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Friday, July 14, 2017

Where and How Do OFW Families Spend The Remittances They Receive?

One reason that keeps the Philippine economy afloat are the dollar remittances coming from the Overseas Filipino Workers (OFWs). It is being sent to their families who spend them for their everyday needs. 
In December last year, OFW remittances reached a new record high of $2.56 billion  which exceeded government target.
Bangko Sentral ng Pilipinas showed that the cash remittances last December were the highest monthly inflow to date and were up 3.6 percent from the $2.47 billion during the same month of the previous year.

Remittances serve as the direct outcome of labor migration and the most important source of dollar reserve for the country. Though the years, the OFWs acted as a savior of the Philippine economy. Almost 10 million OFWs and counting leave their families behind and work for slightly higher salaries they cannot find in their home country. They sacrifice in exchange for the better future they can possibly give to their family, hence the term "modern day heroes".

However, the better future they aim depends on how their family back home spend the remittances they send. That's why there are OFWs, after many years of working overseas, remain broke because they lack financial wisdom to channel these hard-earned money to the right expenditures. They most likely spend it to what they want instead of what they need.

How do OFW families spend the remittances they receive?
Bangko Sentral ng Pilipinas (BSP) survey of 2016 shows that recipients allocate their remittances more on consumables. For instance, 97.3 percent are for food and other household needs.

However,  Asia Development Bank (ADB) stated that families sometimes compromise and lower their food expenses. OFW families allocates larger portion of their remittances for education (70 %), purchase of consumer durables (21.9%), and house purchase (11 %), investment (6.5 %), and miscellaneous expenses (4.5 %).

The expenditure of the remittance-receiving families is closely monitored by the government because it reflects the general condition of the country. 

In this way, OFWs can expect a better return of investment because of the government efforts to further allow recipients to avail and spend more money on government programs. At the same time, investments on education and nonfood expenditure can impart a long-term growth on the economy because of the higher probability of producing better human resources for the country.

The government formulated programs for the OFW families to be financially literate. There are also programs for the spouses of the OFWs who want to start a small business to help their husband/wife who is working abroad.

Another expenditure of the family-receiving remittance is their allocation on savings. According to data by BSP, 43.2 percent of Filipinos who are considered mostly put their savings at home.

Moreover, a portion of OFW households, especially those who left the country for the first time, allotted part of their remittances for debt payments (46.5 %). Geographically speaking, large portion of the OFW households in the NCR allocated their remittances to pay their debts, for purchase of food and other household needs, they stretch their budget on what is left. Their budget for investment follows as they get rid of the debts.

If the OFW families could spend the remittances wisely with at least 30% would go to savings or investment, every OFWs sacrifices will not be in vain. They must work hand in hand to make the better future they aim to come into reality.
Many OFWs has now become successful in handling their finances by educating themselves and through government  programs.
The key is to determine how much do you need to allocate on expenditures and spend only within your means.