“Paluwagan” started even before this generation was born and brought about by get-rich-quick beliefs of our ancestors. In fact, it is our culture to invest our hard-earned money in a program referred by a trusted friend rather than a program advised by a financial manager. It only goes to show that we do not simply invest money – we invest trust. Knowing the following facts about “Paluwagan” may discourage you from joining.
1. Operating a “paluwagan” is illegal. It does not require permits or licenses. Early this year, Guillermo Avelino Jr. of DTI-Pangasinan has issued warning through a radio program of the Philippine Information Agency-Pangasinan against this kind of system that led to scamming people, especially online.
2. Your money is not earning interest. Do not expect that your money will grow. You are only eligible to receive the amount you shared. Since money pooling is not really an investment, you cannot expect that it will earn interest or gain profit from it.
3. There are always a trust issue and broken relationships. Money, as they say, is the root of all evils. Therefore, even if the founder or collector is your best friend, if greed takes over, he can just run away with your money.
4. Be ready for a domino effect. When joining this money pooling system, you should be ready for some unexpected turn of events, like members leaving, late payments, or no collection at all. It would be unfortunate for those people who have not received their fair share of “sahod.”
5. It is not an investment. When you invest, you are expecting your money to grow or gain profit. With paluwagan, you are not investing and you are not saving either. You are simply putting your money at risk of losing.
6. It has high risks and is not sustainable. This kind of program does not have contracts, thus, you are not guaranteed of anything. If one of the members decides not to give his share, the collected money will no longer be enough to pay all members who are yet to receive their share.
7. You fall as an instant victim. It is a trap for people who want high-yield investment in such a short time. It is more of a gamble than an investment. The chance of getting rich on this program is like taking chances in the lottery, although the latter is way better because it is legal and the winning amount is bigger.
8. “Paluwagan” is different from COOP. Cooperatives are registered and regulated by the government. In addition, its board members are knowledgeable on how to invest your money for the benefit of each member. None of these characterizes a “paluwagan.”
9. It has no functional organization that collects and audits the money. Trusting your money to people who do not have the knowledge and expertise in handling and investing is just giving it away without expecting something in return.
10. It is similar to a pyramid scheme. You will end up empty-handed. Only the first few members get to receive their share of the savings. If these people decide to stop giving their share during the succeeding collections, the rest of the members will no longer receive the correct amount of payout.
You have many options in investing your money. You can use it to fund a business, buy stocks or invest in mutual funds. Stay away from the promises of peer money pooling or “paluwagan.”
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