According to an S&P survey cited by the National Centre for Financial Education (NCFE) in the 2019 report “Financial Literacy and Inclusion in India,” over 75% of Indian adults lacked a basic understanding of financial concepts, and over 80% of women were financially illiterate. Making it a priority to become financially literate, the report draws attention to the notable differences and gaps in financial education around this country.
The Reserve Bank of India’s (RBI) financial awareness campaign highlights the need to urgently address this issue. Since 2016, RBI has been organizing a ‘Financial Literacy Week’ around mid-February every year to help people understand financial concepts and their importance.
Some of the previous awareness campaigns revolved around “Good Financial Behaviour, Your Saviour”, “Credit Discipline and Credit from Formal Institutions”, “Digital Financial Literacy”, etc. Despite its arrival, it emphasized how important it is in people’s lives of age.
Financial Literacy: What Is It?
Understanding a variety of financial concepts is known as financial literacy. These topics include simple interest, compound interest, inflation, debt management, budgeting, saving, investing, and retirement planning. An understanding of financial products, financial behavior, and attitude are essential elements of financial literacy.
Why Is Financial Literacy Important?
Financial literacy helps people improve their financial decision-making skills and become financially independent. Learning about how money works is critical to overcoming financial challenges and making the most of your resources to build a financially secure future.
In India, it is not uncommon for a family to lose its financial stability due to some unfortunate event happening to the breadwinner. In most cases, lack of knowledge and planning is the main reason for instability. Being financially literate is important in order to make informed decisions.
For example, people who have savings and pensions will not have problems in old age or retirement because they have planned in advance. Therefore, you need to plan according to your employment status, income, living expenses, needs such as a house and car, and cash flow after retirement. As people’s life expectancy increases, financial planning becomes increasingly important.
Once you understand the importance, some questions may come to your mind. For example, where and how much should be invested to ensure the longevity of the fund? To get these answers, you need a good knowledge of financial products and their concepts.
Even if you are financially illiterate and your income is unstable, you can still choose government social security and pension schemes that can cover your basic needs. But financial literacy is important for stability and peace of mind, regardless of age or economic status.
How To Improve Financial Knowledge?
There are many ways to improve your financial literacy, whether for yourself or for your children.
Discuss with family and friends:
Financial knowledge can begin at home. Talking to children about money can help increase their financial literacy. This exercise will help you gain a basic understanding of financial topics. However, to gain more knowledge, you or your child can seek advice from more knowledgeable family members and friends.
Professional Advice:
To gain financial knowledge, you may also seek advice from a financial advisor, certified financial planner, or registered investment advisor.
Online Resources:
All kinds of information are available online these days, and finance is no exception. Insights on financial products and concepts, from debit and credit cards to bank accounts, insurance and interest rates, are available on the internet, in newspapers, and in magazines. You can also take the financial certificate course online or offline.