India poor in Financial Literacy

Financial literacy is the ability to use skills and knowledge to take efficient and informed money-management decisions. For a country like India, this plays a bigger role as it is considered an important accessory for financial stability.

India is home to 17.5% of the world’s population but nearly 76% of its adult population does not understand even the basic financial concepts.

Survey confirms that financial literacy in India has consistently been poor compared to the rest of the world. Financial illiteracy puts a burden on the nation in the form of higher cost of financial security and lesser prosperity. An example of this is the fact that most people resort to investing more in physical assets and short-term instruments, which conflicts with the greater need for long-term investments, both for households to meet their life stage goals and for meeting the country’s capital requirements for infrastructure and industrial environment that creates employment and self employment opportunities.

In India, there are also certain erroneous beliefs associated with financial literacy, the most common being the myth that one who is ‘literate’ or ‘rich’ is also ‘financially literate’. Lack of basic financial understanding leads to unproductive investment decisions.

Another myth is that financial literacy is more important for adults. We can achieve the desired results from financial literacy only when we start educating our children. Like many other provocative topics, money is something that kids hear about outside homes as well, which exposes them to wrong perceptions.

Financial literacy and financial stability are two key aspects of an efficient economy. Financial literacy enhances individuals’ ability to ensure economic security for their families. In India, on one hand, there is a need to reach out to lower income groups and economically weaker sections, and on the other, to millennial who are hyper-connected and require tailor-made financial products but have limited awareness of the possible financial solutions.

The millennial are economically more active compared to their predecessors but are also more fragile in dealing with personal finances. The bottom-line, therefore, is that a ‘me-too’ approach to financial literacy will not work in India. All stakeholders including consumers must work in conjunction for financial literacy through a combination of innovative strategies.

The word ‘education’ is traditionally defined as “the process of receiving or giving systematic instruction, especially at a school or university.” Now Financial education does not fall into this neat classification, since it is not usually taught in colleges, but rather is something every person needs to obtain for himself or herself. It is an understanding of money, of how the financial system works, and what a person can do to preserve and grow his or her wealth.

The areas that need to be dealt with are:

  • The Importance of household Savings and investments
  • The Banking System
  • Personal Taxation
  • The role of Insurance to overcome personal and business financial losses
  • Pros and Cons of Availing of personal or other Loans

By the time today’s teenagers reach 40 years old, they’re more likely to be buried in credit card debt and face zero savings balances than they are to be thriving for retirement. That’s if we fail to deliver lessons in financial literacy for high school students. It can be avoided; all we need to do is teach our teens about money, its wise use and importance.

There are planners and advisers to plan and advice as a support but one must have a basic knowledge to interact with these people and understand various basic terms and features so that no one gets miss led.