1st July 2024
“An investment in knowledge gives you the best interest” – Benjamin Franklin.
It is reported that in India, only 27 percent of people are considered to be “financially literate.” This indicates that only one Indian in five can manage their financial circumstances.
For a considerable amount of time now, the keyword in the formal education sector in India has been financial literacy. In spite that, adult Indians have a lower level of financial literacy than people in other industrialized countries like the United States, the United Kingdom, and Singapore. While only 27% of Indians are financially literate, it is just 16.7% of Indian students who possesses a fundamental knowledge of finance and money management.
For the next ten years, India’s GDP is expected to develop at the fastest rate. But the people of our nation may never be able to fully take advantage of this enormous economic potential if they lack the necessary financial literacy. A common misconception is that people who are economically disadvantaged or marginalized in society are the only ones who lack financial literacy. This is not entirely accurate. People in the upper and middle classes also deal with this difficulty! However, the economically disadvantaged are more likely to live in social inequality due to a lack of financial literacy. A fundamental comprehension of financial principles is required for people to obtain and use financial services efficiently.
The significance of early financial literacy is emphasized by the National Education Policy (NEP) 2020, which promotes the integration of financial literacy at all educational levels. One is more equipped to handle unanticipated medical costs, domestic problems, and unemployment when they acquire financial literacy. Furthermore, having sound financial knowledge and insights makes it easier to create retirement income plans that are more advantageous. A long-term budget and consistent income and spending tracking system promotes increased saving and helps with wise financial decisions.
Financially literate people are better equipped to make financial decisions that will benefit them personally as well as their communities. Reduced poverty and inequality can also result from more individuals being able to make informed decisions about borrowing, saving, and investing. As a result, the economy may become more prosperous and sustainable.
These days, “financial literacy” is a highly popular concept on the internet. Knowing your financial situation is crucial, especially when the younger generations start to get older. The capacity to comprehend how money is made, managed, invested, and spent is known as financial literacy. Understanding personal taxes, managing a balanced cheque book, creating personal budgets, researching investment options, and tracking market trends are just a few of the many topics it covers.
Why does financial literacy matter?
The Organization for Economic Cooperation and Development (OECD) has undertaken research around the world that reveal an alarming rate of financial illiteracy. All around the world, consumers are unable to respond to basic financial questions. They also exhibit a poor comprehension of debt, hazards, and financial concepts. Not just developing nations like Brazil, China, and India, but also first-world countries reveal a scary trend of financial illiteracy.
A lack of knowledge in finance can put you in danger of a number of unfavorable situations, such as: –
• Insufficient or non-existent retirement planning
• An abundance of credit choices, which, if misused, can give rise to debt concerns.
• Poor investments due to a lack of awareness of financial goals
Financial Literacy and Women
Notwithstanding the advantages of financial literacy, acquiring the same is difficult for Indian women due to myriad reasons. These obstacles include:
- Low levels of literacy and numeracy
- Cultural biases that prohibit women from participating in financial decision-making
- Lack of access to financial education
- Lack of financial products and services that meet women’s needs
- Poverty and a lack of economic opportunities
Women who are financially literate can succeed in their personal and professional endeavors. A woman who understands money, for instance, could be able to launch her own company, purchase a house, or fund her children’s college education. Women who are financially literate may also find it easier to bargain for better pay and working conditions.
How can financial literacy be improved?
India must employ a multifaceted approach involving both governmental and non-governmental measures to raise financial literacy. Through the implementation of a comprehensive strategy that integrates education, technology, cooperation, and community involvement, India may make tremendous progress toward achieving nationwide financial literacy.
• By incorporating financial literacy into the curriculum, kids can gain an early understanding of the principles of managing their money. This can include learning about credit, investing, saving, and budgeting.
• Arrange for various levels of awareness campaigns, seminars, and workshops targeted at different groups, including those residing in rural and urban areas. These programs should be designed with consideration for the diverse needs and understanding levels of different groups.
• Use smartphone apps to promote financial literacy. Encourage financial knowledge by utilizing mobile apps and digital platforms. Financial literacy can be enhanced through interactive mobile applications and online courses, particularly for younger audiences.
• Step up your efforts to support financial inclusion and make sure that everyone in society has access to basic financial services. This includes programs aimed at expanding access to insurance, boosting microfinance, and raising enrollment in pension and insurance schemes.
• Educate clients on their rights and duties regarding financial services and products. This can provide consumers the opportunity to make wise financial decisions while also lessening the chance of exploitation.
To sum up, financial literacy is critical to both individual prosperity and India’s general economic growth. India will then have the potential to thrive economically.
The Reserve Bank of India’s (RBI) financial literacy initiatives
The RBI has consistently reached out to the common man through outreach programs, financial literacy campaigns, media presence in print and online, etc. via its “Public awareness campaign,” which aims to enlighten the public about their rights and responsibilities in matters pertaining to banking. The Reserve Bank of India also empowers the public by educating them about the facilities and services to be expected from banks and financial institutions. Under the slogan “RBI Kehta Hai,” the campaigns are regularly run in newspapers, on TV, radio, in movies, on digital media, via SMS, and on billboards.
Over the years, RBI has continuously connected to the common man through various outreach initiatives, financial literacy projects, and so on.
Simple Steps to Become Financially Literate:
- Learning never ends.
- Spending a few minutes a day is all that is necessary to become financially smart.
The following are some basic and wise money habits that are easy to form: –
- Read as much as you can
- Having knowledge is essential for any endeavor. When it comes to financial literacy, reading is the most effective method.
- You can begin by perusing the finance section of your daily newspaper.
- When you are familiar with the fundamentals, you can go on to economic periodicals and newspapers like Financial Times, The Economic Times, etc.
- You can begin by perusing the finance section of your daily newspaper.
- The internet is another great source of information. There are several articles accessible for all categories of investors.
- Numerous blogs focused on finance are available to keep you informed about all things financial.
- Utilize tools for financial management.
- Enhancing your financial literacy can be achieved by connecting a money management application to your personal account.
- Apps that are widely used can assist you in handling your personal finances. They also give you access to courses, classes, and shrewd advice on financial literacy.
- Some applications provide a comprehensive budget package customized to your requirements and assist you in planning investments and payments so you may stop living paycheck to paycheck.
- Consult wealth managers and financial advisors for professional guidance.
- Consumers with banking institutions can employ in-house services to take care of their fundamental needs.
- Financial organizations provide professional financial guidance for a fee, and their full-time staff is available to share knowledge and assist you get started on the proper path. They support you with debt management, budgeting, and security planning.
- Attend financial education camps
- In order to address the dire state of financial literacy in India, the RBI has recommended bank-operated Financial Literacy Centres (FLCs) to hold special camps. These will be held to touch base on some critical topics in financial literacy, viz.
• Completing the KYC procedure while creating a bank account
• Practicing credit discipline;
• Handling grievances; and,
• Using UPI for Digital transactions
The utilization of interactive techniques to boost interest and involvement in financial literacy will include online quizzes, in-person events, and posters and handouts in local languages.
Gain more knowledge about your personal finances
Reading, watching lectures, or using applications won’t assist if you don’t apply what you’ve learned. Checking your personal money and attempting to put the advice you’ve read into practice is the greatest approach to make sure of that. Theory is not as important in financial literacy as habits and mindset. As a result, creating your own budget, handling debt, and making future plans are essential. An ounce of practice, as they say, is worth a ton of talk.
Being financially literate facilitates rational decision-making. Understanding fundamental financial concepts helps one build wealth and steer clear of unwise investments and excessive debt.
Therefore, develop financial literacy and safeguard your future.
