Financial
literacy or Financial education is the ability to grasp and effectively apply
various financial concepts including but not limited to personal finance
management, budgeting, savings, and investments. To understand and develop good
short-term and long-term financial habits, it is essential to first become
familiar with Finance.
Why is financial literacy so important?
Financial
literacy is one of the biggest assets of any country as it promotes economic
growth. A strong base of financial literacy can help support various life goals
such as saving for education, retirement, successfully running a business, and
many more.
Not being
financially literate has many negative consequences which depend on
individuals. For some people, not being financially literate may simply lead to
not being very successful in life and encountering small debts.
For some, it has
many negative and calamitous effects like bankruptcy, especially for
small businesses.
Financial
literacy helps people understand money, savings, purchase decisions, and their
consequences.
Financial literacy for students
Most people are
not taught financial literacy in school. Our education system focuses merely on
Reading, writing, and mugging up information which might help them gain
theoretical knowledge but it does little to prepare them for real-life
situations, it falls behind when it comes to learning essential skills on some
vital and practical stuff. In short, schools focus on professional skills
rather than financial skills. Saving, budgeting, and financial planning should
be taught to students from the start. While it's never too late to start
planning and investing, starting early has its advantages.
With financial
literacy, students can make the right decisions regarding how to save money,
and where to invest it. It largely helps in avoiding debts or investing with
too much risk. Overall, if students understand the basics of finance they can
make the right decision in the right movement.
Benefits of financial education for students
1.It
helps in generating Financial confidence in students
The
ultimate goal of learning finance is to gain the ability to make better
financial decisions which leads to students being financially confident.
By being well
equipped with the appropriate knowledge about finances, individuals can
approach major life choices with greater confidence knowing they are less
likely to be negatively affected by the outcomes.
2.It
prepares students for unexpected financial blows
Learning how to
save money and its importance will prepare students better for emergencies.
Though having unexpected expenses, or losing a source of income is always
financially impactful, Being ready for uncertain events is very crucial as it
can cushion the blow.
3.It teaches the importance of money
Being
financially literate will make students more aware of the process and the
importance of smartly spending money on worthy stuff rather than making hefty
financial decisions that might lead to financial problems in the long
run.
4.It
makes them strive for long-term goals
Students
can utilize their knowledge about budget and saving, to create plans that set a
course for achieving goals that might seem to be unachievable otherwise. They
are more likely to set financial goals for themselves and have the desire to
work toward those goals, which often means putting off the wants of today to
save for the needs of tomorrow.
5.Preventing
students from making financial mistakes
Seemingly smart
financial choices without making a clear budget and without considering your
current financial condition may have long-term implications that cost
individuals money or impact life plans. Financial literacy helps individuals
avoid making mistakes with their finances.
Here are some
basic topics which should be taught to beginners.
1.Saving and spending habits
When you explain
budgeting, it is crucial to mention saving as well. Make them understand that
saving at least 15% to 20% of their income each month can make a significant
difference. Teaching them to make sure their purchases are worth it and they
are getting a good deal, teaching them to consider their options and not to
purchase something which is not needed will make them more aware of their
spending habits.
2.Creating
Budget
Budgeting
is nothing but a spending plan. Knowing where to spend money and in what amount
can prevent you from unconsciously overspending. Creating a budget can help you
start working towards your aspirations. Once you have created a budget, you can
adjust it as needed according to your income. Budgeting is not about not
spending money but spending smartly.
3.Borrowing
money
Taking a
loan or borrowing money is not always a bad thing. It enables you to make
essential purchases, like buying a home or taking an education loan. But before
borrowing money, make sure you have a way of paying it off.
4.Taxation
Whether it
be from a job, property, investment, inheritance, or any sudden gain, each
source of income is taxed differently. Knowing different forms of taxation and
how they impact an individual’s net income is crucial for obtaining financial
literacy. It helps you maintain economic stability and increases financial
gains through income management.
Conclusion:-
It is not only
important for adults to learn financial literacy but these good financial
habits should be installed in children as well from a young age so that they
could make sound financial decisions as they grow old.
We at Little Scholars promote financial education and believe that students should
be taught how to handle money from an early age. Our main motive is to prepare
our students for all aspects of life.