Financial Literacy should be introduced at the College level

The need to understand the nitty-gritty of finances has increased in recent years, with enhancement of technology, speed with which information spread, introduction of new asset classes and complexity to make things simple.

The economic, social and political environment has changed drastically. The current volatile economic conditions and uncertainty over jobs have raised serious concerns about the financial security of Indians especially the millennials, who have no or little access to pension plan nor proper retirement plan and an eroding purchasing because of rising inflation. Thus, there is a need for having a fair knowledge of money management from a young age so that it develops into habit as days go by. We need to inculcate in the millennials the knowledge and skills to withstand and take advantage of large upward and downwards swings in the business cycle, which affect money. Financial literacy therefore, is important to achieve financial stability.

What is Financial Literacy

Financial literacy refers to the understanding of basic financial skills and concepts. It’s not just about knowing the information, but about successfully implementing it into your own life.  When people have financial literacy, they have the knowledge and confidence to make informed financial decisions. It allows people to responsibly manage their money, borrow and save, and plan and invest for the future. Financial literacy is more important than ever before. As technology grows and society changes, finances become even more complicated. As a result, it’s essential that college students leave school with solid financial knowledge. Savings rates are decreasing while debt is increasing, and salaries are remaining stagnant.  College students who prioritize financial literacy will be able to overcome these challenges and live comfortably in the future.

Financial Literacy in India

The level of financial literacy among young adults in India is generally low, because they have less money to understand and use it. Understanding the phenomena of managing money is crucial for the betterment of people and empowering them financially. Young adults have significant gaps in their personal financial knowledge. Even though they have greater access to more information and technology today, the financial world has grown more complex, and there are more choices and conditions. Generally, Indian parents advise their kids not to play with money and put it in the bank or buy gold; as other financial products are too risky, that is they can erode the principal value of money. Most high schools and colleges lack courses that teach this important skill. Individuals who lack knowledge make more financial mistakes and hence avoid any sought of financial loss and generally get stuck to the basics. If parents had not done extensive learning about money management then they may mistakenly have thought that banks are the best for investing money and investing in stocks is like burning money. Students should be taught about spending, saving and investment both at education institutions and at home.

How can colleges help students to gain financial literacy

Workshops on loans - Education loans are expensive and tricky. The cost of higher education is continuously increasing. If students want to pursue higher education especially abroad, he/she must be able to understand this loan. If the student is not prepared regarding the financial budget it can lead to serious consequences in the future.

Interaction with financial experts -  Understanding the terms and conditions of the financial agreements by the industry experts will help students to make informed financial decisions. Often one doesn't read terms and conditions or fail to understand them properly. Thus making students aware of it at an early age will make it a habit rather than compulsion.

Tutorial workshops - Regularly conducting workshops in the form of tutorials, using latest technology to understand how capital and money markets work, how can we predict the future movements, what are the signs to look for etc, can help create positive financial attitudes and behaviours among students.

Online tutorials - This will apply easy and anywhere access to solve finance related problems. Technology should be used to teach finance in a better way. Students can put a query at their convenience and will provide them the ability to ask questions without hesitation.

Regular online survey - Regularly conducting online survey- where students will fill the questionnaire related to finance. This will help in reviewing the process for improving the financial education among college students plus the status of financial literacy will get a little clear. · Teaching financial education as a subject irrespective of the student’s choice of course, will help to develop a more positive attitude towards finance.

Gauging the external environment - Understanding the external environment into the picture, allows exercising of financial capability by individuals with better sense and capability. Measures that can be taken at the Individual level

Differentiating between long term and short term investment - The financial goal must be matched by the financial investment. For example, preparing a retirement plan requires investing in sound long term investment like long term deposits.

Impact of inflation on savings -The inflation rate affects savings. Students should take into account real interest rates rather than the nominal rate to better manage their finances.

Impart knowledge of Insurance - One should understand the importance of insurance, India still remains an under-insured country. Job market and economies always do not remain stable and hence the colleges should teach the students why getting insured is necessary.

Teaching simple techniques like compound interest can help save a lot of money - 1% per month is not actually 12% per annum but more than that. The college should clear the basics like interest paid on savings account, on fixed deposit, on post office schemes. These types of numerical examples of the real world example plays a crucial role. Such examples give wider perception on how to handle real life finances.

Financial education taught as a topic - Such steps will help students realize how important financial management is.  Videos related to finance can be shown to students. It is an interesting way to teach and attract students towards the financial world. Videos will also help students be aware of new financial products and risk/return associated with them in a fun manner.

Conclusion

Financial literacy is becoming an important element for the stability of economic and financial growth of the country. Financial literacy is an essential component of a successful adult life. It is therefore important that young adults begin to learn about finance at an early age to manage money in the best possible manner. Efforts need to be made at the college level to inculcate financial literacy among students so that they can not only manage their personal finance properly but also of their family members. Financial literacy programs must teach not only the definition and techniques but also practical knowledge to use these resources.