Be a finance wiz

Financial literacy empowers individuals with the knowledge and confidence of making smart financial decisions regarding spending, says Harish Sanduja

Personal finance should be a subject of interest to everyone. All of us are an inextricable part of a functioning society and its economy. Therefore, all of us need the knowledge of smart money management to sustain and succeed in our professional and personal lives.

Simply defined, personal finance is the knowledge and ability to manage money intelligently. Its foundation is best laid in school education, preferably at the middle level. But this important underpinning has been missing in Indian education if we go by the unimpressive financial literacy rates prevalent in India. A Global Financial Literacy Survey conducted in 2018 by the Standard and Poor’s Rating Services revealed that only 24 per cent of the adult population in India is financially literate. This is a dismal figure, considering that 74 per cent of the total population is otherwise literate.

This huge gap in financial literacy needs to be filled. For this purpose, we must begin at the school level and introduce the concept of financial literacy in the curriculum.The aim should be to educate students about different aspects of personal finance, such as budgeting, spending, banking, saving, investing, insurance, mortgages, tax planning, retirement planning and estate planning.

Financial literacy yields multiple benefits to learners. It empowers individuals with the knowledge and confidence of making smart financial decisions regarding spending, saving, investing and multiplying money. Some of the benefits are listed below:

• Differentiate between need and greed: By teenage students must be made aware of the difference between need and greed. One of the most important objectives of financial literacy is to make learners ethically strong and learn to make money grow not only for oneself but also for society.  
• Smart money management: Teaching personal finance to middle-level school students creates a firm base for lifelong money management. Today’s youth is already well connected with technology. An understanding of personal finance will empower them to make the best use of the digital tools for smart spending, which involves cashing in discounts, winning cashbacks, and breaking payments into low-cost EMIs. Besides intelligent spending, personal finance also inculcates the virtues of saving and investing at a young age. Over time, these virtues manifest as responsible money management.
• Prudent financial planning: Planning for the future starts at the school level. Teaching personal finance to students will enable them to create financial goals that are in sync with their career aspirations. Instead of leaving the financial planning to their parents, students will be active participants in charting out a plan for saving and multiplying money to meet their goals. This involves choosing the right financial instruments to earn a high interest rate or investment returns to create ample fund for college education, without taking too much of risk also.
• Securing the present and future: Financial security is important to meet any present or future contingencies. It complements a person’s need for health and social safety. Individuals well versed with personal finance will secure their present and future by making good decisions about insurance and banking instruments such as fixed and recurring deposits. This will help them to mitigate any disruption caused by emergencies.
• Career opportunity: Financial literacy in students creates an awareness of multiple career prospects in finance. With right information, understanding and guidance, students can start working towards a financial career of their choice at an early age. Some of the options are: investment banking, corporate finance, portfolio management, chartered accountancy, stock broking, financial planning and risk management.

The writer is Director — Schools, Seth AnandramJaipuria Group of Educational Institutions, Ghaziabad