Financial Literacy for Non-Individual Investors
Financial literacy is monumentally more important than money itself. As defined by the Organization for Economic Co-operation and Development (OECD), financial literacy is not only the knowledge and understanding of financial concepts and risks, but also involves the skills, motivation and confidence to apply knowledge and understanding to improve financial well-being. -to be. It is a well-thought-out amalgamation of knowledge and behaviors that builds the skills needed to create wealth. A lack of understanding of how finances flow in terms of credit, investments, etc. forms ever-increasing wealth gaps.
Financial literacy is one of the key ways to bridge the gap between the wealth creation journey and economic growth. Lack of financial literacy will lack a solid foundation in terms of savings and investment decisions for non-individual investors. A business owner who is financially savvy is more likely to have complete control over their business. Understanding what balance sheets and profit and loss accounts represent gives a clear picture of the financial health of the business and enables better decision making. A small business owner may not be able to holistically manage financial matters; however, having financial knowledge will enable entrepreneurs to manage part of the company’s finances and monetize opportunities to grow a successful business and that is what Elevo aims for.
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In a country with just 27% of people financially literate, getting started in the world of money should start with an increased focus on financial education. According to a global survey conducted by Standard & Poor’s Financial Services LLC (S&P), India is home to 17.5% of the world’s population, but around 76% of its adult population lacks basic financial knowledge. In a study of the top 20 reasons start-ups fail, 29% cited a simple lack of money as the cause of their failure. Many businesses fail due to a lack of fundamental knowledge about financial services, ideas, banking processes, investments, and risk-return management. According to an Intuit survey of the small business sector, 40% of small business owners consider themselves financially illiterate. Financial literacy can help owners succeed in any field of endeavor and amplify decision-making, negotiation, and leadership skills.
Financial literacy can strengthen:
Business owners can track particular factors that affect the bottom line of the business after understanding their financial accounts. Insight into a company’s financial accounting can be a motivating factor when applied to day-to-day commitments. Knowing how various activities affect the financial health of the business as a whole can help keep the big picture in mind.
Better decision making
Financial literacy will provide business owners with a new arsenal to meet challenges. When faced with business decisions, entrepreneurs can confidently analyze the alternatives and make the best decision for a business by first considering the financial ramifications. Financial literacy can help them become a more complete leader who analyzes all sides of a problem. Additionally, financial literacy will equip them with a solid foundational understanding to forecast growth with highly accurate reporting.
Analyze investment choices
Investing helps businesses generate and grow wealth for the future. All small businesses must grow profitably to be successful, and the ability to scale a business profitably and sustainably requires financial literacy. Financial knowledge will help professionals understand the facets of their investments and maximize every rupee, dollar, euro or pound in the right way, saving time and money. To acquire financial knowledge, one must first understand the fundamentals of investing. The essential elements of effective cash management are: interest rates, diversification, liquidity which must be studied to ensure positive investments.
In my experience, while non-individual investors are not lacking in insight and interest in learning more about financial literacy and monetizing their capital, individuals are eager to learn and expand their knowledge base. Where we lack is a robust mechanism to spread awareness and the right tools to learn the fundamentals and principles of investing and financial literacy. Orchestrating a holistic ecosystem with readily available information and encouraging non-individual investors to step up their game to stay ahead of the game will enable a smooth transition to a financially literate society.
(The author of this article is Shaily Shah, co-founder of Tarrakki. She leads Tarrakki’s marketing and growth efforts.)
First post: STI