Financial literacy is the knowledge a person needs to imbibe separately apart from the academic knowledge during childhood. But, unfortunately, in India we don’t have any schools to teach the children about the importance of financial literacy. A student may have been born in an affluent family or is academically sound, but that has nothing to do with financial literacy. He may be financially illiterate!
Financial education focuses on the ability to manage 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.
Why the discrepancy?
In July 2014, Kingfisher Airlines appeared as the country’s top NPA after its failure to repay loans of over ₹40 billion (US$620 million) borrowed mainly from state-owned banks. On the other hand, in its audit of the Turnaround Plan and Financial Restructuring Plan of Air India, the auditor said that the airline has failed to achieve many of the objectives in various functional areas mandated under the financial restructuring plan which provided equity infusion of Rs 30,231 crores till FY21. Although the owners are affluent and definitely professionally successful, they were lacking in financial literacy.
Right decision at the right time or right investment at the right sector was missing in their strategies. Hence it is important to have financial know-how since the day a child is heading to school.
Why it is important?
Any improvement in financial literacy will have a profound impact on consumers and their ability to provide for their future while avoiding the pitfalls of debt. Recent trends are making it all the more imperative that consumers understand basic finances because they are being asked to shoulder more of the burden of investment decisions in their retirement accounts while having to decipher more complex financial products and options.
The tasks are not easy but a better understanding and more knowledge can ease the burden tremendously. Also, we are living longer. This means that we must have accumulated more funds before retirement to cover living expenses over a longer time. Otherwise, we could become a burden for our families.
It is never too early or too late
Hence it is advisable to gain knowledge or hire a financial advisor for decision making during various aspects of life. Investment on your own without much financial knowledge can be detrimental in the long run. There are multiple options for investments and savings in the market, but you got to choose the best one, either with your sound know-how or assistance of the advisor.
It is never too early or too late to improve your financial literacy. In fact, if you avoid major mistakes and do some of the most basic things, you may find yourself on the road to controlling your financial future with significantly less financial anxiety.