Financial literacy can be key to ensuring good money habits are formed, setting children up for a successful and secure financial future
Financial literacy refers to the ability to understand and effectively manage personal finances. It is an essential skill for everyone, regardless of age or income level. Most nations now place a high priority on financial literacy since it is strongly correlated with economic development. However, many countries, including India, have a significant gap in financial literacy levels compared to developed nations like the United States, Canada, and the United Kingdom.
According to the Standard & Poor’s Global Financial Literacy Survey, India has a financial literacy rate of just 24 per cent, compared to the global average of 35 per cent. In contrast, the United States has a financial literacy rate of 57 per cent, and Canada has a rate of 68 per cent. About 20 per cent of the world’s population lives in India, but only 76 per cent of its adult population is even familiar with the most fundamental financial ideas. This significant gap in financial literacy levels between India and developed countries highlights the need for early financial education.
It is a proven fact that those with the right financial education and understanding organise their finances more effectively and make the most use of their financial resources to their advantage. Financial literacy should start as early as possible in India to bridge the gap between India and other countries. In the United States, for example, 45 states have adopted financial education standards, and many schools offer financial education courses.
In contrast, according to a study by the National Council of Applied Economic Research, only 5.5 per cent of schools in India offer financial education courses. To bridge the gap in financial literacy between India and other countries, financial education must be integrated into India’s education system.
By teaching financial literacy to young people, we can help them develop good money habits early in life, setting them up for a successful financial future. Additionally, early financial education can help reduce poverty and increase economic growth in India.
Additionally, financial education should be made widely available to adults in India. Many people in India did not have access to financial education when they were younger, and they may still lack the knowledge they need to manage their finances effectively today.
In India, poverty is a significant issue, with a large portion of the population living below the poverty line. Financial education can help to reduce poverty by teaching people how to manage their money effectively. With proper financial education, people can learn to budget, save, invest, and manage debt, all of which can help improve their financial situation.
Moreover, financial literacy can also help increase economic growth in India. As people become more financially literate, they can make better financial decisions, such as investing in stocks or starting a business. These decisions can lead to economic growth, creating jobs and boosting the economy.
However, financial literacy is important not just for individuals in India, but for the country. According to the Reserve Bank of India, financial inclusion is a significant issue in the country. In 2018, only 47 per cent of Indians had a bank account, and only 7.6 per cent of rural Indians had access to formal credit. According to the survey by RBI, there is relatively little difference in financial literacy scores across the country’s rural and urban areas. This suggests that significant effort will be needed to improve the awareness of digital banking among all societal strata in the nation.
The direct correlation between macroeconomic prosperity and high financial literacy presents a do-or-die situation before us as a nation. The ambitious aim of attaining a 5-trillion-dollar economy may be achieved but without adequate financial literacy education, it will be of no substantial use for the welfare of the public.
