Importance Of Financial Literacy In Education

Considering that India is home to the world’s youngest population, technical knowledge and financial education are critical to not just planning their safe and secure future but also for the progress of the nation

In today’s fast-paced interconnected world where technological changes and new learnings are a norm, financial literacy is turning out to be a critical value that needs to be taught to students. 

Only 27 per cent of adults and 16.7 per cent of teenagers in India are financially literate, according to a recent SEBI research. Like other 21st-century skills, the National Education Policy (NEP) emphasises the importance of developing financial aptitude from a young age. 

Considering that India is home to the world’s youngest population, technical knowledge and financial education are critical to not just planning their safe and secure future but also for the progress of the nation. This is why the National Payments Corporation of India (NPCI) and the Central Board of Secondary Education (CBSE) have worked together to create a financial literacy curriculum for sixth-grade children that would enable them to understand fundamental financial concepts early on The Organization for Economic Co-operation and Development (OECD) defines financial literacy as the knowledge and understanding of financial concepts and risks. 

It also includes the skills, motivation, and confidence to apply such knowledge and understanding in order to make effective decisions across a range of financial contexts, to improve the financial well-being of individuals and society, and to enable participation in economic life. Thus, financial literacy refers to both the knowledge and financial behaviour of individuals.

When schools and educational institutions deep dive into teaching financial literacy, they are building a strong base for students to develop a very positive and responsible attitude towards finances, savings and spending. The goal of financial literacy is to help students understand the bigger picture and the impact their decisions can have.

In India, financial literacy has gained a whole new significance with the country being home to one of the world’s largest mobile and internet users. With the government batting for BHIM and the ingress of other financial platforms like Paytm, Phonepe among others, there is an urgent need to fill the accessibility gap and ensure that every section of the society including marginalized sections are on the same page. By empowering students to be financially literate through education, this gap can be narrowed, to a large extent.

There are several studies that support the concept of financial literacy in education. For example, according to a study by the Global Financial Literacy Excellence Center (GFLEC) in 2021, individuals with higher levels of financial literacy demonstrate better financial decision-making. Financially literate students are more likely to make informed choices regarding saving, budgeting, and investing. They understand the implications of their decisions and are less prone to falling into debt or making risky financial mistakes. 

As mentioned earlier, these youngsters also have the ability to spark off changes starting with their own households and families by influencing the behaviour of their loved ones, with regard to sound financial decision making. In fact, financial literate students are able to not only manage their finances, but also avoid several obvious pitfalls. This includes taking sensible credit decisions with a long term view, making sound investments, borrowing money or debt with extreme caution and conducting a full background check and verifying performance of any asset before investing their finances into it. 

They are also able to sidestep any fraudulent activities, scams and are able to make informed decisions. As a result of this responsible behaviour, students experience lower levels of financial stress and this in turn, leads to improved overall well-being. 

Many studies have also pointed out the gender gap that exists between men and women with regard to financial literacy. When this is taught as a part of school education, it empowers female students to take well-thought out decisions and understand the implications of their financial action, thus setting a positive and robust foundation for financial behaviour for the rest of their lives. 

Therefore, it is essential to promote financial literacy and education through schools, colleges, and financial institutions to equip individuals with the tools they need to succeed in today's economy. 

To conclude, financial literacy and education are critical for individuals, businesses, and the economy as a whole. As a result, individuals are able to make informed financial decisions, manage their finances effectively, and contribute to economic growth and development.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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