Management of financial matters require structured knowledge and specific skills and the absence of either leads to unproductive decisions.
We all aspire to be successful and leading a happy life. In this pursuit, money excites most of us most of the time. It is so because we all are an Economic Being, besides, a Social Being. Our economic behaviour is equally important for our wellbeing as social behaviour. However, while a lot of emphasis is given to nurturing and shaping up our social conduct, hardly any formal intervention is made to ensure a measured response at the economic front. We have the myth in our society that the one who is ‘literate’ or ‘rich’ is ‘financially literate’ as well. But, the fact is that the rich and educated are as constrained as the others when it comes to systematically using financial frameworks and tools for making financial decisions. Management of financial matters require structured knowledge and specific skills and the absence of either leads to unproductive decisions.
Another myth is that financial education is needed only at a specific age (for adults), or at a time when we have some specific responsibility or a large amount of money. But, the money matters do require our attention all the time irrespective of our age. Formal education and structured knowledge about financial decision making is key to optimal return on the financial resources and financial stability. Thus, financial education from an early age is necessary to hone this important life skill and encourage active savings behaviour in people from all age groups and all sections of society.
The fast-changing skill requirement for jobs and increasing uncertainty of employment make financial education far more important to ensure financial security. An understanding of one’s financial needs and priorities at different points of career and different stages of life, and the ability to choose appropriate financial products and investment options helps in maintaining adequate availability of funds for all the requirements.
In the modern economy, the growing sophistication of financial markets, and the availability of a variety of investment avenues, demand individuals to weigh the risks and make responsible choices while channelizing their savings to optimize return on investments. Also, in the digital economy wherein the use of credit cards, loans and mortgages are an integral part of life, it is essential to create awareness among people about the risks and benefits associated with such facilities. According to a survey, 33 per cent of the Credit Card users in India are not sure of the benefits of paying more than the minimum amount due on their credit card bill. Further, the increasing cases of personal bankruptcy indicate there is a need for widespread financial literacy.
According to a report of the World Bank released in April 2018, there were 19 crore adults in the country without a bank account despite the success of the ambitious Jan Dhan Yojana. It is the second-largest unbanked population in the world after that of China. It makes such a large population remain financially isolated on one hand and struggle to avail the welfare benefits offered by the government wherein the money is electronically transferred in the beneficiary’s account, on the other hand.
Reserve Bank of India (RBI) released the “National Strategy for Financial Education (NSFE): 2020-2025” document on 20th August 2020. It is prepared by the National Centre for Financial Education (NCFE) in consultation with all the stakeholders including the financial regulators - Reserve Bank of India, Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), and Pension Fund Regulatory and Development Authority (PFRDA). The National Strategy for Financial Education aims to support the vision of the Government of India to create a financially aware and empowered India through financial education making it an important life skill, encouraging active savings behaviour, and developing credit discipline. The policy has recommended “5C” approach for financial education which includes the development of relevant content for schools, colleges, and training establishments, building capacity among the intermediaries providing financial services, leveraging on a community-led model for financial literacy through appropriate communication strategy, and, enhancing collaboration among various stakeholders. We may hope that the structured financial education from school level to communities will help the government achieve the goal of financial inclusion and financial literacy within the targeted timeframe.
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