A Dubai school has recently taken the initiative in teaching children how to be smart with money, how to avoid the debt trap that engulfs so many adults today, how to weed out mock currencies, forged utility bills etc.
The Next Generation School in Al Barsha 3, Dubai, has also started School Economy, which teaches financial literacy by giving pupils a monthly salary from which they pay for expenses such as utilities and rent. In addition to this, CTS Canadian Career College and the Modern College of Hairstyling and Esthetics have announced the launch of a new financial literacy training program in North Bay.
What does financial literacy imply?
Accordingly the RBI, financial inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of the society including weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by mainstream institutional players.
It helps in managing personal finance matters in an efficient manner, and it includes the knowledge of making appropriate decisions about personal finance such as investing, insurance, real estate, paying for college, budgeting, retirement and tax planning.
A global survey conducted by Standard & Poor’s Financial Services LLC says about 76% Indian adults do not adequately understand key financial concepts. Unfortunately, this number is lower than the worldwide average of financial literacy.
Stages of financial literacy
As a teenager or school going kid, an individual might require know-how of savings so that he/ she can save pocket money or scholarship and utilize it effectively. Whereas a young person who has just started working and receiving a salary, would require a banking service, complex investment products (given that youth are more inclined to risk-taking and are open to experimentation) and remittance services that would enable him/ her to send a portion of earnings to parents who are not able to do as much physical labour as they could earlier.
As time progresses and the individual gets married and starts a family, he/ she is required to think about safer financial products and longer term investments. His/ her dependency ratio is highest at this point – both children and parents are dependent on the individual. As the individual becomes older, simple banking services are required to access remittances transferred by children, and welfare transfers from the government.
Benefits of Financial Literacy
• Since most investment advice is a Dangerous Half-Truth, a proper financial literacy helps in understanding and assessing the plans.
• One size doesn’t fit all investors. Hence customizing & tailoring investment plans are essential which one can implement from financial education.
• It helps in overcoming the Conflicts of Interest in Investment Advice.
• Your financial intelligence compounds like money & hence it is more probable to take better and faster decisions.
• Financial intelligence obtained from the financial literacy program is the one investment you can never lose.
• Financial Intelligence brings freedom, independence and self-confidence.
The efforts that are being put in by stakeholders to empower people while making them financially literate are commendable but need to be more focused and customized as the rule of ‘one size fits all’ doesn’t seem to apply in this sphere. Providing the right advice at the right time and with the right approach is the key and this indicates vast scope for work and innovation in this field.