Look around. You can find millions of dynamic, young Indians striving forward in the great India story of self-belief, opportunity, prosperity and economic resurgence. Look again, and you will find an army of financially illiterate people. Their illiteracy is visible in the choices they make.
Instead of insulating them from the vagaries of life, these choices render them vulnerable to financial and life-cycle misfortunes. And, as is often the sad case, their version of the India story turns sour. If only people were financially literate! I strongly believe that financial literacy should be compulsorily taught in school, at all levels.
What is financial literacy? I wish I had a formal definition for it. It’s the skill and practical knowledge that enables you to understand how money works in your life. And, indeed, how to make money work for you.
Money drives the vehicle of life. Whether it’s consumption or investment, basic needs or higher education, health or children, housing or personal vehicles, lifestyle or leisure, money is essential. It’s as necessary for you to regularly make broad allocations of your money across these aspects of life as it is for you to figure out how to earn it in the first place.
Financial literacy gives you the ability to distinguish between assets and liabilities on your own balance sheet. You can take informed decisions. You can understand, for example, that putting away small sums of money regularly in the stock market is the easiest way to build wealth over the long term. You don’t panic when the market falls, since all your eggs are not in equity anyway.
The funny thing about financial literacy is that lots of talented professionals (including, ironically, those belonging to the financial domain) are illiterate when it comes to the matters of personal finance. Much of India’s defensive posturing and denial on money matters comes from a misplaced sense of the evils of money. That wealth should be redistributed and cannot be created.
This indoctrination has left us financially challenged, to say the least. We grasp the principles of finance, and earn career qualifications like M Com, MBA, CA and CFA, but cannot put finance to enrich our own lives with the things we love and the values we cherish.
This has to change. School curricula should include “money” as a compulsory subject. Someday schools will encourage debates and discussions on matters concerning money. School children should have their own bank accounts and learn to save (and, indeed, invest) from an early age. As a first exercise after they are taught debit and credit, they should draw their own profit and loss accounts.
Every college degree must, and I repeat must, include a compulsory course in elementary financial management and its application in business. And in the business of life as well. Nobody who gets a qualification or certificate in any profession can afford to flunk in finance. Because an “F” in money matters can land you an “F” in everything else in life.
Dipen Sheth, Head of Research, Wealth Management Advisory Services
dipen@wealthmanager.ws
