Financial Literacy

How literate are we, financially?

Can you tell when was the first time you ever used a credit card or bought your first stock? I used a credit card for the first time when I was 28 and bought my first stock from the equity market when I was 32. In both cases I was late, very late. And I am sure there many like me who are already late in making important financial decisions in life. Let’s try to analyse the reason behind this problem.

Education system

We can surely consider ourselves to be educated. There would be people among us who were considered genius in college in subjects like mathematics or accounting. Many would have secured good numbers in these subjects. But there will be only few who would have carried these knowledge forward to utilise in their practical lives. What could be the reason? May be nobody taught us to do so. We only mastered these subjects just for the sake of getting good marks in the exams. Later we forgot all about them and undermined the fact that they can be really useful in our day-to-day lives in coming days. Many of realise this fact quite late in our lives.

Social upbringing

Apart from our education system, probably one more factor responsible for the issue could be our social upbringing. Any middle class household would have taught its younger ones to keep of the habit of saving. Many must be familiar about the “Piggy bank”. Isn’t that a micro system of saving or investment? But with time, we forget the piggy banks somewhere. With growing age, there comes the intellectual maturity. So if a kid keeps up the habit of saving in the piggy bank, isn’t it appropriate to encourage him to continue with the habit? Whenever he is mature enough to understand, the banking process or profit/loss system can be explained to him/her. That would help the kids continue with the idea of investment, savings or profits.

Asset or liability?

Many people in their lives realise that what they had considered to be an asset, actually is really not an asset. This is due to lack of financial awareness. Let me explain it through a simple example. After being on job for some time, I decided to buy my first bike while my Gujarati roommate was planning to buy a house. The financial statuses of both of us were almost at the same level. So when my friend started planning to buy a house, there was a mixed feeling of enthusiasm and criticism in my mind. Unable to supress it for long, I asked my friend one day about he’s plans to arrange the finance for the new house. He with a smile on his face replied “House is an asset. If not profit, at least you get the principal when you sell. But in case of a vehicle, depreciation starts the moment it’s out of the showroom.” Although in educational qualification we were at the same level, this roommate of mine was far ahead of me in terms of practical financial knowledge. Today he owns at least 3 houses in the town!

Change in mindset

Changing the education syllabus is a time-taking procedure. So every small step we take would help in propagating the comprehensive education which is practical oriented. With proper education from childhood, every person will be able to take right financial decisions at right time in his life. Financial education is a basic and important learning which in coming times can be very useful. In today’s age of information and technology, it will be easy to propagate the knowledge through various mediums. Access to information is so easy these days. A small step here would be a valuable contribution for the future generation.