Financial Literacy Program
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Financial Literacy Program
Need for financial literacy.
Only 24% of adult Indians are financially literate, according to a research by the Global Financial Literacy Excellence Center. India has the lowest rate of financial literacy among the major rising economies. This is brought on by awareness, insufficient formal training, and interstate differences. Even while the rates of financial literacy in other emerging economies are higher, there is still room for development.
Now, the issue is, why is financial literacy necessary? If we can pay a professional advisor to assist us with our financial decisions, why should we spend the time and energy learning the basics of debt management, budgeting, investing, saves, and other financial concepts?
The basic answer to this is that we risk “overspending” or “overinvesting,” both of which have negative effects on our finances. If we are unaware of these principles. If we overspend, we could not have any money left over for unanticipated crises in the future. However, overinvesting may prevent us from enjoying our income and from leading a thrifty lifestyle. Speaking to the Rajya Sabha, our finance minister Nirmala Sitharaman ji stated that, as of December 2020, around 9 crore Indian bank accounts that had not been used for more than ten years held Rs 26,697 crores that were unclaimed. These were the ones who oversaved, but they were unable to pass or enjoy their money.
Managing Income
The main disadvantage is that income management skills are only taught to those who plan to pursue careers in that area. For this reason, the vast majority of youth lack the knowledge and skills necessary to manage their finances. Regarding health and life insurance, a crucial component of financial planning, there is a severe deficiency in financial planning. The majority of individuals believe that holding large cash balances is the only way to invest, so they continue to amass enormous sums of money at home. However, the money they acquire never appreciates in value or enters official financial institutions like banks, etc., making them useless.
Given that India’s population is increasing, having a solid financial education would help people receive larger returns on their investments.
Financial Literacy at the school level
Undoubtedly, the Indian government has been working to increase the literacy rate by introducing regulations to make financial education mandatory in schools. However, the fundamental issue remains: the policies have not been implemented.
Children learn how to solve mathematical problems in school, but they are not taught how to make decisions based on the solutions. We are taught how to measure a square’s area or the hypotenuse theorem, which are useful in very few situations, but we are not taught how to create budgets for our expenses.
The answer to this is to teach kids the fundamentals of creating monthly household budgets, opening and using savings bank accounts, explaining PPF accounts and how they aid in long-term savings, explaining compound interest and how it functions like magic in long-term investing, etc. Children may develop practical awareness at a very young age if all these ideas are taught to them in school, rather than forcing them to memorize formulas to solve mathematical problems.
Current Situation of India’s Literacy Rate
In comparison to many rising economies, the percentage of financially literate adults in India is the lowest at 24%, according to a survey by the Global Financial Literacy Excellence Centre. India may have the lowest level of financial literacy for a variety of factors, including inter-state differences, a lack of formal education and awareness, and many more.
LEAF provides financial literacy at two levels:
1. Basic Financial Literacy: For women who are asking for a loan for the first time, a basic financial literacy course is required. This is not only to make sure the women understand the terms and conditions of the loan but also to teach them how to keep track of their financial activities and stress the value of saving money. In order to make fundamental financial literacy understandable to semiliterate and nonliterate women alike, we are using an increasing amount of graphics. In order to make fundamental financial literacy understandable to semiliterate and nonliterate women alike, we are using an increasing amount of graphics.
2. Advanced Financial Literacy:
For its beneficiaries, the LEAF created an advanced financial literacy course with a business literacy emphasis. LEAF offers information about financial negotiating, marketing, debt management, budgeting, and other topics under this program. Furthermore, for a Business
Additionally, LEAF educates women clients joining the bank and foundation about various financial products and services through a film that is shown at LEAF & NIIT Foundation, mobile enterprises, and offices. In more rural parts of the state, the Program on Wheels provides courses, including instruction in financial literacy. While giving instruction, trainers make use of games and flip charts on financial literacy. In the past four years, LEAF has reached more than 4,000 women thanks to the combination of these initiatives.
Why Financial Literacy in India is Important?
Promote proactive saving habits. individuals, especially young individuals, struggle to manage their finances. The balance between savings and consumption is off. For most people, the notions of investments and savings are foreign. People who possess a solid understanding of finance are better able to manage their investments and savings.
Establish a credit-conscious lifestyle and promote obtaining formal credit from financial institutions if needed. The “Persistence of Informal Credit in Rural India” RBI Working Paper Series A staggering 42.9% of people take out loans from unofficial sources such as moneylenders and commission agents. These non-institutional lenders charge exorbitant interest rates for their loans. The companies get into the debt trap because they are unable to handle their finances. Strong financial literacy will enable small business owners and operators to make
Control risk at different phases of life by getting appropriate insurance. In the large cities and metropolitan locations like Mumbai and Delhi, Individuals are unable to allocate their spending’s. The data released by The Hindu indicates that although investments in fixed assets have been growing rapidly, there has been a significant deficiency in financial planning with regard to life and health insurance. The majority of people hoard large sums of money at home instead of investing it. These choices demonstrate a lack of financial preparation. As a result, the money that has accumulated never gains value. People who receive financial education will be able to handle their money wisely.
Financial education should be used to instill the idea of financial literacy in all segments of society, making it a crucial life skill.
Promote involvement in the financial markets to achieve your financial objectives.
Boost the safe and secure use of digital financial services.
Given that India’s population is increasing, having a solid financial education can help people in the country earn more money.