THE IMPORTANCE OF FINANCIAL LITERACY
One of the most vital aspects of a person's life is their financial literacy. It's like an important game; if you know how to play it right, you win; if not, you lose. The players who have mastered this game are those who know how to handle their money in a methodical manner and safeguard it against future financial uncertainties. However, the question is: What is financial literacy? And why does it have such a significant impact on people's lives?
The capacity to comprehend and use a variety of financial abilities, such as investing, budgeting, personal financial management, and budgeting, is known as financial literacy. And why is that important? It is significant because someone who understands finance can handle their money well and take advantage of the advantages it offers. You can manage your money well if you are financially literate. Since education is the key to a successful financial future, the earlier you start to become financially educated, the better.
To promote financial literacy in India, the Companies Act of 2013's section 8 led to the creation of the non-profit National Centre for Financial Education (NCFE). Four significant financial regulators—the Reserve Bank of India, SEBI, IRDA, and PFRDA—are promoting it. To determine India's degree of financial knowledge, NCFE carried out a financial literacy survey in 2015. It plans several initiatives to raise financial literacy, such as working with educational institutions and creating new curricula that incorporate lessons on money management, financial scams, etc. Investments, bank account types, bank services, Aadhaar cards, demat accounts, PAN cards, the power of compounding, digital payments, protection against financial scams, and other subjects are covered by NCFE in its awareness campaigns.
Even though programs to raise awareness about financial literacy have been held, some people are still unaware of it, and as a result, they encounter financial difficulties in their lives. According to a global survey conducted by Streak and focused on teenagers, the financial literacy percentage for adults in India is 27%, compared to higher rates in the UK (67%), Singapore (59%), and the US (57%). This data demonstrates how illiterate Indians are when it comes to financial literacy. A lack of financial literacy can result in several risks, including excessive spending and the accumulation of unmanageable debt. This, in turn, can lead to poor credit, bankruptcy, house foreclosure, or other undesirable consequences.
Lack of financial literacy knowledge affects a nation's economy in addition to its citizens' ability to handle their personal finances. Inadequate knowledge of finance can also result in a lack of involvement in the capital markets, which limits businesses' access to financing and hampers economic progress, resulting in a lack of financial inclusion, which has the potential to maintain income disparity and poverty.
As a conclusion, we may state that everyone's life is greatly impacted by financial literacy. Financial literacy awareness may help a nation develop by enabling people to make better financial decisions. Additionally, it will support one in avoiding anxiety and worry in the event of future financial uncertainties. Thus, it is essential that we all acknowledge the importance of financial literacy.