Why is financial literacy more relevant than before?
Because it influences both economic growth and individual financial stability, financial literacy is one of a country’s most valuable assets. Learn why financial literacy is so important these days.
Financial literacy has risen to the top of people’s agenda, especially in recent years. People are becoming more ambitious, exploring multiple sources of income and investments, and being more careful with their money.
With digital disruption, there are many platforms and opportunities for people to earn money while doing what they love most from the comfort of their homes. This has prompted people from all demographic groups to reconsider the meaning and importance of financial independence and to take steps to strengthen their financial situation.
The government is working with its various regulators to improve and expand financial literacy through courses, workshops and other outreach programs. This is evident in the range of financial service users in the country, both online and offline. India’s financial literacy has improved as insurance and banking have become more accessible. Although India has come a long way in terms of financial literacy, most would agree that there is still a long way to go.
It is essential to improve one’s familiarity with managing one’s finances, which includes a solid understanding of various investment options/avenues, budgeting, planning for retirement, and avoiding financial burden. There is an urgent need to improve financial literacy at the micro level of society. Introducing financial literacy into the education system is essential, as it establishes a foundation for an individual at a young age, which has a long-term positive impact on their financial health.
Financial literacy is one of a country’s most valuable assets, as it determines a country’s economic growth as well as individual financial stability. In today’s world, financial literacy is essential for the following reasons:
Financial planning and budgeting
Financial literacy helps with proper planning and budgeting through accurate tracking and analysis of expenses. A good budgeting exercise makes it easier to pay bills on time, build an emergency fund to cover unexpected expenses, and save for big expenses. It also helps in keeping track of expenses and sticking to a budget.
Having a budget improves one’s financial stability in the short and long term. A monthly budget can help you organize your finances and improve your saving habits. However, expenses incurred without a budget can lead to unnecessary debt or a lack of savings.
Not to be fooled
People tend to take “advice” from many people due to a lack of knowledge on the subject. It is possible that they are misled in such a situation. Therefore, improving financial literacy leads to personal development. Ideally, people should seek professional assistance, but they should also have financial literacy, which helps them understand explanations or recommendations from a financial advisor.
To create wealth
Take a close look at personal finances and you’ll realize that wealth is simply all the assets a person has at any given time, especially during retirement. These assets could have been purchased with borrowed funds. However, all of these assets can be debt-free through financial literacy and financial planning.
After retirement, this heritage becomes the corpus from which a significant and constant source of income can be drawn to meet all growing financial needs. Planning, budgeting, debt management, financial diversification, long-term saving and investing are therefore essential to accumulating wealth and achieving financial independence.
To ensure its future
By encouraging people to set goals for themselves and their loved ones, financial literacy fosters a sense of personal identity. People who are financially literate understand the fundamentals of market operations, can analyze their “needs” and “wants”, and develop savings and investment habits that provide them with the resources they need to manage their expenses, including dealing with emergencies.
To achieve financial independence
Understanding financial goals is essential in financial planning. Here are some important questions to consider: why are you saving, what is your savings goal, will the savings you are making now be enough to cover obvious future expenses, and how to plan when the amount is unknown now, for example, children’s education, marriage, health expenses, retirement corpus, etc. In summary, we can divide their financial needs into three categories:
- Immediate requirements – Expenses that must be paid immediately.
- Unexpected unbudgeted expenses – Home repairs, large medical bills, etc.
- Post-retirement expenses – Planning for retirement Financial literacy allows a person to methodically achieve these three goals.
Financial capabilities can help boost overall economic growth and raise living standards. The workforce in India, when combined with a solid financial education, has the potential to propel the country to great heights. A financially savvy India would have a significant global impact, bringing it closer to rupees. Dream of saving 5 trillion dollars.