The dependency over financial institutions and instruments has been increasing each day and with that the threat to have the much-needed and necessary financial literacy. While at a glance, it may seem that individuals living in the cities and supposedly within the vicinity of loads of information as well as have a certain reachability are more financially informed than remotely located villages where internet penetration itself is a bit of a concern, taking a closer look, this belief comes under heavy scrutiny. Instances of cybercrime, wrongful transactions and inadequate wealth management are prevalent irrespective of location and wealth. Financial literacy aims to empower people so that they can make their own decisions related to their wealth, spending, financial awareness pertaining to the popular modes of crime as well as promote such habits among their family and friends.
What is Financial Literacy
Whether it is saving for marriages, children education and retirement or being aware when someone calls asking for your AADHAR ID, the spectrum of financial literacy has been broadened by regulation agencies to quite some length. Practices of saving in cash, refraining from transactions and system along with the trust over word to mouth can be observed across the various sections of society. Thus, we have curated here a list of the important elements and issues, financial literacy address:
- Budgeting: In Indian societies, the practice of budgeting is amply stressed upon and while this is a good start, it needs to be widened a bit more. Budgeting now not only involves preparation of a spending plan of expenses but also on how to effectively lower them understanding which areas are consuming most and least. Further, it also helps answer questions on how to lower cash dependence, loans and debt as well as how to move closer to the banking system.
- Interest rates: The fact that interest rates need to be mentioned separately speaks volumes to its ill-use. Financial literacy encourages people to use the formal credit system which charges marginally than the informal system wherein interests rates touch the sky. As reluctance towards the formal system is high, it is important for people to know how interest rates work and then swiftly help them move away from moneylenders.
- Saving Patterns: With the natural inclination to save money ingrained in ourselves, it has become vital, in this day and age, to save intelligently. From mutual funds to tax saving instruments and life insurance to health or accidental cover, there are various tools and mechanisms which help minimise the need to save in huge amounts altogether as they typically work on a monthly basis and assigning a small portion towards it is enough. This also helps in keeping away from debt traps, huge interest rates and financial abuse.
- Awareness of Government Schemes: Financial literacy also includes now, the various schemes and projects run by the government for financial inclusion. From filling up, for instance, the scholarship form Punjab to managing the funding received, it includes plentiful resources of being aware and informed.
Tips on How to be Financially Aware
Here are some tips we feel can help you in being financially aware.
- DO NOT TRUST news or information related to changes in banking rates, account or schemes. Verify directly from your bank or post office for any and all information. This small step can help you be one step ahead.
- While mutual funds and stock markets are attractive avenues of income as well as investment, putting your money into particular stocks must be according to your financial condition and goals. Only let certified professionals or bankers do this research.
- Tax saving can seem a tricky business but there are a lot of ways you can save taxes like ELSS, etc
- Credit usage whether it is credit card or loans must be done only after careful assessment and consideration. Plan your monthly spend, allocate minimum amounts for repayments.
- Think twice before buying real estate or even gold for investment purposes. They may seem attractive on the outset but they offer sluggish return on investment and may give you problems while resale.
- Always have a minimum basic family life, health and accidental insurance cover.
- Keep your plastic cash like cheque book and card safe and secure and do not share your passwords. And, in case of theft, loss or wrongful transactions, contact your bank immediately.