OFW Talk: Top 6 money traps and how to avoid them

Money Mistakes OFWs Make

• The Hero Syndrome – A common struggle among migrant workers is guilt about withholding money from people back home. Cultural expectations often push OFWs to prioritize sending large sums of money home over building their own ipon, leaving little room for savings or investments. OFWs in Japan² for instance, list providing a better life for their families at home as their motivation to migrate, more than their own need to be self-reliant.

  When you regularly send home 60%-80% of your earnings, it’s hard to build a safety net for yourself. Constant inner pressure can lead to financial burnout, as shared by OFWs who feel they have little choice but to support multiple relatives, even when not asked.

• Cost of Living Abroad – Big cities like Singapore, Dubai, Hong Kong or Tokyo can be more expensive than OFWs initially anticipate. Between rent, transportation, and daily expenses, they often find themselves with less disposable income than planned. Many OFWs in high-cost cities share that it’s difficult to balance personal expenses with their regular remittance, with their earnings consumed by necessities. In an online cost of living calculator called Expatistan, the cost of living in, say, Singapore, is double that of Manila.

• High-Interest Loans – Even before starting their journeys, many OFWs are forced to incur high-interest loans for recruitment fees, travel expenses, visas. Di pa kumikita, may utang na. The debt can quickly spiral out of control, forcing OFWs to overwork or take unprotected second jobs to make ends meet. In some cases, OFWs are trapped in cycles of debt repayment, which hinders their ability to save and achieve financial independence. If a loan is unavoidable, look for lower interest options or make it the first priority to repay and retire the loan.

• Lifestyle Inflation – With more disposable income, some OFWs go overboard with luxury purchases or expensive gifts to “show success.” Social media and cultural pressures can lead to overspending and balikbayan boxes stuffed with branded goods and gadgets. Social media feeds highlight day-offs out on the town, swerte and successful. We all deserve the occasional treat, but chronic splurging can eat away at potential savings, leaving OFWs without a cushion for emergencies or long-term investments.

• Lack of Financial Literacy, both for the OFW and the family – A lack of access to financial education leaves many families vulnerable to scams, risky investments, and poor money management. Stories abound of OFWs and their families falling victim to pyramid schemes or get-rich-quick scams. Without the right knowledge, many struggle to make informed decisions, which can result in missed opportunities to save or invest. In many countries with large OFW communities, NGOs offer free financial education classes to help OFWs choose better and diversify their investments. Online classes can be a huge help as well.

• Ignoring Long-term Savings – Many OFWs focus on immediate financial needs, such as paying off debts and supporting family members. Others prioritize home ownership, but neglect long-term goals like their own retirement. These mindsets leave them ill-prepared for the future. Data shows that a considerable number of OFWs return to the Philippines with little to no savings, making it difficult to reintegrate into local life or secure their retirement.

The Sidekick to the Story

Financial mismanagement can have a profound effect on family dynamics. Overcommitting to remittances can create dependency, while lack of financial planning may leave OFWs with no savings when they return. This financial instability often traps them in a cycle of migration, with no clear path to settling back in the Philippines.

To break the cycle, it’s wise to invest in their family’s future and their own, to rewrite the story. You can secure long-term savings, go into a variety of low-risk businesses, and get an insurance policy. By doing some or all of these, OFWs can create their own strong financial safety net for peace of mind and protection. Through these realistic and achievable means, OFWs can be relieved of financial stress, and have better headspace to care for their families and themselves, even from far away.

It’s a big job. Fortunately, OFWs don’t have to do it alone. Getting insurance plans for the family can be a big help in protecting their finances from unexpected expenses such as accidents and critical illness, while investment-linked insurance provides both life coverage and wealth growth opportunities. FWD has different plans that combine life insurance with investment to grow funds over the years, plus optional health protection for the family back home. FWD Family Hero Investment-linked Insurance is one plan that has potential to grow your family's wealth. It also protects your family from unexpected health setbacks. On the other hand, critical illness insurance for family members such as Set for Health Critical Illness Insurance can protect your hard-earned savings by financially supporting medical expenses. FWD The One is an affordable insurance plan you can get for every member of the family, and it is available to purchase online.

The Redemption: OFW Journey Tips and Tricks

1. We’ve read it a lot on self-help social media: We cannot give what we don’t have. We are heroes first and foremost to ourselves, and only then towards others. While helping family is noble and fulfilling, we can’t help if we have not secured our own finances and emergency funds first.
2. Borrowing to finance migration is a sure, quick way to jumpstart an OFW journey. But it’s wise (and even interesting!) to research the pros and cons of your possible new home. Ask yourself these practical questions before accepting a tempting offer abroad.
3. The map to financial freedom involves being willing to spend for your own well-being through insurance, savings, or investments - whatever you think will float your boat (and keep it afloat!).

OFWs make tremendous sacrifices to support their families. Easily avoidable financial mistakes should not threaten their future security. By reassessing financial decisions and investing in smart solutions, OFWs can protect their loved ones and secure a stable future, to ensure that the katas ng abroad goes where it should – and keep our modern-day heroes flying high and strong.

You can start by getting a free consultation with a financial advisor to help you take the best course of action.

Sources:

¹Survey on Overseas Filipino Workers - Philippine Statistic Office, September 2024

²Working in Japan: The Experience of Filipino Overseas Contract Workers - Stella P. Go, De La Salle University