“Financial literacy is the capability to make conversant judgments and make effective decisions regarding the use and management of money.” Financial education enables you to properly understand your cash flows and apply your financial literacy skills to achieve financial stability with better control over your resources. According to a survey in the USA, Most of the American citizens spend more than they earn. The extra amount they spend includes different types of loans, such as credit loans or loans. The same situation is in the largest country in Asia, “India.” More than half of the Indian population is financially illiterate. They don’t understand their cash flows and make wrong Financial Decisions.
Financial literacy has a significant value in economic development. It helps in the transformation of society by enabling every member of society to understand Financial issues better. According to a report published in 2017, Financial Literacy is regarded as an essential factor of the Country’s economic development and the households’ financial potential. Unfortunately, there are not many financial education programs introduced by the Governments. With the introduction of Financial Education Programs, people will have increased awareness of it. It will surely boost the country’s economic and socio-economic growth.
Let me start with a fundamental but important one, “Health.” We all heard a very famous quote.
”Health Is Wealth”
1. Financial Illiteracy Has Adverse Effects On Health:
Difficulties in managing finance are one of the significant causes of stress among adults. When young people lack the skills to manage their financial budgets effectively, they fail to meet their needs. Hence, they suffer from Financial stress. The financial stress leads to several health problems such as depression, anxiety, feelings of loss of control, and other mental–emotional distress. In the worst cases, financial stress could also lead to suicides. According to a poll conducted by Associated Press Health, approximately 16 to 20 million people are “suffering awfully due to their debts, and their health is likely to be negatively impacted. With the introduction of financial education in educational institutions, we can significantly improve every student’s financial knowledge.
2. Financial Literacy Helps To Live A Healthier & Happier Lifestyle:
Financially educated peoples are well-aware of their income pattern, and they make sure to save an amount for their hard times. Most people with a lack of financial education don’t save or invest their amount for the difficult times, while the genius peoples take the other route making reasonable investing and saving decisions. With a smarter approach to investing or saving, they successfully deal with the tough times while enjoying a healthier and happier lifestyle. Financial experts suggest saving 15% of the net income. This is only possible when people become financially literate.
3. Student Loans Are Costlier:
The education expenses of students have increased. When the students get admissions in colleges or schools, they are unable to pay their huge fees. As a result, students opt for student loans. The student loans are costlier and hard to pay back due to the rising interest. The students who opt for loans usually have no or little financial education. They don’t know the drawbacks of drawing huge debts. When financial education is imparted in schools, the same students will prefer to save money rather than spending it unnecessarily so that they don’t require huge loans. They get the chance to learn and understand financial contracts earlier. This allows them to devise wiser financial decisions.
4. People Go Bankrupt At A Younger age:
According to a report by the USA, almost one in every five Americans from age 18 to 24 declared bankruptcy, The People become bankrupt for Credit Debt, Student Loans, Bad Budgeting, Unexpected Expenses, and overspending. All these reasons are linked to financial illiteracy. To prevent young peoples from making the wrong financial decisions, we must focus on teaching financial education to every student from an early age. Current life is such that almost from the get-go, as people get into the job market, they have to make economic and financial decisions.
5. The Importance Of Financial Literacy In A Society:
Financial literacy is the fundamental knowledge that Society should seek to lead to its needs and prosperity. The Indian community has failed to provide the deserved heed to financial literacy, while the importance of skill-based education has found its emerging supporters. The economic, educational programs have been neglected both by the governments and by the public. One of the main reasons behind the minimal importance is the lack of awareness. At the same time, we learn how to earn money through various mediums; investing and utilizing it properly isn’t a popular teaching custom.
6. The Bleak Economic Condition:
According to several published reports, India experienced only 50,000 small and large scale start-ups in 2019, clear progress from a dull 2018 and unstable 2016/17. The Country has improved explicitly in motivating the young generation to choose a different track than the norm. According to research, the average age of start-up entrepreneurs was as young as 28 years, while 9% were female. The start-ups were divided amongst multiple sectors, and most of them were either online businesses or based closely on technology. As every coin has two sides, you might be indulged into thinking that it is a right foot forward, but I feel sorry to burst that bubble. According to an analytic published by IBM, with the cooperation of OXFORD Economics, 90% of the minimal 50,000 start-ups shall fail within the first five years of operations, while 50% of them might quit in half the time. The information stated above shall be dismal for any reader, but we have a solution to overcome these crises like every other problem.