative efforts from the NFEC's team of educators, financial professional and
community leaders, these financial education standards represent the best practices in the
industry. For personal economic well-being, the JumpStart Coalition asserts that individuals
should be able to take individual responsibility. They insisted that, broadly speaking, person
possessing financial capacity should know how to: find, evaluate, and apply informative
economy; set goals and plan financial affairs to achieve them; enhance potential income-
earning and saving abilities; use effective financial services; meet financial obligations; and
profound and protect wealth.
14. 14. Level of Financial Literacy  Budgeting  Saving  Investing Characteristicsof Minimum
Wage Earners:  Gender  Civil Status  Educational Attainment Conceptual Framework The
study is intended to establish the relationship between the individuality of Minimum Wage
Earners and the level of financial literacy as the basis for investment strategies for future
economic decisions. The Figure 1 below illustrates the independent and dependent
variables. Figure 1. Conceptual Framework Showing the Variables of the Study
15. 15. Chapter 3 METHOD Presented in this chapter are the methods and procedures used in
making this research. It gives information about the device which is useful in the data
gathering and the statistical tools used for the analysis and interpretation of the data being
gathered. Research Design This study will use descriptive quantitative method to assess the
level of financial literacy of minimum wage earners in Davao City. Descriptive research that
are going on or trends that are evident in an opinions held in processes, is concerned with
 conditions, practices, structures, differences or relationships that exist (Best 1970). Research
Respondent The 40 respondents of the research were the minimum wage earners in Davao
City with 2012 barely minimal monthly earnings. These earners will be organized according
to the factors affecting their financial literacy level. Research Instrument A modified
questionnaire, adopted form the study of a certain researcher, was used in collecting the
data. The first part of the instrument used is the profile background of the respondents and
the second part is their level of financial literacy under budgeting, saving and investing. It is
composed of five questions in each
16. 16. independent financial aspect that will be answerable by level of frequency and if it is not
attainable it will be treated as blank. Research Procedures Data Gathering. The sampling
plan will include the sample of 40 minimum wage earners, with different kind of jobs, in
Davao City.  Suitable questions modified from related research was used in creating the
survey and individual questions will be formed. The survey will be comprised of 15 questions
in totality, which will be related to the respondent’s knowledge about financial matters.  The
confidentiality of the respondent’s survey was assured. We will be giving them the option of
being anonymous in an understanding that people’s consciousness may hinder the
answering of survey.  After the researchers have gathered the data, Likert scale was used
in the questionnaire to determine the respondents’ behavior in a subject matter provided and
to determine the level of their financial literacy. The data gathered will be analyzed using the
scaling below. Figure 2. Data Interpretation Scale Range Level Interpretation 0-1 Very Low
Financially illiterate 1.1-2 Low Below Average in Financial Literacy 2.1-3 Moderate Average
in Financial Literacy 3.1-4 High Above Average in Financial Literacy
17. 17. 4.1-5 Very High Financially Literate Statistical Tools Treatment of Data. The following
statistical tools was used in the computation of data. 1. Percentage/Frequency. This was
used to identify the ratio of characteristics of the Minimum Wage Earners in Davao City in
terms of sex, educational attainment and civil status. 2. Mean. This was used to determine
the financial practices and applications of the Minimum Wage Earners in terms of budgeting,
saving and investing. 3. Analysis of Variance (ANOVA). This was adopted to test the
hypothesesdeveloped in this study. Moreover, this was used in identifying the significant
difference of the level of financial literacy of the Minimum Wage Earners. 4. T-test. This was
used to measure the significant difference in the level of financial literacy by Sex,
Educational Attainment and Civil Status.
18. 18. Chapter 4 RESULTS AND DISCUSSIONS The study’s population is composed of
minimum wage earners in Davao City. There are 40 respondents with three different
characteristics. The table below summarizes the gender, educational attainment and civil
status of the respondents and its respective percentages. Table 1 Frequency Distribution of
Respondents Descriptive Value Frequency Percentage Sex Male 21 52.5 Female Total 19
40 47.5 100 Educational Attainment Elementary Graduate 2 5 High School Graduate 16 40
College Graduate 22 55 Total 40 100 Civil Status Single 20 50 Married 20 50 Total 40 100
The table exemplifies that the population of the male respondents acquired more than half of
the entirety with the ratio of 52.5:47.5 as to sex. The table illustrated also that the college
graduates dominated the total respondents which represents 55% of the totality. High school
graduates comprise 40% and elementary graduates resulted to a 5% of the population under
the educational attainment variable. The table shows above, when analyzed by their civil
status, that the population of the single and married respondents got the same percentage
showing a ratio of 50%:50%.
19. 19. Table 2.1 Level of Financial Literacy in terms of Budgeting Item Statement Mean
Descriptive Level How frequent are you budgeting your labor-worked money? 4.13 Very High
Do you consider the benefits over cost? 3.80 High Do you consider the value of the thing you
buy? 4.20 Very High Do you compare your previous expenses with the expenses in present?
3.60 High Do you keep records of your income and expenses? 2.88 Moderate Overall 3.72
High The table above shows the level of financial literacy of the minimum wage earners in
the field of budgeting, which is from moderate to very high under each item statement
 thereupon. The following results indicate that the minimum wage earners have an overall
average or mean constituting 3.72 in totality which describes as high in descriptive level in
this field and practicing it at the same time. Table 2.2 Level of Financial Literacy in terms of
Saving Item Statement Mean Descriptive Level Are you saving? 3.70 High Do you properly
spend your money every transaction? 3.83 High Do you consider how much you saved and
spent last month? 2.88 Moderate Do you keep a record of all your daily savings regularly?
