Can Financial Literacy Help you Grow Your Wealth?
Can financial literacy lead to prosperity in a world where Financial decisions impact our day-to-day lives and our long-term prospects? The path to financial success is frequently paved with obstacles and doubts. But knowing the fundamentals of money management can really make all the difference.
The state of financial literacy is very important in India. Having the capacity to handle personal money has become more than just a talent, as living expenditures rise, consumption increases, and the work market becomes more diverse.
A key issue is revealed by the Standard & Poor's Global Financial Literacy Survey: only 24%1 of Indian adults have a solid understanding of fundamental financial concepts, which translates to about one in four people being equipped to handle the intricacies of financial management. This is a cross-class problem that affects the middle and upper middle classes in addition to the marginalized.
In sharp contrast, according to a research by the Securities and Exchange Board of India (SEBI), only 27% of people in urban areas have a strong grasp of financial concepts. There is a noticeable difference between urban and rural areas as this percentage drops to 16%2 in rural areas.
The Reserve Bank of India (RBI) has responded with an extensive initiative known as the National Strategy for Financial Education, which will run from 2020 to 2025. This program reflects the RBI's dedication to creating a country of knowledgeable and financially literate citizens more than it does data.
The need for financial literacy is evident when one considers that 76% of Indian adults do not possess a sufficient understanding of basic financial concepts. It's important to comprehend the entire range of financial options and their long-term effects rather than focusing only on saving or budgeting. Let's investigate the ways in which financial literacy might improve lives:
Risk management: Those who possess financial literacy are better equipped to recognize and control the risks connected to various financial products. Making well-informed decisions on loans, investments, and Life Insurance reduces the possibility of financial hardship.
Wealth Accumulation: Compound interest, saving, and investing fundamentals can all have a big impact on wealth accumulation. Those with a greater understanding of finance are more inclined to invest in diversified portfolios, which raises the likelihood of better returns.
Debt Management: Those who possess financial literacy are better able to successfully manage and consolidate their debt. It assists in comprehending the ramifications of different loan products, avoiding debt traps for people.
Retirement Planning: With longer life expectancies and a growing number of nuclear families, retirement planning is becoming more and more important. Understanding the many retirement planning alternatives and making decisions that guarantee financial security in later life are made possible by having a solid understanding of finance.
