STUDY ON CONSUMPTION, SAVINGS AND INVESTMENT FACTORS OF

SELECTED ECONOMICS STUDENTS WITH OFW PARENTS

CHAPTER 1
THE RESEARCH PROBLEM

Introduction
According to Migration and Filipino Children Left Behind: A Literature Review ", a
working paper by Melanie Reyes published on July 1, 2008 sponsored by United Nations
Childrens Fund (UNICEF), the Philippines has been the number one source and supplier of
labor migrants in over 100 countrie and because of this the country has been benefiting much
from the phenomenon, economically. These economic benefits of such migration are greatly
reflected in the families, communities, and even the state.
According to UNICEF, Overseas Filipino Workers (OFW) sent home $12.3 billion or
about P615 billion in the first nine months of 2008 making a 17.1 percent increase despite the
global slowdown that the economists warned may bite the local economy in 2009. Nearly 10
percent of the countrys 90 million people work overseas, with the money they send home
equivalent to about 10 percent of the countrys gross domestic product, all of which pertains to
the benefits that the state enjoys.
But the primary recipients of the benefits by which these remittances are directed to are
the respective families. The money brought in by migrant parents increase the levels of
educational attainments among their children, opening up more opportunities for their future.
And this money is directed to supplying them in forms of tuition fees, allowances, etc.

But amidst all the benefits, and privileges by which the families, most especially the
children enjoy, there is a social cost that lies in it. According to Melanie Reyes, although the
parents may have sufficed and supplied them with financial support, the children may develop a
consumerist attitude towards their absence. Most children view the migration of their parents as
an opportunity to have a better life. They only see the money equivalent" of migration. Still
according to her, as long as they receive the money regularly, they will be fine. This also leads to
a materialistic attitude of children of migrants.
This consumerist behavior may therefore affect the consumption, savings, and investment
factors of a student with OFW parents given that they have a sustainable high source of income.
With this at hand, the researcher had come up with an idea of analyzing the consumption,
savings, and investment factors of students with OFW parents.

Background of the Study

San Beda College is a private Benedictine college administered by the Benedictine
monks in the Philippines. It is situated in the busy street of Mendiola, Manila, found on the
University Belt. It is founded in 1901. San Beda offers degrees in the fields of accountancy,
business, marketing, and law to name a few. Some of these degrees are offered in the College of
Arts and Sciences or CAS, the oldest college or tertiary level in San Beda College Mendiola.
At present, the College of Arts and Sciences offers eleven courses namely: BS Economics
and Public Policy, BS Psychology, BS Legal Management, BS Human Biology, BS Information
and Communications Technology, BS Accountancy, BSBA Marketing and Corporate
Communications, BSBA Financial Management, BSBA Operations Management, BSBA Human
Resource Management, and BS Entrepreneurship.

San Beda College, being a private institution, requires students to pay a higher tuition fee.
With this, the institution has already established a community of students from rich families that
can afford to pay such tuition fees. These families are generalized to have stable, high, and
sustainable income source to provide for the schooling of their children. These sources may
include business, employment, inheritance, etc. One of which can also be overseas employment.
Overseas employment produces what we call as Overseas Filipino Workers (OFW). This
type of employment generates high income due to the differences of level in wage compensation
and exchange rates. OFW may enjoy higher incomes compared to the ones employed in the
country because of the disparity in exchange rates. Therefore, the children of OFW parents enjoy
a higher source of allowance and money compared to non-OFW children.
With this at hand, the researcher wanted to conduct a study analyzing the consumption,
savings and investment factors of selected students with OFW parents in the College of Arts and
Sciences San Beda College, Mendiola, Manila. The researcher will focus the analysis on the
Department of Economics. The researcher wanted to figure out where the assumed high level of
allowance goes in terms of consumption, savings and investment.

