Financial Literacy -

India is the fastest-growing major economy of the World. However, when it comes to financial literacy among Indians, results are quite different. A report revealed that only 24% of the Indian adult population is financially literate and also it revealed that Indian parents do not talk with their children’s about basic knowledge of money management.

Ways forward

In a population of 1.3 billion, financial education will make a long-lasting impact.
Indian schools need financial education compulsory for all.
The government has initiated policies to improve unsatisfactory literacy rates.
However, all the programs initiated have a fundamental problem – a lack of implementation.
Financial skills will help to raise the standard of living and contribute to overall growth.
It would help us in eradicating poverty to some extent.
In short, a financially future smart India would be a major force in the world.

What is Financial Literacy?

Financial literacy refers to the capacity to understand and apply financial skills such as budgeting, investing, credit management, and financial management, etc, effectively. In simple terms, it is the capacity to handle money. Understanding basic financial concepts such as time value of money, compound interest, annual return, and opportunity cost is also part of Financial Literacy. Individuals lacking financial literacy find it difficult to make big financial decisions. Furthermore, Financial literacy improves financial discipline and capacity. This will result in significant lifestyle changes.

Why is Financial Literacy important?

People who are financially literate are generally less vulnerable to financial fraud.
Effective management of money, debt, and Expense reduction
Ability to make more informed financial decisions
Financial anxiety and stress are reduced.
Increase in ethical decision-making when selecting insurance, loans, investments, and using a credit card
Effective creation of a structured budget
A strong foundation of financial literacy can help support various life goals, such as saving for education or retirement, using debt responsibly, and running a business.
The financially literate don’t follow random public opinion. They are more immune to incorrect market speculation.

Components of Financial Literacy

Financial literacy is composed of a number of financial skills to handle money effectively.

**Budgeting**

Budgeting is a necessary life skill that aids in the acquisition of financial knowledge for money planning and management.
One of the first building blocks of a successful personal finance plan is the ability to budget.
Although it’s easy to understand, it’s also difficult to do because it requires a hard look in the mirror and a willingness to see what really stares back at you.
Budgeting requires that you analyze and change your spending habits. Instead of your money controlling you, you control your money. Develop habits to save, avoid financial crises, and maintain peace of mind.
A successful budget defines, a monthly spending plan, Lowering your monthly bills, handle accrued debt, distinguish between short term and long term goals

Debt

Debt is often viewed as a negative element. As a result, it’s critical to understand debt.
It’s also essential to understand the difference between good and bad debt.
Borrowing money for goods that are required to make a livelihood is considered good debt.
Borrowing money for unneeded expenses is considered bad debt.
As a result, being able to distinguish between required and superfluous spending will assist an individual in avoiding falling into debt.

Savings

Savings guarantee financial security, a stable present, and a bright future.
Long-term wealth may be built via prudent financial planning.
Keeping track of one’s spending patterns might aid in money-saving and financial discipline.

Investments

Instead of letting money sit in a bank account, it can be invested in financial products.
Investing is all about creating and developing wealth so that you may live a secure and happy life.
Investments will assist in the generation of additional monthly income as well as substantial profits.
It is also possible to attain financial goals while allocating funds to retirement savings, Equities, debt instruments, mutual funds, real estate, and gold are some of the most popular investment possibilities.

How to Improve Financial Literacy Skills ?

No matter where you are in life and financially, it’s never too late to start practicing good financial habits to improve your personal finances, including budgeting, managing, and paying off debts.

Here are several practical strategies to consider.

Create a budget:

Track how much money you receive each month against how much you spend in an Excel sheet, on paper, or with a budgeting app.

Budget should include income, fixed expenses (rent, payments, etc), spending, (essential & non-essentials Ex of eating out, shopping, and travel), and savings.

Pay yourself first:

To build savings, involves choosing a savings goal, such as paying for Future needs, deciding how much you want to contribute toward it each month, and setting that amount aside before you spend the rest of your expenses.

Pay bills promptly:

Stay on top of monthly bills, making sure that payments consistently arrive on time. Consider taking advantage of automatic debits from a checking account or bill-pay apps and sign up for payment reminders (by email, phone, or text).

Limit and Reduce Debt

It means that, don’t spend more than you earn to keep debt from getting out of hand.
Minimizing repayments (to interest only, for instance) can free up income to invest elsewhere.

Check your credit score:

Review these reports and dispute any errors by informing the credit bureau and should monitor yourself regularly.
Having a good credit score help you to obtain the best interest rates on loans and credit cards and other benefits.
Be aware of the financial decisions that can raise or lower your score such as credit inquiries and credit utilization.

Credit Cards

It can be major debt traps, but not to own is unrealistic in this contemporary world. Furthermore, Credit needs to be managed correctly, meaning you should pay off your entire balance every month.
Keep your credit utilization ratio at a minimum (that is, keep your account balances below 30% of your total available credit).
Avoid maxing out credit cards at all costs, and always pay bills on time.
One of the fastest ways to ruin your Credit Score is constantly paying bills late.

Invest in your future:

If your employer better to opening an individual retirement take financial advice from professional advisors to help you determine how much money you will need to retire comfortably and develop strategies to reach your goal.

Buy Insurance

Buy insurance in time, Insurance can be expensive if you wait too long to get it.
Health care, long-term care insurance, increases in cost the older you get. Additionally, you never know what life will send your way.
Insurance can cover most of the hospital bills and prevent you from leaving your hard-earned savings.
Medical expenses are one of the leading reasons for debt. If something happens to you, life insurance can get back on their feet financially.

Emergency Fund

Building an Emergency fund can materially boost your financial health.
The fund is meant to be money that is saved and readily available for emergencies, such as regular expenses or job loss.
The goal should be to have three to six months worth of living expenses.

Quick Tips for Maintain Financial Health

Few quick rules and tips that you can follow to either improve or keep you in good financial health.

• Automate your bill pay and savings, set up