Growing Importance Of Financial Literacy In India

Financial literacy is not a profession to be taught, it’s a need that our economic future demands. The current financial scenario continues to go through both micro and macro-level changes impacting not just the global economies but our pockets as well. Financial literacy aims to create awareness around sustainable management and allocation of money. It helps us in making informed decisions on our budgeting, savings, spending and investing activities.

Financial education not just helps in individual growth, but rather creates a self-reliant ecosystem fostering financial independence. The concept of financial freedom plays an essential role in the growth of developing economies like India, which are progressing rapidly. Besides the many benefits, it is crucial to note that financial literacy is a pressing priority not just for individuals but for country’s economy as well.

An ambitious appetite

As humans, we all have needs and wants. Needs represent stuff that is crucial for human survival and wants refer to our desire which at some point have no ends. It is nearly impossible to satisfy all our wants. Nevertheless, if one tries to understand the cash flow and the real value of temporary desires, one can make strong definitive monetary decisions. Financial education helps in understanding the real value of wants, thus providing assistance in spending and saving attitude. A good money attitude guides you in segregating your ambitions and achieving the ones that carry the highest utility value.

Preparing for the best and worst

One major benefit of financial education is that it improves your buying/selling behavior. It inculcates the habit of a healthy money mindset by saving and investing prudently. This helps you in getting prepared for both the best and the worst. Savings and investments are not just great for wealth generation, it gives you a sense of security during adverse times as well. Keep in mind, that earning money and managing money are two different things. Most of us earn money but only some understand the value of managing that earned money. Financial literacy instills money management skills so that you can make the best of your generated income by right allocation.  

Financial confidence  

Financial literacy also helps in developing confidence. Nobody likes being dependent on someone for basic needs. Financial freedom is perhaps one of the most essential character traits that should be practiced by everyone. Besides giving you a sense of liberty, financial freedom also inculcates confidence. The more you know about something, the better informed you are, and the better ability you develop in handling adverse situations. A confident financial attitude protects you from monetary fraud.

As per a 2019 research by NCFE, 76 per cent of adult Indians still need to enhance their comprehension of fundamental financial concepts. Given that 27.6 per cent of Indians (between 25-44) continue to participate in the financial inclusion program through financial education, India has the potential to rank among the nations with the highest levels of financial literacy in the world. If the young, between the ages of 10 and 19, are also given good financial education, this percentage might increase by more than 20 per cent in the next two decades.  

The economic trends are never constant. The disruptions caused by the pandemic is an epitome of unfavorable upshots. No one had thought that the imminent financial disaster would leave a lasting impact on common lives affecting the financial stability of many. Sometimes unseen disruptions have a major impact. And for this very reason, financial literacy is quite necessary. You cannot fathom the future economic shifts but you can control your financial situation in adverse times if you are financially literate.

Marc Despallieres

Guest Author The author is Chief Strategy Officer, Vantage