Theoretical Framework
Various theories, concepts and model are observed to aid in the understanding the course
of the study. These are the following:

Keynes General Theory of Consumption

John Maynard Keynes developed a theory by which other theories on consumption are
founded. According to Jeffrey Parkers textbook entitled Economics 314 Coursebook

published last 2010, Keynes produced the general theory of consumption based on the grounds
knowledge of human nature and detailed facts of experience. According to the theory,
Keynes believes that we are disposed, as a rule and on the average, to increase our consumption
as our income increases, but not by as much as the increase in our income. The study will test the
theory as it applies the concept in the analysis of the consumption of students with OFW parents.
Such theory may also be applied in recognizing that the difference between consumption and
income may be regarded possibly as savings. Investments, therefore, can be recognized as a type
of savings which creates income.
It will also test the following concepts:

Consumption Influences
According to Michael Francis Williams, a renowned author and publisher, there are five
factors that influence consumption. Three of them are discussed below because the researcher
feels that such concepts may apply to the analysis of the study.
One of the factors that influence consumption is income. According to Williams, the
analysis of personal consumption is also patterned in the concept of national income. There is a
positive relationship between the level of national income and the level of desired consumption.
Basically, when we have more Y (income), then we have more consumption, ceteris paribus. If
we have less Y, we will have less consumption.
Another factor is wealth being defined as the value of all of the assets that households
own. This defines the social status of an individual hereby segregating them to social clusters as
poor, middle class, and rich. Following this factor, economists generally agree that there is also a
positive relationship between wealth and desired consumption. Basically when we have more

wealth, we consume more, ceteris paribus. And if we have less, we consume also less, ceteris
paribus.
Next factor is what they call expected future income. Economists believe that if a person
expects to receive a higher income, the implications will be is that they will consume more and
vice versa, ceteris paribus. Economists believe that there is also a positive relationship between
the expected future income and the level of desired consumption. The thinking is, if an individual
tends to have a high level of spending, despite a low current income, because he believes that he
will have a much larger future income than his current income. If this happens, when there is
expectation of higher income in the future, there will be a higher consumption now. But when
there is lesser expectation of income in the future, there will also be lesser consumption now.

Life Cycle Theory

This study will also test the Life Cycle Theory on Savings. The theory basically revolves
around the analysis of individual consumption patterns over a time period in a lifetime.
According to this theory, individuals develop a long term plan of saving with the intent to even
out their consumption and savings over the time period in the best way possible in their entire
lifetime. One assumption on this theory is that all individuals aim to maintain a stable lifestyle.
This means that individuals dont save enormous amounts over a year with the intention of
spending it nonchalantly over the next year. What they do is they try to stabilize their
consumption levels every year for savings to come in.

Investment Theory

Another theory that will be tested in this study is the Investment Theory. According to
William N. Goetzmann, author of the book An Introduction to Investment Theory, if there is
savings, there will always be a possibility for investment. Goetzmann also identified three
possible motivations why people invest. The motivations are:

Savings. This is the most common motivation why people invest. People have this desire
to pass money from the present into the future. One assumption is that people always
anticipate future cash needs. With this they always see that their future income would not
be able to suffice their future cash needs. People invest mainly because they want to
prolong and extend the reach of their present income to the future.

Desire to get wealthy. People invest because they want their money to grow. Sometimes,
having the desire to get wealthy triggers a person to disregard risks in investing making
more investments made.

Charity. Following this point, it is presented that people invest because they wanted to
help or basically they want something big to happen. It is an investment for self-worth.
These investments may go to building museums, or financing low-cost housing, or even
re-claiming urban neighborhoods. However, these investment may not be economic nor
should be evaluated and compared with the benefits that one may enjoy in other forms of
investment but these types of investments often motivates people to invest in longer
terms.

Paradigm of the Study

The figure above shows the flow of the study that the researchers will conduct. First, the
researchers will identify the main respondents of the study, which are selected economics
students from the College of Arts and Sciences with OFW parents. The researchers will secure
the aid of the Office of the Guidance Counselor to help in the extraction of this data. After which,
the researchers will also seek the assistance of the professional organization of the Department of
Economics, the San Beda Economics Society, to disseminate and help facilitate the surveying
process. After identifying the target respondents, the researchers will then analyze the
consumption, savings, and investment factors of the respondents through a structured survey
questionnaire. After which the researchers will then extract the primary data from the survey that
will be relevant for the completion of the next step, recommendation. The researchers will
suggest recommendations that will be relevant for the students, the academe, and for the future
researchers.

