Since National Education Policy (NEP) 2020 was unveiled, a lot of euphoric activity has been seen amongst all the education stakeholders, specifically in school education. There were clarion calls for introducing all new-age courses as part of curricular and extra-curricular education. Every school leader has taken to coding, robotics, creative intelligence, and fancier ones like a duck to water. But then again, and amongst all the novel courses, one domain and sub-domain with tremendous potential for socio-economic impact, particularly at macro and microeconomic levels, is Financial Literacy (FL).
I still remember the formula for the area of a circle or that CH3OH is Methanol from school. Similarly, If we taught finance basics in school, like why start investing early, inflation, insurance, retirement planning, etc. These lessons will be helpful throughout life. – Nitin Kamath, CEO Zerodha
To prove the point, let’s consider the following data pointers and news items:
- As per data available from the Reserve Bank of India, a meagre 27% of Indian adults – and only 24% of women – meet the minimum level of financial literacy standards.
- According to the Economic Survey 2022 released by the Ministry of Finance, only three people out of 100 have a life insurance policy, which stood at a paltry 2.82 in 2019.
- Latest data shows that health insurance penetration is measly 0.4% in India, compared to 0.7% in China and 4.1% in the US. This is at a time when lifestyle diseases are ever increasing
Likewise, there are myriad examples of even seasoned professionals and wealthy businesspeople lacking the essential financial acumen and up-keeping financial hygiene factors like risk management, diversification of assets, prudent tax planning, and estate planning.
Reading all of this, one can safely say that FL is a subject that affects everybody’s lives and is yet understood by so few!
What is FL?
FL is a core life skill focusing on knowledge, behaviour, and attitude required to make responsible money management decisions. Way back in 2005, the multilateral institution Organization for Economic Cooperation and Development (OECD) recommended that FL start as early as possible and be taught in schools. But India has nothing home to write about this crucial life skill, as reflected in the dismal state of affairs mentioned above.
Conventional wisdom amongst young Indians says that financial education is a dull affair. But this need not be. If one were to introduce formally and make students appreciate basic concepts of finance, such as banking, savings, insurance, and tax planning, at impressionable ages (between 5 to 15 age group), the impact would be profound. Elementary money management skills like investment, savings, retirement planning, mutual funds, cost of money, and rate of return must be taught to students at the school or college level.
How can FL augment India’s story?
FL can be the difference between drowning in unregulated debt, often from loan sharks, and breaking free by building through successful small businesses, developing an entrepreneurial mindset, and leveraging financial instruments and techniques like the simple power of compounding. Additionally, it will prevent many gullible people from falling prey to fraudulent get-rich-soon schemes, shady lottery games, dubious cooperative banks, and accompanying debt traps.
Many Indians, ironically the most vulnerable section at the Bottom of the Pyramid (BoP), are unaware of life insurance’s benefits or do not understand how it works. Some people consider life insurance too complicated to be bought!
India can potentially be among the top FL country in the world as 28 % of its demographics between the age group 25-44 continue participating in the financial inclusion program through financial education. As per research work done by IBEF, this rate could expand by more than 20% in the next two decades if the youngsters within the age group 10-19 are also provided proper financial education, and it is a no-brainer that FL needs to include in school education for secular and long term stable economic growth.
Select Success Stories and Baby Steps
The strategic and timely initiative of the National Centre for Financial Education (NCFE) to proffer unbiased financial education in schools for improving FL literacy (for the holistic development of each student) is indeed commendable. Many schools must be part of their well-curated and intelligently designed Money Smart School Program (MSSP). The Income Tax department took another novel learning intervention to deepen tax literacy. It has collaborated with Lot Pot Comics to spread awareness about concepts of income and taxation among children and young adults. Leveraging digital comic books, the tax-related messaging given by the immensely popular cartoon characters of Motu-Patlu, etc., through their bone-tickling dialogues are wholly age-appropriate and effective.
Likewise, the learning intervention aptly titled ‘Snakes, Ladders and Taxes’ is an immersive board game introducing students to good and bad habits regarding tax events and allied financial transactions. The game is super simple and seamlessly intuitive, with good habits rewarded through ladders and bad habits penalized by snakes. In the context of learning design and instructional design, there is a pressing need for designing, developing and disseminating age-appropriate learning tools and techniques.
As Mr. Nithin Kamath of Zerodha, India’s largest broker, often quips, “if India has to do well economically, then we need more wealth creation to happen within. For this local wealth creation, more Indians have to take calculated risks, especially the younger lot, must be financially literate and make better financial decisions when they start earning.” As India celebrated its 74th Republic Day, absolute freedom and dignity will start with a robust FL framework and implementation thereafter.
Akin to the Constitution of India, each Indian needs to have one’s financial constitution detailing the step-by-step process of taking sound financial decisions to attain financial independence. Let’s wholeheartedly support this economic revolution of spreading FL to the nook and corner of every Indian school and college.
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