You Can't Count On Remittances Forever As Said By Suzie

[Call me bubba]

MANILA, Philippines - Families of overseas Filipino workers must anticipate the day when remittances from their loved ones will stop coming, international personal finance advisor Suze Orman said on Monday in Manila.,said that families who are dependent on remittances must always think that the money will not flow forever; their loved ones can lose their jobs abroad, get sick, or even die."Anything can happen at any time and the problem that is going on out there [abroad] when one person from over there stops sending money in here, you've not only affected one person there but also four, five or six people over here. Then that starts the very dangerous possibility of things going wrong,"Orman said in a talk hosted by the Bank of the Philippine Islands.OFW-dependent families have to understand where that money comes from in order for them to get motivated to fix their household finances, she added.The Philippine economy is kept afloat by consumer spending that is primarily fueled by OFW remittances. Last year, overseas workers sent $20-billion back home, a record in remittances. According to a survey conducted by Citibank in 2007, however, only one of 10 Filipinos save enough to last their families nine weeks.Orman said OFW dependents must change their expectation that the funds they receive every month are going to always be there."And once we understand it is possible that that check would stop [coming], you would think twice before you go out and buy a flat screen TV or you do things other than saving that money," the financial advisor said.No money of their ownOrman shared that members of her household staff are Filipinos, so she is familiar with the habits of OFWs, and the culture of sending their entire paycheck back home and leaving nothing for themselves."And we always say 'Can't you just save a little money of your own? Can you just keep a little something for yourself?' It goes on for 10, 15, 20 years," she said.Then Orman observed that in the last two years, her staff stopped coming home to the Philippines for their annual month-long vacation every May. When she asked, they said they wanted to save the plane fare money and open a bank account."They are afraid they don't have money themselves and what are they going to do? And their parents can't take care of them, their parents just died or something happened," she said.That sudden change in their thinking was brought about by the realization that they are getting older and they are not feeling as sprite as they did 10 or 20 years ago.The personal finance guru noted that this phenomenon is not exclusive to the Philippines but it resonates to economies that are dependent on remittances such as African countries.Change culture of mendicancyOrman said that it is important to evaluate the realities that are besetting OFWs and their families. They should also think about whether or not perpetuating the culture of mendicancy among the able-bodied members of the extended family is really helping them and the economy."Are we helping those people by sending money to them so they never have to dig deep themselves and reach their own potential because the money is coming into them like clockwork when they haven't made any contingency plan in case that money stops because they don’t think it will ever going to stop?It is possible that we're hurting them rather than helping them/ Because a lot of times they [dependents] are still very young," she said.The personal financial advisor related that some members of her household staff have dependents that are young, employable people. One of them told Orman that her 23-year old brother ""just does not want to work" despite being in perfect health."But it's another thing for parents. I believe all children should take care of their parents, I don't care where they are. I take care of my own mother, she's going to be 97. It's an honor to have money to take care of my mama. [but] it's a whole different light if you're talking about brother, sister, friends, or things like that," she said.http://philnews.com/...news_0228ah.htmedited from original post

Edited February 28, 2012 by Call me Bubba

[Art2ro]

That's just the way life is in the Philippines and in other 2nd and 3rd world countries! Just have to cope and or go with the flow until one has enough money to be self reliant from a reliable steady employment or from a business that is diversified! It's a do or die situation, with no source of income, you will die eventually or will continue to sponge off from family, relatives or friends forever! Can people in general live long with the guilt of being dependent on others and or with low self esteem?

[Old55]

That's just the way life is in the Philippines and in other 2nd and 3rd world countries! Just have to cope and or go with the flow until one has enough money to be self reliant from a reliable steady employment or from a business that is diversified! It's a do or die situation, with no source of income, you will die eventually or will continue to sponge off from family, relatives or friends forever! Can people in general live long with the guilt of being dependent on others and or with low self esteem?

I agree Art. Some time ago (I’m too lazy to look) Lee or someone posted how few Filipinos ever had enough money after covering basic needs to know how to save or the benefits of saving.I think down deep many Filipinos believe in fate and have a live for today and don’t worry for tomorrow attitude. I could be wrong perhaps that would be an interesting question to ask a Filipino.

[Garpo]

When I have discussed saving money with my wife and often ask her why her family never seems to save money she has often replied to me that part of the problem with her family is that if one member has any extra money then other members will always want to borrow it and because the family bond is so strong it is often expected that any extra money is meant to be shared with the family. Because of this type of attitude, you are better off to spend what ever money you might have or end up giving it away to others who are in need.

[Art2ro]

Filipinos believe in fate and have a live for today and don’t worry for tomorrow attitude

That seems to be the correct presumption or assumption and will probably continue as long there are hard working/self sacrificing OFWs and rich pooreigners with a large extended Filipino family they married in to! What's there to do? Just grin and bare it or move far far away and how far or where?

