You could be a onetime investor, an investment professional or a college graduate, you would still need to know how money works in the real world. It is not enough to know how to earn money. Knowing how to invest, save, grow and donate money is equally important. You need to develop the ability and the wisdom to make proper decisions when it comes to your personal finances. This ability is not something that can be developed overnight. A proper, methodical financial planning and education is necessary. Not all of us get this information in our day-to-day lives. We all need to make wise financial decisions and understand the mechanics of a credit card, advantageous savings methods, consumer rights, time value of money, etc. Hence, financial education is the need of the hour.
Read on to find out all you need to know about financial education and what it comprises of.
Is it really important?
To know if it is really important, we need to know the effects of not having any financial education.
There are many monetary scams these days. One may wonder why an increasing number of people are falling prey to these. Even though information is easily available by use of technology, the lack of proper and stream-lined financial education makes all the difference.
The absence of financial literacy can lead people to making poor decisions that can have adverse effects on the financial health of an individual.
Selecting the right kind of investment for your income level, choosing from the wide range of insurance policies and selecting the right kind of future investment plans – all fall under the umbrella of financial knowledge. Not knowing these basics leads people to follow the herd mentality. They may, possibly, choose the wrong products that are not right for their portfolio.
Who needs financial education?
All those who dream of a secure financial future deserve to have financial education. If you are an investment professional, you need to have knowledge of various stocks and market share values. If you are a passive investor, you need to have information about the various bank interest rates, brokerage charges and so on. If you are a housewife and think that financial education is not your cup of tea, you are wrong. You need to have correct financial information because you have the ability to influence the family into securing their financial future. College graduates too need this information to make right choices in their career paths.
Various organizations are trying to make financial information accessible to all. The Reserve Bank of India (RBI) is working with nationalized banks and some Non-Profit organizations to this end. The key in spreading financial education is to make use of technology that can be accessed by the masses.
Are you financially illiterate?
The level of financial literacy varies according to education and income levels. Evidence shows that highly educated consumers with high incomes can be just as ignorant about financial issues as their lesser educated, lower income counterparts.
If you are unaware of your bank or loan interest rates and credit card rates - you are financially illiterate. It is time to increase your financial knowledge, take charge and secure your financial future.
How can you achieve financial literacy?
There are two parts to financial literacy—one is to know financial terms and how they work. The other is to be aware of your own finances and the choices you make to secure your personal finance.
You need to know the basics of investment—SIPs, mutual funds, stock market trends and other investment options. You need to be aware of current interest rates, investment and savings options. Take the time to evaluate investment and savings options, take timely guidance to improve your financial knowledge about everyday commerce, take responsibility of your own financial future—these will add to your financial education. This information will allow you to make informed and wise decisions about your finances; and that is the need of the hour.