India is home to 17.86% of the world’s total population; but nearly 76% of its adult population does not understand even the basic notions of finance. According to a survey by Visa on Global Financial Literacy in 2012, India emerged as one of the least financially literate countries, at 23rd rank among 28 countries. A survey by IIM Ahemdabad concluded that only 22% students are equipped with high financial knowledge whereas 50% scored “Very Low” on the financial knowledge barometer.
According to President’s Advisory Council, “Financial illiteracy is not an issue unique to any one population. It affects everyone: men and women, young and old, across all racial and socioeconomic lines. No longer can we stand by and ignore this problem. The economic future of the country depends on it.” It is the conflux knowledge regarding financial, debt and credit management to make financially rational decisions- decisions that are integral to our everyday life.
Not many people, especially in India, are enlightened about the significance of being financial literate. To consider one as “financially literate” just because he/she is either rich or literate, is a fallacy. Everyone saves money for future needs, according to their own abilities. However, the approach to save surplus money is found missing among many people, particularly the younger generation, rural poor and unprivileged sections of our country. It is important to inculcate financial sense among children, too. It not only imparts a sense of financial awareness and responsibility, but also engenders economic sense and core values of social responsibility in them.
Financial literacy prepares individuals to recognize and seize important opportunities as they arrive. It also helps in recognizing common signs of fraudulence, and thus assists in protecting financial information. It succours in preparing oneself for retirement as adequate planning is required to save enough money before retirement and know how to handle money once in retirement. Financial literacy aids in learning how to deal with these inevitable life altercations and can help make the process go a lot more smoothly.
Countries around the globe are becoming increasingly aware of the importance of financial education and are already providing a variety of financial education programmes, ranging from Web sites and pamphlets or brochures to training courses and media campaigns. They cover issues such as credit, insurance, investment and retirement saving. In India, Pradhan Mantri Jan Dhan Yojana was one such step towards imparting financial literacy and ensuring access to financial services namely Banking Savings & Deposits Accounts, Remittance, Credit, Insurance and pension in an affordable manner under India’s national mission for financial inclusion. The role of technology in improving financial literacy can never be overlooked. It can be used to accelerate financial literacy via three media: computer, mobile and internet.
Financial inclusion has always been a priority in our country, but, financial literacy is the need of the hour. The financial service industry- either on its own or as required by government regulators- needs to find ways to make it easier for people to make sound decisions. It is essential that each and every section of our society understands the basic concepts of financial management so that everyone contributes towards nation building in a positive manner.