The most basic way to start being financially literate is understanding budgeting, managing debt, saving and investing.The Covid-19 pandemic has put millions of lives in danger and put many people out of jobs or a financial crisis. The pandemic not only impacted everyone physically and mentally but also financially. This made people more self-aware of the importance of investments and saving for an unexpected rainy day. It is important to be financially prepared irrespective of our age, gender, education or living in metro or rural learning how to manage our finances can be life-changing.
As the economy now is on the path to recovery, a surge in investments, especially by retail investors is observed. But, the country’s lack of financial literacy is a grave concern as half knowledge is more dangerous than no knowledge.
Financial literacy can be one of the key ways to bridge the gap between your wealth creation journey and economic growth. It essentially includes your understanding of the way accounts work, the use of credit cards and the ways to avoid debt. The absence of financial literacy will lack a strong foundation in terms of your decisions concerning savings and investment. At the same time, financial literacy will provide in-depth knowledge of financial education and strategies that are crucial for financial growth and success.
Financial literacy is an important skill to learn to achieve financial growth and success. The most basic way to start being financially literate is understanding budgeting, managing debt, saving and investing.
- Debt: Debt is basically spending money that isn’t yours for eg: loans or credit cards. But debt can be good too. If you are taking debt for things that are necessary for making a living for example school’s tuition fee or buying a car to go to the office. Whereas borrowing money for things that aren’t really needed should be avoided.
- Budget: The most crucial way to being financially literate is understanding your budget that you can live on, this plays an important role in achieving your financial independence. The simplest rule for budgeting is that income should be greater than expenses.
- Saving: Saving is securing the present and the unseen future. Saving can become your emergency fund or a way to keep your expenses in control. Saving is not investing.
- Investing: Investing will help you in generating and growing wealth for the future. Investing is what will make you money while you sleep because of the effects of compounding. Investing can be a gateway to achieving your financial goals.
Financial literacy is the most basic and critical skill that everyone should have. But in India, talking about finances at home is not a common practice, many lack the basics of managing money, whether it’s savings, investing, buying insurance or emergency funds.
The importance of savings and investment is an important value that must be inculcated from early on. This will help one understand the golden rule of investment- to start early. Being financially literate is one factor that determines the economic growth of a developing nation like India.
As per a global survey by Standard & Poor’s Financial Services LLC (S&P), India is home to 17.5 per cent of the world’s population, but nearly 76 per cent of its adult population does not understand even the basic financial concepts. It will not only help you build wealth for the long term but also protect you and your family in case of emergencies.
by, Ajinkya Kulkarni, Co-founder of Wint Wealth
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