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
Ricky James D. Dayot
Paolo Vic T. Elarcosa
John Carlou J. Perez
Katherine S. Uy
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
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
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).
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:
1.2 Educational Attainment
1.3 Civil Status
2. To find out the level of financial literacy of the Minimum Wage Earners in
Davao City in terms of:
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
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
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
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.
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.
Review of Related Literature
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
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
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
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.
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,
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
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
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
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.
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
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.
Level of Financial Literacy
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
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
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
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.
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
independent financial aspect that will be answerable by level of frequency and if it is
not attainable it will be treated as blank.
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
4.1-5 Very High Financially Literate
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
4. T-test. This was used to measure the significant difference in the level of
financial literacy by Sex, Educational Attainment and Civil Status.
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
Male 21 52.5
Elementary Graduate 2 5
High School Graduate 16 40
College Graduate 22 55
Total 40 100
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%.
Table 2.1 Level of Financial Literacy in terms of Budgeting
Item Statement Mean Descriptive Level
How frequent are you budgeting your labor-worked
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
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
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
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
Do you properly manage the time and money? 3.53 High
Do you make decisions for future expenditures and
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
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
accepting the null hypothesis is always attainable under the independent variable
Table3.2 Significance of the Difference in the Level of Financial Literacy of
Minimum Wage Earners by Educational Attainment
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
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
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
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.
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
1. Majority of the respondents were male and most of them were college
graduates. While the ratio between single and married respondents was noted
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
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
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
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
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.