By Dr. Kumar Gaurav & Dr. Pallavi Seth
Financial literacy is the capability to use know-how and abilities to handle monetary sources correctly for a lifetime of monetary well-being. The Organisation for Economic Co-operation and Development (OECD) defines Financial Literacy as a mixture of monetary awareness, know-how, abilities, attitude, and behavior important to make sound monetary choices and eventually reach person monetary well-being.
What is the level of monetary literacy in India?
The National Centre for Financial Education in 2019 performed a survey and mentioned that only 27 per cent of Indians are financially literate. Amongst the BRICS nations, monetary literacy in India is the lowest.
As per the survey performed by Standard and Poor, “While the array of financial products available in Asia continues to grow rapidly, the survey suggests that most consumers lack a general understanding of credit, compound interest and other key concepts”.
Why is monetary literacy significant for children?
Most of the parents give a piggy bank to their children in which they save their spare modify, birthday revenue or money gifts received from their relatives/ households. This idea assists them to retain a discipline of saving. But monetary markets are complicated and are significantly beyond the idea of saving only. If children have an understanding of the idea of monetary markets as per their age, this can avoid them from investing in incorrect monetary instruments later.
When children are conscious of the idea, they can influence their households by sharing the know-how on significance of savings and take important actions to superior handle their revenue. Thus, spreading the idea of monetary literacy and generating monetary awareness amongst children can be a good enable.
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Where can children invest and save?
There are lots of schemes or monetary solutions which can be opened for children beneath the guardianship of parents .Like opening a savings account with a kid will enable them not only have an understanding of the significance of saving but also investment. Public Provident Fund (PPF) can be opened with a guardian only with Rs one hundred. After becoming adults, they can operate this account themselves. Although PPF account is for 15 years, this account can be extended indefinitely in a block of 5 years. After becoming adults, they can operate this account themselves.
A Sukanya Samridhi Yojana account can be opened for a girl youngster under 10 years. After the girl youngster becomes 10-year-old, they can operate the account themselves as properly. Even investments via Systematic Investment Plan (SIP) can be made for a kid with a parent, and this can be a superior replacement of “home -piggy bank” which we give to children and can enable them in finding out the saving and investment idea in the extended run. There are many other monetary solutions obtainable which can be selected as per the desires of the family.
Investing in a scheme with a youngster would give them ownership and make them accountable. As a parent, you need to go over with them about the monetary item so that they have an understanding of the nitty gritty of these solutions. You can make monetary plans for them which can enable them get their dream item like a bicycle, playstation and so forth. and enable them have an understanding of how this monetary item would be valuable in fulfilling their wishes.
How can you teach them monetary literacy?
There are pros like physicians, lawyers , professors who are professional in their domain but lots of instances they also lack know-how whilst generating choices relating to their individual finances. If the students have an understanding of the nitty gritty of monetary markets beginning from their college age, they can make the appropriate selection at the appropriate time.
Institutions like National Centre of Financial Education (NCFE) run the flagship college instruction system and about 150 schools in India are certified ‘Money Smart’ schools. Under the programme, schools are supplied indicates for imparting monetary education via cost-free workbooks for students and instruction for teachers.
National Stock Exchange is providing monetary education programmes in about 4,000 schools across six states, namely, Nagaland, Gujarat, Himachal Pradesh, Goa, Tamil Nadu, and Punjab.
The Central Board of Secondary Education (CBSE) also delivers courses like Financial Markets Management, Banking, and Insurance at Secondary and Senior Secondary level.
Apart from the initiatives taken from these institutions, as a parent, you need to also impart monetary literacy amongst students like undertaking the grocery buying with them generating them have an understanding of the fundamentals of commerce. Opening some schemes beneath your guardianship with them, can make them accountable and enable them have an understanding of the monetary solutions. There are many on the net and offline brief-term courses obtainable on sensible revenue management for college and college students. You need to encourage them to enroll in these courses to be more financially literate and take the appropriate selection at the appropriate time.
(Dr. Kumar Gaurav is Co-Founder of Nurturing Wealth and Dr. Pallavi Seth is a faculty in Amity School of Insurance, Banking and Actuarial Science, Amity University, Noida)