Financial Literacy has become one of the top priorities for most of the world today as it is directly proportional to the economic growth of a country. It is alarming to know that the financial literacy rate in India is way behind other countries. According to a global survey, India is home to almost 20% of the world's population, however, 76% of its adult population is not even aware of the basic financial concepts. The survey reports that Financial Literacy in India has been signification poor compared to the rest of the world.
What is Financial Literacy?
Financial Literacy is the ability to understand basic financial concepts and the possession of knowledge and skills required to make informed and effective financial planning, decisions using the available financial resources. It is about knowing how to generate, spend, invest and save money. It is the ability to manage your finances well by making the optimum use of the available financial products and resources to give you maximum benefit.
Significance in India
In India, Financial Literacy has still not become a priority like other developed nations. Lack of basic financial knowledge results in poor investments and financial decisions. That’s why most people invest in short-term plans and physical assets to accomplish their personal goals which give lesser benefits and does not help in the economic development of the country. According to a global survey, about a staggering 76% of Indian adults do not understand basic financial concepts and are unfortunately financially illiterate even today. The survey confirms the financial literacy rate in India has been consistently poor as compared to the rest of the world. It is indeed high time for a developing country like India to realise the importance of financial literacy as such poor financial literacy rate can prove to be a major setback to India’s ambition of becoming an economic superpower in the coming years.
Where do other nations stand?
Financial Literacy has become one of the topmost priorities for most nations today as understanding basic financial concepts allows people to manage their wealth in a more organized way which in turn helps in the economic growth of the nation. It is proved that people with appropriate financial education and knowledge make better financial planning and makes the most of the available financial resources for maximum benefit. In the United States of America, financial literacy was initiated way back in 1908 by the American Credit Union Movement. In 1957, financial education was made mandatory by the state of Nevada and then other states followed. Australia also provides financial literacy education through customised programs. Singapore and Indonesia are among few of the Asian countries who have started this initiative and have taken the first step towards Financial Literacy.
Self CheckHere are a few questions which you can ask yourself to know your financial literacy rate:
- Are you able to understand basic financial concepts like compound interest, credit scores, 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 planning?
- 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?
Now, if you are not able to find satisfactory answers to these questions, then you definitely need to educate yourself on financial concepts as soon as possible. The lack of knowledge on financial literacy may lead to making poor financial decisions that can have serious impacts on your financial well-being. Hence, it is high time we understood our finances well and did better financial planning and investments for a smooth financial life.
Why is Financial Literacy Important?
It helps in improving the financial knowledge of individuals. It brings clarity on basic financial concepts and principles such as compound interest, debt management, financial planning etc. It enables you to manage your personal finances efficiently. It helps in making appropriate financial decisions about investing, saving, insurance, managing debts, buying a house, child education, retirement planning etc. It helps individuals to achieve financial stability and financial freedom. It helps in understanding the difference between assets and liabilities. It helps in developing the skill sets required for better financial planning and managing your money. It provides in-depth knowledge on financial education and strategies which are indispensable for achieving financial growth and success. It helps you in generating, managing, saving, spending and investing money. It enables you to be debt free by inculcating financial knowledge and debt strategies.
Need of the Hour
Hence, we need to put our conscious effort in improving our financial knowledge and should also impart financial education to our children as they are the future. The government should also take initiatives to make financial education compulsory in schools and colleges. The government should run campaigns to educate people about the importance of financial literacy in everyone’s life. Government bodies, banks, insurance companies and financial institutions should take necessary measures to educate people about various financial concepts and investment opportunities so that people can live a financially stable life. Financial stability and financial inclusion are two key aspects of a growing economy. In India, there is an enormous opportunity to provide financial literacy to all sections of society. The first priority is to reach out to the uneducated, poor and economically backward people with limited access to the financial world, who constitutes the major chunk of the society. They should be given free financial education about basic financial concepts. They should be trained on how to generate money, the best ways to save money and where to invest their money to get maximum returns.
Also, the educated, working middle class should be given proper knowledge about the various financial products available in the market so that they can invest their hard earned money in the best possible ways. Even the rich and famous should be made aware of the various opportunities of investments, how to use their wealth to make maximum benefit for their personal development and for the development of the society as a whole. Hence, financial literacy, financial inclusion and financial stability are the top three aspects of a growing and efficient economy. These are undoubtedly the most important factors for India to emerge as an economically developed country in the next few years. In order to enhance your Financial knowledge and take your life to the next level, register today @ Power to Me.