Managing money wisely unlocks various opportunities, yet few have those skills. Let’s change that! Managing money is learnable and life-changing, especially in India, where around 70% of Indians don’t handle finances confidently.
This article explains what financial education initiatives offer, why Indians need to develop smart money habits, and how women and youth need financial literacy resources through education.
Also read: What is personal finance?
What is financial education?
When we discuss financial education, we mean teaching people the lifelong skills necessary to manage their finances. The knowledge and mindset needed to fully understand the concepts of money and finance are acquired through financial education.
A solid grasp of financial concepts gives us the tools to handle our money wisely. Because of this, we can make sensible choices and develop responsible spending habits.
Effective financial education teaches students how to mitigate risks and spend while maximising savings. It teaches individuals the fundamentals of financial independence and how to change their views on money so that it works for them.
The importance of personal financial literacy
Personal money management skills:
Financially literate people can handle their money wisely. People may improve their financial situation, save for emergencies, and reach their goals if they understand the basics of budgeting and saving tips. Building a solid financial foundation begins with being financially literate, which includes skills like making a family budget and cutting down on unnecessary spending.
Debt and credit management:
Credit cards, educational loans, and mortgage debt are heavy weights for many people. Financially literate students learn about the value of credit scores, the risks of taking on too much debt, and how to borrow responsibly. People may use this information to their advantage and make wise choices to help them pay off their debt and stay out of debt traps.
Reaching informed financial goals:
A lack of financial awareness may make investing seem daunting, even though it is an effective tool for building wealth. People may make better financial decisions when they understand investing opportunities, risk, return, and compounding. Financially literate people are better equipped to diversify their portfolios and invest in mutual funds that will help them achieve their financial goals over the long run.
Financially literate people are better equipped to prepare for retirement, identify gaps in coverage, and understand their options, such as the Public Provident Fund (PPF) or the National Pension Scheme (NPS).
In times of economic recession:
A solid understanding of personal finance is crucial in times of economic uncertainty. Being financially savvy makes people cope better when faced with challenges, such as a loss of employment or a drop in income.
Why is empowering through financial knowledge necessary for India’s economic independence?
Only a small percentage of Indians understand how to invest wisely so that they may enjoy the benefits of compounding. Most people do not have a basic understanding of personal finance, which includes budgeting, investing, taxes, compounding, and healthcare.
Only 27% of people in India know how to handle their money appropriately. That’s right, only one in five Indians can handle one of the most significant aspects of their financial well-being.
For India’s economy to thrive, its citizens must step up and do their part. It is about time that individuals had access to unbiased financial education.
To make good use of financial services, people could benefit from having a solid understanding of fundamental financial concepts. When it comes to opening bank accounts, applying for loans, or understanding the limitations and conditions of financial products, people with inadequate financial knowledge may need guidance.
People in this situation often miss out on government support programmes that may improve their lives, such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) or the Stand Up India Scheme.
A lack of financial education increases a person’s risk of being a victim of fraud, poor investment decisions, and debt traps.
Financial illiteracy slows down economic empowerment on both the micro and macro levels. It can make people more reluctant to make financial investments, which slows down capital growth.
Also, not knowing enough about money can make people less likely to participate in the financial market as they should, which lowers the efficiency and usefulness of financial intermediation.
A more robust and resilient economy can only be achieved by improving people’s financial literacy, which in turn empowers them and improves their financial skills.
Also read: Financial securities
Financial empowerment strategies for women: Why is it important?
Financial empowerment is crucial when it comes to women’s empowerment and general well-being. Encouraging women to achieve financial independence and safety is essential in a country like India, where gender inequities are still heavily present.
Empowering Indian women financially means providing them with the knowledge, tools, and support they need to take charge of their financial futures, whether that’s by saving, investing, or earning an adequate salary.
When people are financially empowered, they no longer rely on other people to meet their financial needs, increasing their feelings of independence and autonomy. Control over one’s financial situation makes women more resilient to crises, unexpected expenses, and significant lifestyle changes.
Financial freedom shows that women can handle money, run businesses well, and help the economy grow, which goes against traditional gender roles and ideals.
Investment education for the youth
Young individuals may better prepare themselves for financial uncertainties and risks by learning to diversify their income streams, invest in valuable opportunities, and manage their money wisely. With this approach, individuals can lower their dependency on others, handle unexpected economic downturns, and ensure their financial stability in the future.
Proper financial education may help youngsters avoid debt, paying high interest rates and affecting their credit scores. When young people are educated about money, they are better able to use it, get involved in the official financial system, and contribute to the development and growth of the economy.
Also read: Credit score
In conclusion, understanding finances is power. It lets you navigate loans, taxes, and accounts and avoid fraud. But many Indians lack this knowledge, hurting them and the economy. Making concepts like budgeting and investing simple to grasp is critical. Financial education, especially for women and youth, means greater economic well-being.