Lack of financial Literacy has been observed as one of the major reasons behind the financial problems faced by most of Indians. Recently we have seen the idea buzz around us. But a few years ago, the situation was not like this. We hardly had any idea about what exactly financial education means or why it is important for us.
Financial literacy is the education that helps us to use various financial skills effectively for personal financial management, budgeting, and investing. In other words, financial literacy teaches us to manage and grow our money effectively.
Now you must be thinking why it is so important! According to a recent survey conducted by the Securities and Exchange Board of India, only 27% of India’s population is financially literate.
Because of a lack of financial knowledge many of us fail to manage our funds properly, as a result, we face problems in crisis situations. The crisis may come in the form of inflation, recession or any personal emergency situation. If we have proper financial knowledge, we can manage our money in a way that all these crises can be met more easily and comfortably.
Why do we need financial education?
- Proper financial education can help us to achieve various life goals
- Saving for education or retirement
- Buying assets
- Using debt responsibly
- To create a budget
- Track personal spending
- Increase investment
- A working knowledge of key financial concepts, such as compound interest and the time value of money can help us to grow our money more effectively.
The key components of Financial Literacy
You don’t need to master Mathematics, Statistics, or any financial degree to learn about the basics of financial education. Some of the key components of financial education are:
- Budgeting– Keeping a record of where your money is being spent
- Saving– Keeping different funds for different goals
- Investing- Using different avenues to grow money
- Proper understanding of financial terms- Knowing the keywords of financial details.
#Financial knowledge is the only key to monetary success.