Examining the need to include Financial Education in Schools - Impact and Benefits

In the rapidly evolving economic landscape of India, a foundational understanding of finances is more than just an added skill—it's a necessity. As the nation's GDP grows and the middle class expands, there's an imperative need to arm the next generation with the tools they require to navigate this complex financial world. However, the emphasis shouldn't just be on financial planning; it should be on structured, comprehensive financial education.

Despite being one of the world's fastest-growing economies, a substantial portion of the Indian populace is financially illiterate. A SEBI survey threw light on a concerning fact: a mere 27% of Indians are financially literate, with a stark gender disparity highlighting only 24% of adult women falling into this category. Diving deeper, the National Centre for Financial Education (NCFE) underscored the depth of the problem, revealing that a staggering 73% of India's adult populace struggles with rudimentary financial concepts. The Reserve Bank of India, in its 'Financial Literacy and Inclusion' survey, highlighted the parity in digital banking awareness across urban and rural segments. Both clocked an average score of 11.7 out of 21. These figures, while disheartening, only underline the urgency of the matter.

Considering this lack of Financial Education there arises a need to inculcate fundamental financial principles in students from a young age. Addressing this, the National Education Policy (NEP) 2020, has covered financial literacy in India under “Adult Education and Lifelong Learning.” The NEP 2020 is a landmark reform that envisions a comprehensive overhaul of India's education system. Amid the focus on critical thinking, creativity and experiential learning, the NEP 2020 recognizes the pivotal role of financial literacy in shaping responsible and informed citizens.

India has a strong culture of savings, but there's significant potential to evolve this into a culture of investment. With the right financial education, students can understand the power of risk management and asset diversification. This not only benefits them personally but contributes to the nation's economic growth.

Why Financial Education in Schools?

From understanding the implications of a credit score to deciphering the complexities of investments, the world of finance is multifaceted. When these concepts are addressed during school years, students are taught a toolkit to make informed decisions in their adult lives. Financial education teaches skills that individuals will use and adapt throughout their lives. Here’s how Financial Literacy can impact individuals and society.

Avoiding Financial Pitfalls

Financial challenges faced by Indians range from choosing the right savings account, understanding GST implications, to investing in diverse sectors like agriculture or technology. Knowledge gleaned from school can aid in these choices. Financial education equips students with the knowledge they need to make informed decisions about their finances. By introducing concepts like savings, budgeting and investing at an early age, we're essentially giving them the power to take control of their future. Students can avoid falling into common financial pitfalls like making uninformed financial decisions, debt traps and missed investment opportunities and are less likely to be swayed by ill-informed opinions.

Monitoring Risk of Credit Debts

Whether it's selecting a suitable loan or saving for retirement, the decisions individuals make throughout their lives have profound impacts on their well-being. An early grounding in financial principles ensures that these decisions are made with clarity and foresight.

Personal loans and credit card debts are rising in urban India. With the advent of UPI payments and Buy Now Pay Later options in India, the risk of rising credit debts and unmonitored expenses also increased. Equipping our youth with insights into interest rates and responsible borrowing will help avert potential financial crises.

Boosting Entrepreneurial Ambitions

India has emerged as the hub of 'Start-up' ecosystem in the world, ranking third with 90,000 'Start-Ups' and 107 unicorn companies worth $30 billion, according to the data revealed by Union Minister Anurag Singh Thakur. Having a robust financial understanding enables entrepreneurs to make informed decisions, be it in choosing the right investment, understanding the nuances of cash flow, or evaluating the financial viability of an expansion strategy.

It also aids in attracting investors, as financial savvy projects confidence and credibility, assuring stakeholders of the startup's potential for sustainable growth. Moreover, the intricate landscape of taxes, regulatory compliances, and financial negotiations in the Indian market can be daunting. Entrepreneurs equipped with financial knowledge can effectively maneuver these challenges, minimizing risks and maximizing returns.

Impact on Society

When we delve into the broader implications of financial literacy within India, the cascading effects on society are both profound and transformative. While the personal benefits of financial education are undeniably significant, they merely represent the tip of the iceberg in terms of their societal impact. Elevating financial literacy across the population can be a potent catalyst for poverty alleviation.

By arming individuals with the knowledge to make astute savings and investment choices, we not only bolster their individual financial security but also pave the way for entire households to rise above the poverty line. This, in turn, accelerates the nation's economic vitality. A financially educated citizenry is better equipped to engage with and contribute to, the economic tapestry of the country. Their ability to grasp intricate market dynamics augments economic growth and resilience.

The ripple effects of widespread financial understanding seep into the democratic fabric of the nation. When citizens are adept at deciphering economic policies, it empowers them to participate more actively and knowledgeably in the democratic process, be it through informed voting or more nuanced civic engagement. In essence, financial literacy doesn't just cultivate financially sound individuals; it shapes a more prosperous, informed and participatory society.

Incorporating financial literacy into school curricula is an investment that pays dividends for generations to come. By arming students with the knowledge and skills to navigate the complex financial landscape, we empower them to make informed decisions that shape their futures and contribute to the collective growth of society. As we champion this cause, we take vital steps towards a more financially secure and prosperous world.