By Vineet Patawari, Finance Mentor, StockEdge & Elearnmarkets
Why have we limited our learning to the “Seven Wonders of the World”? Why not teach children about the eighth wonder of the world, i.e., the value of compounding money? This Teacher’s Day, let us promise to learn and teach finance as an essential subject in our schools.
Financial literacy among the young is often an underrated concept. Parents wanting their wards to be able to handle money matters during their adult years must inculcate in them the need to save and invest for their future growth. This is only possible when we teach our children about money and how it affects almost every aspect of our daily lives.
Financial education is a must. It is a continuous process that starts with encouraging children to keep money in piggy banks, informing them of secure investments like the Public Provident Fund (PPF), recurring deposits, and then the various investment opportunities including equities and debt instruments that compound money into a corpus necessary to fund your various life plans including retirement. The irony is that despite financial education being at the core of every key life decision, our learning institutions took too long to recognise this fact. The absence of essential subjects like financial planning in our school curriculum highlights the huge gap in our learning process.
India ranks low in financial literacy
As per a survey carried out by the National Centre for Financial Education in 2019, India ranks the lowest among all the BRICS nations in financial literacy. National Centre for Financial Education also conducted a similar survey only to find out that only 27 per cent of the country’s population is financially literate. The assumption that people will learn how to handle their finances on their own has caused many people to lose out on their savings in the long run. This also explains why most of us struggle with money-making and investment decisions and have to grapple with inadequate savings post-retirement.
Strategising financial education
India has nearly 20 per cent of the world’s population, yet it scores among the lowest in the financial literacy index. The Indian government recognised this anomaly in our education system and sought to correct it by promoting financial education in schools. The Reserve Bank of India (RBI) suggested a five-pronged approach to promoting financial learning in schools in 2020. This approach is built on five essential tenets of learning including Content, Capacity, Community, Communication and Collaboration.
The “National Strategy for Financial Education 2020-2025” put forward the idea of developing content for school children, creating relevant finance study material for adults, and encouraging community participation and collaboration through multi-stakeholder participation. The government’s idea to strengthen the financial inclusion concept in the country has also received support and recognition from other financial sector regulators including SEBI, IRDAI and the PFRDA.
Aiming for a career in finance
Many people misconstrue Chartered Accountants, Company Secretaries and Cost Accountants as experts in financial management. This has led to the common myth that a career in finance is about pursuing these courses. However, recent advancements in the financial sector have led many people to plan their careers in finance. These include equity research analysis, portfolio management, actuarial consultants, insurance and investors, personal finance advisors, professional traders and more.
Learning finance is all about understanding how money works. It is about crunching numbers, charts, patterns and theories into easily readable information that can be comprehended for everyone’s benefit. The study of finance is about grasping the principles of money management and learning how to acquire and multiply it. More than knowing how to deploy and manage finance, students aiming to make a career in finance focus on other financial aspects too. These include credit, investments, banking, liabilities and assets.
Financial awareness as a life skill
Learning finance is equivalent to adopting a core life skill. In today’s complex world, identifying education with mere schooling is not enough. To participate in modern society, we must strive for more. Our children will have to take charge of their financial future someday. So, why not start teaching them about the unlimited possibilities in finance? Why not tell our children how thinking about finance will gradually translate into thinking about life? Why not help them achieve financial literacy through financial awareness programs while they are still in school?
The lack of financial literacy has cost many generations their hard-earned money. Why not curb the plague of financial ignorance by adding financial literacy subjects to the core school curriculum?