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Financial Literacy in India: Why is Financial Literacy in India Poor

Jul 10, 2018 | 2 years ago | Read Time: 4 minutes | By iKnowledge Team

Financial literacy refers to skills and knowledge with regard to finance to make informed choices to manage resources and income. Basically it’s the capacity to have a solid financial plan. Most surveys show that financial literacy is still poor in India. Over two-thirds of the population, is not financially literate, i.e., people lack financial planning basics.  The Standard & Poor survey from 2014 found that over 76 percent of adults in India didn’t comprehend financial planning basics.

Source: LiveMint, Dec 16, 2015

When we lack the ability to maintain a viable financial plan, it’s important to look for guidance from experts. This is where a financial planner as well as financial planning websites and financial planning apps come in. The advantage of today’s tech-intensive and internet-enabled world is that we have access to information at our fingertips.

A simple Google search will yield a rich bounty of articles on the important features of a financial plan, financial planning basics as well as access to many a financial planner.

The key to your financial plan is to meet your financial goals and bring prosperity to your life. But as any financial planner will tell you wealth creation and savings are the foundations of a good financial plan. Sound financial planning means managing your income well enough to meet your needs and dreams as well as creating wealth for your future with a comfortable cushion for any emergency. 

Source: Monterey Private Wealth

According to the Economic & Political Weekly article “Deciphering Financial Literacy in India,” there is tremendous inter-state difference within India itself. A nationally representative data-set with an index of financial literacy representing financial knowledge, behavior, and attitude demonstrated over 60 percentage points variation between an Indian state with the highest financial literacy and one with the lowest. Statistical analysis showed that these differences in financial planning basics correlated to differences in gender, qualification, location (rural, urban, rurban or metro), employment, technology savvy and current debt.

Contrarily, an ING survey found that Indians ranked number 2 in across 10 leading countries assessed on financial literacy levels. But going into the data it was found that this was linked to the basic Indian ethos to save and invest in real estate and gold. However, growing dependence on credit cards and access to a variety of personal loans as well as a heavy EMI burden are affecting the success of the financial plan of the salaried classes.

Financial planning means managing your finances well. What a good financial planner or a good financial planning app or tool will do for you is create a roadmap to address your needs as an individual as well as your family. Financial planning basics involve ensuring sound investment, adequate life insurance, ULIPs and good health insurance. Your investments should yield income in the short and long term to meet your goals and desires as well as protect you from poverty and debt in the future. Aegon Life’s iGuarantee Insurance plan secures you with guaranteed annual payouts on regular premium payment. If you’re looking for such returns, this one’s for you.

The BBC program Money Clinic is shot across the world and gets couples talking about finances with a qualified financial planner. It ensures that financial planning is made a priority and a formal conversation between couples is not just an argument on exceeding the budget and spending too much. In a family, both in India and abroad, the financial plan should cater to the needs to the earning member, the dependents especially the children. Financial planning basics, any financial planner or financial planning tool includes ensuring that your personal as well as  the financial future of your family including your child or children is secured.

While savings, investment, wealth creation and debt reduction is central to a good financial plan, you need to keep track of developments, invest early and manage your finances. You could manage your finances personally or by using the services of a financial planner. The key is constant financial learning and making the knowledge work for you. And most importantly the need of the hour is inculcate financial literacy early. The younger you are when you invest and prioritize financial planning basics, the wealthier you will be. The mantra is “invest early, invest well” after all! Financial literacy must be part of school and college curriculums.  More the number of wealthy individuals means a healthy economy, which is good for all.

Source: eSchool News

Advt. No.: IA/Jul 2018/4185

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