Financial Literacy: The Key to The Growth of the Economy How financial education is the primary stepping stone towards a complete financial inclusion, and how to achieve 100% financial literacy?
By C S Sudheer •
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Take a look at this shocking statistic. According to an S&P survey, more than 75% of Indian adults do not adequately understand basic financial concepts. It's even worse when it comes to women. More than 80% of women are financially illiterate.
Why is financial education important? To answer this question you must know, what is financial education? Financial education is the ability to understand how money works. It is the art of investing and managing money and the ability to make sound financial decisions. Crores of Indians cannot make sound financial decisions and the consequences are terrible to imagine.
Unscrupulous life insurance agents and others in financial services, cheat the financially illiterate out of hard earned money by recommending financial products, not suitable for them or hiding relevant information. There's a popular term to describe this called mis-selling.
People make the wrong financial decisions losing money saved for years. Loans are availed without understanding interest payments and the consequences of a default. People don't commit suicide if they are unwell; they commit suicide if they are in financial trouble. No financial education = No money for retirement. Lack of financial education is a heavy burden on the Nation, as expenses on financial security rise. This begs the question. How can India be made financially literate and achieve complete financial inclusion?
Now to the next big thing. Financial education can be a stepping stone to complete financial inclusion. Financial inclusion is making financial services like banking and insurance, available to all citizens of India at an affordable cost. A financially educated person knows the value of financial inclusion and this is the first step to financial inclusion.
Financial inclusion insists on a bank account to save and invest. A person who is financially educated understands this and will open a PMJDY savings bank account to avail the benefits of life insurance, personal accident insurance, and even the overdraft facility to save him from greedy money lenders.
The Government is playing its part in bringing financial inclusion to the doorsteps of every citizen. Bank Mitras bring banking services and PMJDY accounts to the doorsteps of rural citizens deep within the country. India Post Payments Bank has been set up with the main aim being financial inclusion. The poor rural citizen has to say YES to financial inclusion and this happens only with financial education.
Financial education encourages citizens to jump from the informal financial system of greedy money lenders and illegal chit funds to the organized financial system of banking and insurance. Citizens who are financially educated ask questions. How can this financial product help me? Why must I avail this financial product, which could spell the end of mis-selling in India?
Financial education is equally if not more important than financial inclusion. People learn to save, invest, borrow and spend wisely. A person who is financially educated doesn't ask why financial inclusion, but goes to it. This solves all problems of financial inclusion and if the Government is bringing financial services to your doorstep, even better. This is where Companies like IndianMoney.com which follow PET, Protect, Empower and Transform, have a big role to play. They impart a holistic financial education, empowering even rural citizens to protect themselves from financial fraud and adopt digital transactions, making the Governments task of financial inclusion, really easy.
India needs to achieve 100% financial literacy and what better way than teaching young minds at school. Our education curriculum needs a serious rethink. Financial literacy must be imparted at the school level to both rural and urban students and currently, financial concepts are not taught, even at the degree level.
One big way of achieving 100% financial literacy is educating the girl child. A good financial education imparted at a young age empowers the women of our society. They, in turn, teach their children to save and invest, making India a developed Nation.
There's a popular belief that the rich are financially literate. Not true. Financial literacy is important for all citizens and very important for the rich financially illiterate citizens, to save and protect wealth.
It's the duty and responsibility of every citizen to make himself financially literate. Take financial literacy into your own hands. Knowledge is the key to financial literacy and nothing's better than reading up personal finance. The next step would be understanding your finances and making the right financial decisions.
Introduce a practical approach vis-a-vis financial literacy to promote financial inclusion. Studies have shown that financial literacy programmes where service providers were involved and backed by a suitable financial product, encouraged citizens to use that product. Citizens would use that financial product if they felt it met their needs.
Banks could impart financial education to leaders of rural communities and this knowledge would percolate to the lowest rungs of society, reaching every citizen in the Nation.
Financial products which meet the needs of low-income people must be introduced and a financial education provided to encourage citizens to use these products, get included in the formal financial sector and enjoy financial inclusion, making India 100% financially literate.
Be Wise, Get Rich.