[JJReyes]

The above is a good example why I distrust overnight financial experts on the Philippine economy. Her expertise is derived from hiring a few domestic helpers, probably undocumented workers because the US Embassy won't issue H1/H2 visas for unskilled workers.My guess is Suze Orman concluded that OFW families save very little based on total remittances through the banking system and money in savings accounts. (Please remember her sponsor is the Bank of the Philippine Islands and they want to increase the number of depositors.) The savings data is gathered by the Bangko Sentral ng Pilipinas from the banking community and the aggregate information is forwarded to the Bank for International Settlement in Switzerland. This is the central bank for central banks. After checking for accuracy, the data is then published.In a corrupt political system, how many citizens trust their government and the government controlled banking system? We are not talking about the poor and really poor. This is about the new Philippine middle class - the 10 million plus OFWs and their families. A small part of their wealth is in banks, the balance is hidden under the mattress. My participation in the original remittance research is 25 years ago so I am uncertain which details have changed. My assumption is some of the fundamentals remain the same.Let's bring it closer to home. Just think how much jewelry your asawa or girl friend really owns and never wears. You are probably clueless regarding the total stash. That's her retirement savings when you go to heaven or, heaven forbid, if you abandon her. She has other forms of non-bank savings. That includes. believe it or not, lending or giving money to relatives. Guys, they are smarter than we are. Everytime you drink a bottle of beer, she is probalby putting aside an equivalent amount is some form of savings.This may not apply to the Canadians, Australians, and Britons in the forum, but I will use the Americans as another example. One accusation is we are lousy savers. At one time Americans were saving at 4% of disposable income compared to 10% or more by Japanese. Americans who distrust the banking system purchase memorabilias and other collectibles as a form of savings. I am dubious about baseball cards because it is nothing more than a piece of cardboard. Well, US dollars are pieces of paper with the words, "In God We Trust." What would happen if they changed the words to the more accurate, "In Government We Trust" or "In Politicians We Trust." Consider all the guns and ammo being purchased when times are tough. It is for protection. You only need one rifle and one side arm, why do they buy ten or more? It is a form of savings they can touch, feel and enjoy. Then there is the gold and silver coins trade. None of these will appear in the retirement savings data. In theory, Social Security is a forced savings account. Unfortunately, the Social Security Administration does not go out and buy buildings, farmlands, invest in new businesses. They are limited to buying US Treasury, which our politicians promptly spend. It's an accounting trick.Gawd! I would love to debate Suze Orman.

Edited February 28, 2012 by JJR

[Tukaram (Tim)]

Savings? What is that? I haven't had any money in savings since 1983... before I got married. I have been a single dad for 15 years and all disposable income goes to travel or entertainment of some kind. There is no savings. Almost everyone I know just gets by paycheck to paycheck. Well I do have about $15K worth of empty credit cards; that is as close to savings as I've got.

[Tatoosh]

You only need one rifle and sidearm... Spares, tiger, spares. And would you be from the one tool fits all school? Does a .223 Matty Mattel M16 provide the same function as a .338 Magnum? Or even a .30-06 Remington Model 700? Would you pop out of bed and grab a Ruger .22 Government Model target pistol to protect your house or .45 Colt 1911A1? So, sorry for the aside, but yeah, people buy stuff that to an uninformed view, seems redundant, but it is more like having a 3/4 inch wrench when you need it, not a 3/8 inch or 1/2 inch or whatever size you thought would fit every situation you would need for the rest of your life. Then there is the fairly odd possibility that you simply like guns and enjoy them for their design and history, much like Jay Leno likes cars and such.I am not a great fan of Suze O, but I respect her. She wasn't handed things on a silver spoon. Her dad was a chicken plucker for goodness sakes! How many of us can put that on our professional resumes? She worked as a waitress, started a restaurant, then trained as an investment counselor for Merrill Lynch. At the same time that she was training to be an adviser with them she was suing them for a $50,000 investment squabble. And she won. Then she worked for them for a few more years and moved on. So, while she is a bit fashionista and probably way too popular, she has worked to get where she is. And she was invited by BPI to speak. She was supposed to say no? Sorry, not a clue about Filipino economics except for the woman dusting my house in La Jolla and another one cooking lunch in my Martha's Vineyard getaway. Sorry, I don't see the problem at all. Oh, I may not like her, but BPI was getting the views of a very popular and pretty darn successful financial adviser. Feel free to disregard her as I surely have often enough, but I'm clueless to the hubbub over being told to save some of your income, and the other odd tidbits of advice you find amusing.

[FlyAway]

Let's bring it closer to home. Just think how much jewelry your asawa or girl friend really owns and never wears. You are probably clueless regarding the total stash. That's her retirement savings when you go to heaven or, heaven forbid, if you abandon her. She has other forms of non-bank savings. That includes. believe it or not, lending or giving money to relatives. Guys, they are smarter than we are. Everytime you drink a bottle of beer, she is probalby putting aside an equivalent amount is some form of savings.

I have reservations about that statement. If you base my wifes retirement on her jewelry it would not last long. Lending or giving money to relatives is not even that much anymore. My wife never really considered saving for retirement. Her thought of old age and retirement was tending a small tomato garden and selling them on the street corner.We all need some sort of plan and a backup plan. I am not counting on any future pension or social security. While I am not some sort of doomsday preparing sort of person, I do think of what could happen in a major disaster or calamity.I think the Philipino backup plan is counting on the family connections. One or two is bound to help when you consider the sheer size of the extended families.

[Dave Hounddriver]

I think the Philipino backup plan is counting on the family connections.

When my wife goes to visit family, she lives on nothing (as they do). I am sure she has the thought in her head that: Should anything happen to me or us, she will go back to the family and live in a bamboo hut in the bukid like so many family members do now. And that would not bother her in the least. Thus no need to save money, in her mind.