Financial Literacy & Financial Education in India
President of the Institute of Company Secretaries of India (ICSI), Ashish Garg quoted "Despite having the world's 10th largest and Asia's oldest stock exchange, India still has low per capita income, educational inequality, non-banking habits, informal borrowing and lending practices that have been going on for years. Thus, it is imperative for the country to now understand how to optimize its resources and boost the economic and financial backbone of the nation."
India is home to roughly one-fifth of the world's population but just 24% of the country's population is financially educated. The fact that three-quarters of India's population is unaware of or unconcerned about the critical need to manage funds is concerning for a country whose progress and development is dependent on the economy. Financial literacy is the most fundamental and important ability that everyone should acquire. However, in India, discussing finances at home is not customary, and many people lack the fundamentals of money management, such as saving, investing, purchasing insurance, or having emergency reserves.
The COVID-19 pandemic has further had a financial impact on people, emphasizing the need for financial education to help the economy expand faster. Millions of people lost their jobs in a couple of months, leaving them with mounting debt. This increased people's awareness of the significance of investing and saving for a rainy day. Regardless of our age, gender, education, or whether we live in the city or the rural, knowing how to handle our finances may be life-changing.
Are you unsure if you are financially literate or not? Here's a simple self-assessment checklist to see whether you're financially literate:
Are you familiar with basic concepts such as compound interest, rate of interest, mutual funds, and so forth?
Do you believe you make sound financial judgments, or can you assess your own financial decisions?
Are you well-versed in smart money-saving strategies?
Is it possible for you to live a debt-free life?
Do you have a good handle on your own finances?
Most of us would take a long time to answer these questions, and if we're being honest, our responses would be primarily unsatisfactory to ourselves.
The cornerstone of a person's relationship with money is formed through financial literacy. One of the most effective strategies to bridge the gap between your wealth development journey and economic growth is to improve your financial literacy. Financial illiteracy will leave you with a weak foundation when it comes to saving and investing. Financial literacy, on the other hand, will give in-depth understanding of financial education and methods that are necessary for financial development and success. People who are financially educated are also less likely to become victims of fraud.
Financial literacy is required mostly when young individuals who have recently begun their professions find it difficult to manage their finances and wind up spending more than they make. When people fall into the debt trap, they increase their chances of not being able to care for themselves and their children. When people recognise the necessity of financial education later in life, it becomes less beneficial since they already owe money.
Understanding budgeting, debt management, saving, and investing are the most fundamental steps to becoming financially literate.
Debt: Debt is defined as spending money that is not yours, such as through loans or credit cards. Debt, on the other hand, can be beneficial if you get into debt for something that is important for your livelihood, such as school tuition fees. Borrowing money for items that aren't genuinely essential, on the other hand, should be avoided.
Budget: Understanding your budget that you can live on is the most significant aspect of being financially literate, and it plays a critical part in reaching financial independence. The most basic budgeting concept is that revenue should exceed spending.
Savings: Savings is the act of safeguarding the present as well as the unknown future. Savings might serve as an emergency reserve or a means of keeping your costs under control. Saving is not the same as investing.
Investing: Investing can help you create and increase money in the future. Because of the advantages of compounding, investing is what will make you money while you sleep. Investing can help you achieve your financial objectives.
Experts frequently feel that financial education is a lifetime process that should begin as soon as possible. Financial education in schools would be an effective policy instrument for combating the threat of financial illiteracy. Furthermore, the government would not be responsible for teaching future generations how to manage their finances appropriately at a later time in their life. Educating individuals on real-life difficulties would result in a generation of young people who are more realistic in their financial decisions, which would ultimately help the economy.
At a personal level, you can start your journey to be Financial Literate with the help of these few quick reliable resources now!
Don’t forget that you are never late to Begin.
Written by: Pushti Raja
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