There are two aspects of financial stability in a country - financial literacy and financial inclusion. When people are financially literate, they are more likely to explore the products and services offered by Government and Banks for their benefit. This directly influences the financial inclusion. With the increase in financial literacy, there will be an increase in the pace of financial inclusion. As everyone can access the basic banking facilities rather than depending on old-school money market system like money borrow from Zamindaars or money lenders in Village.
Financial Literacy- Need
It's quite shocking to know the statistics associated with financial literacy in India. The study done by Standard & Poor’s (1), on 150,000 adults from 140 countries, states that over 76% Indian adults lack basic financial literacy and they don’t understand the most basic and key financial concepts.
Today, crores of Indians cannot make sound financial decisions which result in them losing the money saved for years. Loans are availed without understanding the consequences of a default and the details of interest payments. Often, people without financial knowledge fall prey to chit fund schemes and multi-level marketing scams.
No financial education is directly associated with a shortage of money in retirement, this makes financial education a heavy burden on the nation, as the Government’s expenses on financial security increases.
Financial Literacy- Challenges
Financial education has unquestionably become a global issue. For common challenges that prevail with lack of financial education are --
- Innovation and growing sophistication of markets
- The virtual explosion of financial products (like credit cards) reaching out to a large number of new consumers.
- Increased transfer of risk, such as longevity and investment to household especially in pension field.
- Low awareness, low information and low understanding of financial concepts and overestimation of financial knowledge
In addition, there are certain beliefs associated with financial literacy, among all the most common belief is every literate or financially rich person is “financially literate”.
Another challenge to financial literacy is that – The entities that try to raise financial awareness are often trying to push their products on to the unaware public, which is why a large number of insurance policies lapse after the first anniversary, as people let them lapse because they had been pushed into buying the wrong product for their needs. This mis-selling leaves a bad taste in the customer’s mouth, and they look at financial literacy initiatives with suspicion.
Financial Literacy- Opportunities
Along with Adults, Educate Youth
Financial literacy is important for adults but at the same time, it is equally important to educate our children about financial literacy. We can achieve the desired results from financial literacy only when we will start focusing on the education of our children.
Since adults are themselves not financially aware, kids hear misleading, incomplete information. This absorption of the wrong perception about financial management results in a weak grasp of fundamentals among youth.
Studies show that digital efforts like video clips, short films and interactive quizzes on financial education have had a far greater impact on learning as compared to traditional methods of education (2). We at Power to me focus on the same. Our objective is to educate people about the need for financial education and to provide them with the correct information on financial literacy using these methods.
Power to me has designed impactful modules consisting of 4 plans which empower individuals, families and communities by educating them about financial literacy, personal empowerment, business and investment strategies which are indispensable for achieving financial growth and success.
We hope this article helped you to understand the need for financial literacy.
Still, if you have a doubt, think of these questions --
- Do you understand basic financial concepts like compound interest, principal, credit scores, stocks, mutual funds etc?
- Are you able to make effective financial decisions?
- Do you know the best ways to generate cash flow?
- Are you able to make effective financial plans?
- Are you able to manage your personal finances well?
- Are you aware of the most profitable savings techniques?
- Do you have enough savings for your rainy days?
- Do you live a debt-free life?
- Do you know the best investment options for gaining maximum profit?
- Do you have the solutions for your financial problems?
If you are unable to give a satisfactory reply to any of these questions, you know where you stand. Don’t give it another thought. Visit us right now.
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- Klapper, L., Lusardi, A., & Van Oudheusden, P. (2015). Financial literacy around the world. Standard & Poor’s Ratings Services Global Financial Literacy Survey., Access mode: http://media. mhfi. com/documents/2015-Finlit_paper_17_F3_SINGLES. pdf.http://www.openfininc.org/wp-content/uploads/2016/04/2015-Finlit_paper_17_F3_SINGLES.pdf
- Mohammadyari, S., & Singh, H. (2015). Understanding the effect of e-learning on individual performance: The role of digital literacy. Computers & Education, 82, 11-25.