A financially literate society will contribute immensely to the growth and development of the nation, making it imperative to ensure financial education is imparted to the youth of the nation.
Recent years have seen an increased emphasis on health and wellbeing across the world – not just in terms of physical and mental, but financial as well. Therefore, outside of academic and career-related pursuits, financial education is one of the most critical aspects that will help secure your future. Besides, a financially literate society will contribute immensely to the growth and development of the nation, making it imperative to ensure financial education is imparted to the youth of the nation.
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However, up until recently, financial education was given little importance – both in our education system and outside in the real world. Even today, many youngsters don't possess the skills to manage their money. Parents often don't expose money matters to their children since they assume they might burden them. On the contrary, children who grow up gaining knowledge about their families' finances become financially savvy young adults. If you're looking for more, here are five reasons why financial literacy at a young age is imperative.
Budgeting your income
Most of us begin working full-time in our early twenties. Now, while earning money may seem to appear as financial independence, what about financial security? Many new earners are often unaware about budgeting their income and living on a budget. For example, allocating a certain amount of money from your income for needs (house rent, food, etc.) and wants (entertainment) and saving/investing the rest or creating an emergency fund will ensure you have financial security in the future. The earlier you begin to budget, the better.
Understanding inflation, risk, and return
As much as we work hard to earn money, saving money requires smart work. Alongside the rising per capita income, standard living expenses have also increased, which means that the value of money decreases over time due to inflation. For example, the number of items you can purchase with INR 100 today will reduce in a few years. Although we encounter these situations in our daily lives, only a handful understand them and invest/save accordingly. With financial education, the youth will understand inflation, risks, and the returns to make smart, informed choices.
Lay a strong foundation
Alarmingly, most youths are unaware of the basics of everyday finance such as banking, tax payments, etc. As a result, especially early on in their careers, they often struggle to perform regular tasks like filing income tax or banking. Given that these are unavoidable tasks, it is necessary to impart financial education to youngsters before entering the workforce. Financial literacy can, quite literally, keep you from becoming a defaulter.
Learn about investments
When people hear the word investments, some of the first things that came to their minds until a few years ago were PPF (Public Provident Fund), FD (Fixed Deposit), or RD (Recurring Deposit). Additionally, other investment options such as mutual funds confuse them and drive them away from investing altogether. While recent times have seen an increasing number of millennials and GenZ beginning their investment journey, inculcating this habit through financial education will ensure they have a financially secure future.
The earlier, the better
It's not just new earners; even college-goers and high schoolers need to be financially educated. Most people take to investing only in their late twenties or thirties, by which time they could have lost money to inflation and other such factors. Commencing their investment journey at an earlier age will not only boost their financial health and ensure they can sustain themselves in the long term.
Money is indisputably an essential commodity, and mastering your financial management skills at a young age will offer greater control over your future and avoid uncertainties. Be it through apps or personal experiences, parents should prioritise imparting financial education to their children, enabling them to safeguard themselves financially from any adversity. Remember, the right time is now!
The author, Harsh Jain, is co-founder and COO at Groww. The views expressed are personal
First Published: IST