Let me start with asking few questions. The below table consist of 2 columns. Each column has a set of questions, you must answer each question with answer of either “Yes” or “No”. Read the question and see if you can answer it or not. I do not need the answer - I just need to know if you know the answer or not. Confused? Let me clarify – Say the question is “Who won the Bengal election?” If you know the answer, then say “Yes” otherwise “No”. Similarly do that for the below set of questions. Give yourself 1 point if the answer is “Yes” and 0 for “No”. And then sum it up separately for both the columns.
Column
A
|
Column
B
|
Can
you recommend me the best app among these: Instagram, Snapchat or TikTok?
|
What
is compound interest? Does it affect us?
|
Who
won the last cricket world cup?
|
Why do we pay taxes?
Can we avoid it?
|
Which
place creates the best cake or the best pizza?
|
If I
give Rs.1000 can you earn 200 by using it within a week?
|
Where
to buy clothes from? Amazon, Flipkart or Myntra?
|
Can you save
money in today’s age of inflation and high expenses?
|
Can
you listen to 5 songs in 20 minutes?
|
Why
does credit card charges interest amount?
|
Do
you have notes for next exam?
|
What is
inflation? How to prepare for that?
|
Do
you have a job? Or do you own a business?
|
Where
would you keep your money for it to grow? Bank? House? or someplace else?
|
Once you have the points summed up, compare which column did you get the maximum points. If total points in column A is more than column B, then you’re in for the ride. Then this write up of mine is of significance to you – do not stop, continue reading. If you get more points from column B, then too continue reading and let me know if I make sense.
Knowing answers to questions from column A is good for general knowledge but not beyond that. But knowing what is being asked in column B directly affects us. You may not know but if you have answers to questions from column B, then you are sorted with money matters of this life. And you would be called financially literate.
What does It mean to be Financially Literate?
Before I answer that let me tell you what finance is: The money for any project or a business is called finance. Finance is also the activity of managing the money. Taxes, insurance, loans, budgets, banking, credit cards, expenses, savings are all part finance.
Financial literacy is the union of financial, credit, and debt management knowledge that is necessary to make financially responsible decisions or choices that are integral to our everyday lives. Financial literacy includes the skill to understand what using a credit card really means, where to invest, and how to avoid debt. It also gives you answers to questions asked in column B. Financial literacy has a direct impact on us as we try to balance our budget, buy a home, fund our children’s education, and ensure an income for retirement.
The absence of above-mentioned understanding is referred to as being financially illiterate. According to an accredited financial literacy survey, traditionally, India hovers at around 24% in financial literacy rates, which compared to 55 per cent in developed countries, is woefully insufficient. This means nearly 76% of Indian adult population does not understand even the basic financial concepts. This reveals the pressing need to educate the masses about finance. Financial illiteracy puts a burden on the nation in the form of higher cost of financial security and lesser prosperity.
Despite having the world's 10th largest and Asia's oldest stock exchange, low per capita income, education inequality, non-banking habits and informal borrowing and lending, ruled the country for years. Thus, it is imperative for the country to now optimize its resources and boost the economic and financial backbone of the nation. India’s financially literacy rate, albeit abysmal it’s increasing. Not long it was around 15% and now it 24%. Recent reforms like push for bank accounts, digital payments, increase usage of mobiles for payments is significant, as India is already the world’s second biggest smartphone market with over 220 million smartphone users. There are enormous possibilities to go digital and create new opportunities to engage and share financial knowledge with consumers.
How important it is be Financially Literate?
Financial literacy is important because it prepares one with the knowledge and skill to manage money effectively. Without financial literacy, the actions and decisions one make or do not make with respect to savings and investments would lack a strong foundation. Financial literacy helps in understanding financial concepts better and enables one to manage their finances efficiently. It also enables an individual to prepare for future, create himself or herself with enough wealth for his or her retirement.
It is important to inculcate financial awareness at an early age as that would benefit the people in planning their investment properly at a later age. The introduction of financial education at an early level will also help the students to identify whether to narrow down to the same career in future or not. As currently, they are able to take this decision only when they are undergoing graduation.
How would you benefit if you are Financially Literate?
Managing bills: Bills for electricity and such, loans, rent can easily be managed
Savings and expenses: What you earn should be divided into two parts: savings and expenses. Education in finance can help you know how to divide it better
Building wealth: One should be wealthy and not rich. Money with education makes one wealthy
Protecting oneself in case of emergencies: A sound knowledge in finance can be helpful in creating an emergency fund
Achieving goals: Without financial education one mostly lives life from paycheck to paycheck with no goals and ambitions to aspire
Retirement planning: How to save, where to invest – knowing answers to these questions will help one to prepare for their retirement
Lead a tension free life: Being financially literate will also help you stop stressing on your expenses
How to Become Financially Literate
There is no dearth of knowledge in today’s digital age. One only needs to do a simple search in Google or in YouTube to get multiple responses to a single query. I am listing down links to few videos which I hope will be helpful to the seekers of financial wisdom.
Financial literacy for all -
https://www.youtube.com/watch?v=pWU3DYvnP0s Investing in your 20s simplified -
https://www.youtube.com/watch?v=qsCUE7kzFHA&t=2s 3 money management tips -
https://www.youtube.com/watch?v=TITs-R1BM-M Best money management tips -
https://www.youtube.com/watch?v=uYNfT6B2Hqg Best personal finance strategies -
https://www.youtube.com/watch?v=nbrkmJTuGoY Source for the writeup - The facts and figures are taken from the following sources:
https://www.livemint.com/Opinion/f5xo11OSPqxGWUdaWKVb8J/Why-India-needs-to-work-on-financial-literacy-now-more-than.html https://timesofindia.indiatimes.com/home/education/news/why-encouraging-literacy-in-finance-matters/articleshow/78060694.cms https://www.investopedia.com/articles/investing/100615/why-financial-literacy-and-education-so-important.asp