Financial Literacy as a concept involves imparting people with an ability to understand and execute matters of personal finance, including basic numeracy and literacy, budgeting, investing, and risk diversification. A combination of financial awareness, knowledge, skills, attitude, and behaviors is necessary to make sound financial decisions and ultimately achieve individual financial well-being. Financial illiteracy puts a burden on the nation in the form of higher cost of financial security and lesser prosperity.
To use financial services to their full potential, the low-income people need products well suited to their needs and appropriate training and education for financial management. Bringing this about requires attention to human and institutional issues, such as quality of access, affordability of products, familiarity and comfort in use, sustainability for the provider of these services, proper training and outreach to the most excluded populations.
Today, with financial literacy being the need of the hour, mediums like banks and NBFCs are helping the marginalized manage their finances well through numerous services like debit cards, net banking, and mobile banking. Increasingly, people in the rural areas are also being brought under the formal banking net and being made to invest their savings in Fixed Deposits and saving accounts, which helps the idle money grow and gain interest. This, in turn, promotes the strive towards a cashless economy and simultaneously enables the rural population to effectively use their Jan Dhan accounts. Sufficient financial education and access to products & Government welfare schemes can further ensure that the communities can maximize income and minimize expenditure to create a stronger financial position in the long-term. Financial literacy also ensures reduced financial insecurity and risk of debt-traps, risky transactions, and informal loan sharks.
Financial literacy should thus be aimed at addressing real pains, not just offer benefits. The consumers will come into the formal financial sector and embrace the new opportunities if they receive enough education about how the solutions make certain specific pains disappear. One of the primary objectives of us as Indian citizens today should be to financially educate the marginalized communities to help more and more people avail the benefits of our current formal banking sector.