2.60 Moderate How frequent are you saving than spending? 4.00 High Overall 3.40 High The
table 2.2 shows the level of financial literacy of the minimum wage earners in the field of
saving which is from moderate to high under each item statement on the specification above.
The result signifies that they are saving their money frequently as indicated above by its
overall mean approximately 3.4 and therefore resulting to an overall high in descriptive level
of knowledge about this field.
20. 20. Table2.3 Level of Financial Literacy in terms of Investing Item Statement Mean
Descriptive Level Are you aware of the business world? 3.45 High How frequent are you
dealing with money management? 3.95 High Do you make any business if in case you have
extra money? 3.13 High Do you properly manage the time and money? 3.53 High Do you
make decisions for future expenditures and savings? 3.95 High Overall 3.60 High The table
2.3 shows the level of financial literacy of the minimum wage earners in terms of investing
their idle or extra money. The results indicate that though they are earning less or at the
least, the respondents’ level of knowledge in this field is high when analyzed in its mean
approximating 3.6 of the overall item statement thus minimum wage earners are
knowledgeable when it comes to investing money affairs. Table3.1 Significance of the
Difference in the Level of Financial Literacy of Minimum Wage Earners by Sex Indicators
Male Female F-Value P-Value Decision=Ho Budgeting 3.81 3.62 0.72 0.4 Accept Saving
3.29 3.53 1.39 0.246 Accept Investing 3.47 3.75 1.7 0.201 Accept Overall 3.52 3.63 0.42
0.52 Accept The table 3.1 shows that the level of financial literacy of minimum wage earners
in terms of budgeting, saving and investing is considered to be high because of the resulted
overall analysis of data when analyzed by sex. In analyzing the data using ANNOVA, the
researchers always consider the P-Value in order to arrive at the decision whether to accept
or to reject the null hypothesis. Wherein the chance of
21. 21. accepting the null hypothesis is always attainable under the independent variable
illustrated above. Table3.2 Significance of the Difference in the Level of Financial Literacy of
Minimum Wage Earners by Educational Attainment Indicators F- Value P-Value
Decision=HoElementary Graduate High School Graduate College Graduate Budgeting 3.6
3.74 3.72 0.03 0.97 Accept Saving 3.3 3.29 3.49 0.47 0.63 Accept Investing 3.3 3.43 3.75
1.29 0.29 Accept Overall 3.4 3.48 3.65 0.57 0.57 Accept The table 3.2 above shows a high
level of financial literacy of the respondents when analyzed according to educational
attainment in each indicator. The overall result thereby is the likelihood of accepting the null
hypothesis. The probability of getting 95% of correctness in the computational process under
the P-Value is always attainable in each aspects of financial literacy in the independent
variable illustrated above. Table 3.3 Significance of the Difference in the Level of Financial
Literacy ofMinimum Wage Earners by Civil Status Indicators F-Value P-Value Decision=Ho
Single Married Budgeting 3.69 3.75 0.07 0.789 Accept Saving 3.48 3.32 0.6 0.442 Accept
Investing 3.62 3.58 0.03 0.857 Accept Overall 3.6 3.55 0.07 0.787 Accept The table 3.3
shows above that the level of the minimum wage earners financial literacy resulted to a high
level of frequency after considering the data gathered, using ANNOVA, under budgeting,
saving and investing, when analyzed
22. 22. according to civil status. The presumption herein is to accept although there is a
difference but it is not significant at all. The decision made to accept the null hypothesis is
greater than the approximate error set on the overall results illustrated under the
independent variable above.
23. 23. Chapter 5 FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Summary of
Findings The researchers had conducted a survey, composing five questions in each
 dependent variable, to 40 minimum wage earners. The gathered data, with the use of the
research instrument, has been analyzed and interpreted to determine their level of financial
literacy. 1. Majority of the respondents were male and most of them were college graduates.
While the ratio between single and married respondents was noted equally. 2. Using the
Mean Deviation, the level of Financial literacy of the overall result in the three
independentvariables is high. The result therein indicates that their knowledge in financial
aspects is all above the average of the minimum wage earners. 3. Using the ANOVA and the
t-test approach, results showed that there is no significant difference in the level of financial
literacy of Minimum Wage Earners when analyzed according to their profile, thus the null
hypothesis is accepted. Conclusion This research showed that though it has differences in
totality, each independent variable with respect to determining the level of financial literacy of
the minimum wage earners, this cannot be considered as significant at all. In addition, this
research shows that even though respondents earned within the minimum amount of
24. 24. wages per day stipulated in the Regional Tripartite Wages and Productivity Boards
(RTWPBs), they still do budgeting, saving and investing intheir idle funds for future spending.
Recommendations In line of the findings and conclusions as the basis of the study, the
following recommendations were drawn by the researchers: 1. The Municipality of Davao
should set the bases for the wages of Minimum Wage Earners per day and they should
make an additional amount of pesos for the betterment of their spending strategies. 2. The
minimum wage earners, such as Construction Workers, Security Guards and Salesperson,
should keep track on their daily recordings for their future spending and expenditures
strategy.