The Covid-19 pandemic has left many people losing their sources of regular income and forced them to make expenditures from their lifelong savings that could drain out gradually. Such times bring forward the reality that our country needs financial literacy.
This article throws light on the significance of financial literacy and suggests ways to improve it.
- Shocking Statistics
It is shocking to know that only 24% of the Indian population has financial literacy. This implies that a large proportion of us do not have conceptual awareness and do not know the practical application of investment, savings, lending, borrowing, taxation and budgeting.
- Why so much stress on Financial Literacy
India is among the nations with the highest rate of savings. However, these savings are not invested correctly and seriously. Now, of course, this may be because of the confusing investment criteria, but, this keeps us lagging behind as a nation.
When you know financial management deeply and well, it subtly leads to an increase in discipline towards your finances and will lead to a major shift in your financial practices like saving and investing regularly, and off-loading debts. Add to that, financial literacy protects individuals from financial fraud.
- Developing financial management skills start with a bank account
A bank account in a trusted bank provides reliability, access and safety. Online transactions via cards and cheques offer proof or record of payments, they also give you a track of where your money goes.
Additionally, it is suggested by experts that you have a savings account which you can use for unexpected emergencies.
Keeping all your money in a current account implies that your savings are instantly available to spend, leading to you not benefitting from any interests, otherwise generated by a savings account.
- Savings and Budgeting
Track your expenses, then differentiate between fixed and variable expenses, and think of ways to cut down any ‘unnecessary’ expenses. Set up a proportion of your income to go to savings, like a SIP (small investment plan). Yes, that is where your investment journey begins.
- Role of Indian Government in spreading Financial Literacy
The Reserve Bank of India has been celebrating the Financial Literacy Week since 2017 and has created and compiled an educational, interactive portal that includes films and games in over 13 languages for school kids, farmers, self-help groups, trainers, senior citizens and entrepreneurs alike. The goal behind this project is to spread the importance of and awareness of financial management and risk prevention.
Find the link to the RBI’s Financial Management Portal below.
https://www.rbi.org.in/FinancialEducation/
- Financial Literacy Material – FAME Booklet
The Reserve Bank of India has created reshaped financial literacy modules for five target groups which are Farmers, Small entrepreneurs, School children, Self Help Groups and Senior Citizens.
Audio-visual media has been created for the general public on topics pertaining to Financial Literacy. These Audiovisuals are on “Safe and Basic Financial Literacy“, “Unified Payments Interface UPI” and “Digital Management of Finances”.
Find the link to the booklet below.
https://www.rbi.org.in/commonman/English/Scripts/fame.aspx
- Taxation for Beginners
Taxation can be daunting and a rather hazy path for first-timers. When you start a new job – ask your HR department to get your Salary details/ Pay Slip / Tax Statement in order to understand whether they’re deducting TDS (Tax deducted at source) or PFF (Public Provident Fund) while depositing your salary.
Try inculcating this very essential life skill of financial management in order to reduce risks in life. Governments should already be taking measures to include financial literacy lessons in students’ high school curriculum.
We hope you are soon able to monitor your financial portfolio — taxation, savings and investments.
We wish you a very happy Financial Management journey..!