Financial Literacy refers utilization of knowledge as well as sets of skills to enhance the ability to manage various financial resources at their highest efficiency for a better financial status.
It is defined to include various things such as financial awareness, knowledge about management financial resources, skills to deal with various economics, and a specific attitude and skillset.
All these play a key role in case of taking important financial decisions, which plays a key role in determining the financial status of an individual.
Level of Financial Literacy in India
As per the recent survey reports of the National Centre for Financial Education(NCFE), about 27% of the total population is found to be financially literate. India has the lowest financial literacy rate among all the counties from the BRICS organization.
Even though Asia is considered one of the fastest-growing regions in the world in many respects, including finance, but still people lack the key understanding of many important topics such as compound interest, credit system, etc.
Importance of Financial Literacy for Children
As per our general customs and traditions, when a child starts to grow up, they are given a piggy bank or similar item where they can save up some of their spare money.
This practice is very good in creating the discipline of saving money starting from childhood. Even though it is a good practice and gives the child some perception of how finance works, it doesn’t give them the complete picture.
The working financial market system is quite complex and involves a lot of criteria to be followed, which may or may not be possible for every child to understand, especially in a developing country like India.
But, if they are given the proper time and resources to understand the concepts of the financial market, then they will be able to figure out the market system at an early age then now enabling them to take better financially sound decisions and make the right investment choices.
Thus, it is not only helpful for the children who in the future will become financially aware citizens but also for the economy of the country itself.
Some of the ways for children to save money and invest
- In today’s era, financial management, as well as investment options, are highly diverse across the financial market.
- There are many schemes and government-sponsored programs under which even children can save up some of their money and also use them to invest in the market.
- Under the guidance and guardianship of their parents, they can open a savings account that can teach them about the importance of money savings.
- Also, they can save up money in Public Provident Funds(PPF), which can also be opened at a fee of as low as Rs.100. After growing up and becoming adults, they can completely have control of these accounts to choose more independent financial planning for themselves.
- The use of a Systematic Investment Plan(SIP) can be a good replacement for their piggy bank traditions and also will give them interest over time. These are some of the financial options to which a child can be given access for their growth of knowledge as well as experience in the field of finance.
Teaching Children about Financial Literacy
Lack of financial knowledge is a major cause of concern in today’s world. Top professionals such as doctors, lawyers, and professors who are considered experts and highly experienced in their respective fields and earning huge sums of money for their work can often be seen failing to manage their finances.
So, if people already had experience with money and market systems from their childhood, then they won’t face such situations where they have to wonder where to invest and how to do it.
The presence of clear financial ideas can also allow them to make the right decisions at the time when needed. It not only will help them grow their wealth but also allow the country to grow its economy as a whole.
Several of the institutes, such as the National Centre of Financial Education(NCFE) in India, has started several free workshops as well as training programs. They support nearly 150 schools which are titled: Money Smart” schools. These schools have many programs and free workshop classes where the students are exposed to various aspects of the financial market.
This gives them a great boost in their financial knowledge. The institute also provides workshops to anyone who wants to learn. So, in general, many people can also benefit from these programs.
Even National Stock Exchange(NSE) is also providing financial education to students via various programs. It supports more than 4,000 schools across the northwest region of India, including Goa, Punjab, Haryana, Gujarat, and even supporting schools in Tamil Nadu and Nagaland. They help the students in gaining insight into the stock market and its operations.
Apart from these institutions, the Central Board of Secondary Education also has several types of subjects and courses on finance and its management which students can study as their subject of concern. It involves subjects such as Banking, investment management of primary as well as secondary level, Financial Market Management are some of the subjects.
Above all of these programs and schemes, the final decision lies with the parents. The parents must encourage their child for getting more knowledge about finance and money. It will not only help their children become more financially sounding but also allow them to better manage their money once they start earning.
Many great online courses are free of any charge on several platforms that the children, as well as students, can use.
Parents must encourage their children to take up those courses as they are available at no cost and will increase their interest in understanding finance.