Statement of the Problem

The researcher wanted to analyze what are the factors that the respondents consider that
affects their consumption, savings, and investment from the Department of Economics in the
College of Arts and Sciences, San Beda College, Mendiola, Manila. Along with this, the
researchers also wanted to know the demographic profile of the students in terms of their Age,
Course, Gender, and Real Income (Monthly Allowance). The researchers also wanted to know
the percentage share of their allowance allotted to consumption, savings, and if possible,
investments. With this, the researchers would also like to know fundamental information about
their consumption, savings, and investment like; categories of consumption, where does their
savings go, where do they invest, etc. The researcher also wanted to ask questions pertaining to
factors that affect their consumption, savings, and investment decisions. And to conclude the
study, the researcher wanted to create a best suited recommendation as to the analysis of the
consumption, savings, and investment factors of the respondents.

Hypotheses
The researcher assumes that the null hypothesis will be rejected and alternative
hypothesis will be accepted. Alternative (Ha) and Null Hypothesis (Ho) includes:
Ha = The consumption factors asked in the survey has a significant effect to the consumption of
the respondents.
Ho = The consumption factors asked in the survey has no significant effect to the consumption
of the respondents.

Ha = The savings factors asked in the survey has a significant effect to the savings of the
respondents.
Ho = The savings factors asked in the survey has no significant effect to the savings of the
respondents.
Ha = The investment factors asked in the survey has a significant effect to the savings of the
respondents.
Ho = The savings factors asked in the survey has no significant effect to the savings of the
respondents.

Significance of the Study

Evaluating the consumption, savings, and investment factors of students with OFW parents is
essential in formulating the best recommendation that will benefit the following stakeholders:

For the Students. The study will be helpful for the students because it will open new
insights about their daily undertakings pertaining to their consumption, savings, and
investment factors. The study will enforce knowledge on a topic analyzing a clear
representation of their kind, students.

For San Beda College College of Arts and Sciences. The study will be helpful for the
administrators to visualize the community of students they have. The study will visualize
the setting that the administrators may have failed to see. This will also embark a
significant part on an analysis of the future needs of students that may be beneficial to the

Office of the Guidance Counselor. This study may help in supplying data relevant to
identifying a possible need for attention with regards to students with OFW parents.

For future researchers. The study will be helpful for future researchers as a source of
information about the consumption, savings, and investment factors of students with
OFW parents. The study may also be helpful in visualizing possible research topics that
may aid in understanding fully the given target, which are the students with OFW
parents.

Scope and Delimitation of the Study

The study aims to cover the analysis of the consumption, savings, and investment pattern
of the students with OFW parents in San Beda College College of Arts and Sciences. The
respondents shall be determined by having all the requisites that this study needs such as:
a) Must be a student of the College of Arts and Sciences A.Y. 2013 2014 currently
enrolled during the data gathering phase taking up BS Economics and Public Policy
under the Department of Economics. The researchers wanted to start the analysis of the
study in a smaller scale within a smaller target population before branching out to
analyzing the bigger picture. This will also jumpstart an opportunity for future
researchers to conduct further researches in a bigger setting.
b) Must belong in any year level from 1st year 4th year.
c) Must have a father/mother or both working abroad in any field of expertise.

The study will only focus on the analysis of the consumption, savings, and investment factors
of the respondents.

Definition of Terms
Economics Students with OFW Parents refers to the main respondents of the study. OFW
Parents are mothers or fathers or both working abroad. Therefore, Economics Students with
OFW Parents are enrolled students from the College of Arts and Sciences San Beda College
specifically in the Department of Economics with parents, mother or father or both working
abroad.
Consumption refers to the income spent to acquire utility by not acquiring another capital
investment but in mere spending. It refers to the usage of income to fulfill an immediate need. It
is foregoing income in exchange of satisfaction to achieve utility.
Investment refers to income spent to income-producing capital. It is a type of savings that is
consumed to create an income-producing capital. Investment refers to the response of an
individual to an investment opportunity.
Savings refers to income not spent. It can be explained as: Savings = Income Consumption. It
is the left over amount from consumption that may or may not be conscious or sub-conscious.