Financial Literacy in India
Financial literacy refers to the ability to understand and
apply different financial skills effectively, including personal financial
management, budgeting and saving. Financial literacy makes individuals become self-sufficient,
so that financial stability can be accomplished.
To be financially literate is to know how to manage
your money. This means learning how to pay your bills, how to borrow and save
money responsibly, and how and why to invest and plan for retirement.
Take the initiative to self-educate and
grow your financial knowledge, by beginning with the basics of money management
and maturing into a smart spender. Putting time into your financial development
improves saving and investing decisions.
Financial literacy in India is a compulsory
part of school curriculum. National Education Policy (NEP) 2020 says that
financial literacy must be included in the curriculum of school students.
Here, I am going to give a few examples of financial literacy that can be included in school textbooks to make the school students financially literate.
Financial Literacy in India
Financial Literacy 1: Growing Money using Government Schemes
People say money doesn’t grow on
trees. Agreed, you need to work hard to earn money. But, once you have earned
it, there are many ways in which you can grow them which is strongly
encouraged.
Imagine this: You have 1000 rupees in
your bank account. Instead of keeping it idle there, you invest in a scheme
that converts it into 1050 rupees within 365 days. Would you say no to such a
scheme?
But, I have heard that investments are
risky. What if I lose my original 1000 rupees?
While it is a genuine concern, there
are multiple Government Schemes that one can use to grow their money. These
come with the guarantee of the respective Government departments which means
your money will be safe and will continue to grow.
Here are a few popular Government
Schemes which help you grow your money:
· FD (Fixed Deposits in a Government Bank or Post Office. You invest
a certain amount and after a certain period, you can withdraw it with
interest.)
· RD (Recurring Deposits. You deposit a certain amount of money
every month and can withdraw a bulk amount after a certain period.)
· KVP (Kisan Vikas Patra. Your money doubles in 124 Months.)
· NSC (National Savings Certificate for a 5 year investment period.)
· PPF (Public Provident Fund. You can invest up to Rs 1,50,000 per
annum and withdraw after 15 years.)
Financial Literacy 2: Fix Deposit (FD)
Suboth and Rishabh are two farmers,
who just harvested their crops and sold them in “KISAAN MANDI”. Each of them
sold 30 quintals of wheat at rupees 24 per kg.
Calculate the amount they received in
return.
For their next crop Subodh spends
rupees 32000 in raw materials (like: Seeds, manure etc.) and Rishabh spend
rupees 40000 out of the money they received. Find the balance amount they have.
Rishabh realises that he does not need
the balance amount for any immediate expense for next one year, so he put his
balance amount into an FD (Fix Deposit) of one year on which he is getting an
interest of 6% p.a.
Whereas Subodh kept his balance amount
in his savings account in which he is getting an interest 4% p.a. Find the
interest received by both of them.
Class Activity: Discuss which method of keeping money is more profitable? Also,
discuss the advantages and limitations of FD.
Financial Literacy 3: Travel Insurance
Gurpreet Singh is travelling to Europe for
his higher studies. He and his entire family are busy shopping and packing.
As Gurpreet’s travel date was nearing, one
of his uncles came to meet him and wish him good luck. He casually enquired,
‘Gurpreet, did you get your Travel Insurance?’
‘No, Uncle’, replied Gurpreet, ‘What is
Travel Insurance and why do I need one?’
‘Whenever you travel across many countries,
airports, there is a likelihood of mishaps such as loss of passport or baggage
or other personal items’, explained his uncle. ‘These may look like small
things now. But, if and when they occur, they can cause big damage personally
and financially. Hence, it is advised that you take a Travel Insurance which
protects you against such happenings.’
‘Oh, this looks like an important thing to
do which I totally missed’, told Gurpreet and thanked his uncle. ‘But, where
can I get Travel Insurance?’
‘You can speak to your bank. There are
companies which provide travel insurance online also. Ask around, you will get
a good plan soon’, told his uncle and shook hands with Gurpreet, ‘Travel
without any anxiety and study well. Wishing you a bright future.’
Class Activity: If Gurpreet wants travel insurance for Rs X, then he has
to pay a premium of Rs Y. If he wants a higher coverage, his premium will also
increase. Similarly, if he wants a lower coverage, his premium will reduce.
What is this relationship called?
(b) Inverse Variation
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