Definition: Financial Literacy
Financial literacy means being aware and literate about financial skills. These include budgeting, investing, saving, and forecasting. The ability to comprehend and apply it in your own life refers to implementing financial knowledge. In this blog, Learning Perspectives will explore the meaning and importance of financial literacy.
Movie Case Study
Gulam Rasool (played by Johnny Walker) walks into a sweet shop. He first gives the go-ahead to pack two kilograms of laddoo, but as soon as he sees Barfi, he changes his mind and requests that Barfi be packed in place of the laddoo. He then chooses to have Pedas (milk fudge) packed rather than Barfi after seeing how freshly made it is.
Finally, he sees piping hot jalebis and he couldn’t resist eating one of them and asking to be packed instead of Pedas. He gets 2 kgs of Jalebis and walks out without paying for it.
When the shopkeeper asks for money, Gulam says, ‘But I bought Jalebis instead of Pedas’, so the shopkeeper says, ‘Then pay for the Pedas’, to which Gulam responds, ‘I bought it instead of Barfi.’ Again, the shopkeeper repeats paying for the barfi, and then he says that was taken instead of Laddoos. When the shopkeeper demands payment for the Laddoos, he responds, I never purchased a Laddoo, why must I pay for it? and walks away.
The shopkeeper agrees to that but is also confused as to what just happened.
By manipulating his words, Gulam Rasool avoided paying for the Jalebi he had bought. The shopkeeper bore the brunt of the nonpayment.
Understanding Financial Literacy
Financial Literacy in India is around 27%. while the gross domestic product is growing at approximately 7%. These statistics indicate that India is growing and there is a lot of money in circulation; however, the large population in India does not know how to manage money in India.
For women in India, the rate is even lower and stands at 21%. These statistics make it very clear that India, as a country, needs to work on its financial literacy skills.
Financial literacy skills include budgeting & forecasting, investment, saving, and many others.
These basic skills should be taught in schools, however, we remain unaware of them until life hits us.
Importance of Financial Literacy
Personal Finance Management:
Having solid financial literacy gives people the information and abilities they need to handle their finances wisely. This covers debt management, investing, asset allocation, and budgeting. These abilities enable people to manage their money sensibly and strive toward their financial objectives.
Making Informed Decisions:
Having an adequate grasp of financial principles enables people to make well-informed choices regarding a range of financial goods and services, including credit cards, mortgages, insurance, and loans. This assists people in avoiding costly errors and in making decisions that are consistent with their financial goals.
Creating Wealth:
Achieving financial security and creating wealth requires financial literacy. People who comprehend ideas like asset allocation, compound interest, and investment can make calculated choices that will increase their wealth over time and ensure their financial security.
Avoiding Financial hazards:
Financial fraud, bankruptcy, and debt buildup are just a few of the financial hazards that can be brought on by a lack of financial literacy. People can protect their financial well-being by identifying and avoiding these traps with the right financial education.
Empowerment:
Being financially literate gives people the ability to manage their finances. It provides individuals with the self-assurance to negotiate better terms, understand intricate financial systems, and stand up for their financial interests.
Future Financial Challenges and Possibilities:
Financial literacy aids in preparing people for upcoming financial possibilities and challenges, including retirement planning, home ownership, educational costs, and unforeseen emergencies. They can take proactive measures to ensure their financial stability in the long run, thanks to it.
All things considered, financial literacy is a basic life skill that is necessary for one’s financial security, the stability of the economy, and the general quality of life.
