Financially literate person is an individual who possesses a certain set of skills and knowledge which helps him to make sound and effective decisions regarding the allocation of all his financial resources. Financial literacy and financial inclusions go hand in hand. A financially literate person is a boon to any country’s economy, because not only he puts his financial resources to best usage but also his investments helps the GDP and other economic aspects to flourish. The further article discusses the need of financial literacy in India, what are the challenges, future aspects and solution for the state that India currently is in regarding it’s financial literacy.
According to a survey conducted in 2014 by Standard & Poor’s , more than 76% of adults lack basic knowledge of concept and key features of financial literacy. The biggest myth is that most people believe if a person is rich and well educated, then it is to be certain that he is financially literate too, but in reality this is not the case. It was aptly said by Robert Kiyosaki – “ if you want to be rich , you need to be financially literate’’, not vice-versa. In India, the main problem lies with the economically weaker sections and women. 80% of the women population are financially illiterate whereas 73% of the men are financially illiterate. This is due to many women think it is the job of men to make decisions regarding any financial matter, hence they believe that financial education is of no use to them.
When coming to the economically weaker section we find quite an array of problems that support this condition. The main and the most persistent problem is the lack of communication, people who are underprivileged and ill-educated does not possess sufficient resources to access any knowledge related to finance and financial reforms. Most of the government plan and schemes are unknown to them. This give way to our second problem that is the exploitation of loanee/ borrower by the hands of zamindaars, unsecured money-lenders etc. As these loanees does not have any knowledge of the functioning of banks and other such financial institutes, they do not know the interest rate that prevails in the market when you take loan from banks, hence they end up taking loans on higher interest rate from these zamindaars, who then can easily exploit them according to their whims and wishes. The third problem and the most hazardous one in nature are that of many people who provide their money into the hands of some unsecured entity for safe keeping, many times it happens that these entities tend to loot their money and run away leaving them bereft and weak. These cases occur because some people from this lot does not know about saving accounts and investment option and that they even earn some interest for keeping their money in banks, moreover, quite a few of them have some sort of misconceptions regarding these saving accounts. Fourth and the final problem is that a much greater percentage of people does not know anything about the judicial usage of funds and financial resources, irrespective of their status. These people, hence, end up bankrupt or broke in the later stages of their lives.
“ It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
- Robert Kiyosaki
Hence it is imperative to find a solution for this critical condition that our country is in, the first and the for most solution is that we start the foundation of financial aspects from the grass root level i.e.. from the school and house level. Financial education should be made a crucial arrangement in children’s basic education curriculum. Any person who is with a background of finance and economics or any individual/institute who possesses apt information should conduct classes/ workshop for the underprivileged section and any other section who is deprived of such knowledge with the help of bank and other financial institutes. Therefore, the growth of our country is solely on our shoulder, the more judicially we allocate our financial resources, the more will the growth aspects. In the end, it is correct to say that financial literacy is a must for any country especially for developing countries like India.