Money-minded
Saumyaa Gupta
Financial literacy is an important life skill. It relates to the possession of a set of skills and knowledge that allows an individual to make informed and effective decisions with regard to their financial and allied resources leading to a balanced and stress-free life.
However, research estimates that less than 33 per cent of adults worldwide are financially literate. This number simply means that around 3.5 billion adults globally, most of them in developing economies, lack an understanding of basic financial concepts. The problem is even worse in India where less than 30 per cent of the adult population is financially literate.
While this may seem like a mundane issue, it warrants a lot of thought. The growth of our economy depends on the financial decisions made by individuals. Irresponsible financial decisions have a long-term impact on our economy and our future generations will be facing economic downturns because of our actions. This problem needs to be fixed and requires educating people and providing resources to increase overall financial literacy.
There are two components to financial literacy. One is to help students understand the importance of saving money through banking and investment. The other is to help them understand and anticipate future expenses to ensure control over current expenses. Some future expenses can also be prevented by carefully regulating one’s lifestyle in the present. For example, if one does not take care of one’s health by eating healthy food and exercising, the chances of falling sick at a later stage in life and incurring huge expenses as a result are very high. Similarly, if children do not imbibe the right values and skills, the money that the parents earn will be wasted. Financial literacy is more than the “Earn, Save and Multiply” approach, it is a way of life that will ensure a good today and a secure tomorrow.
Let us therefore discuss the importance of financial literacy at an early stage – it will help students realize the importance and value of money leading to an understanding between income and expenses, it will lead to better self-awareness hence better emotional intelligence. Financial literacy is also important for national and social development as money saved through banking and other means is used for various developmental projects for the country.
Strategies for teaching financial literacy
Reflective questions and exercises: Reflective questions and exercises involve research and can be used effectively to promote financial literacy. For example, while teaching about space and universe, we can ask students questions like, “How is ISRO able to launch satellites at a much lower cost than other similar agencies in the world?” We can ask students to study the balance sheet and annual reports of companies and recommend cost cutting.
Audit expenses: Involve students in analyzing home expenses, especially those related to vegetables, fruits, groceries, etc. They can compare expenses of two to three months and come up with different strategies to reduce these expenses. How about buying from a different grocery store? Or will a supermarket offer more discounts? And in today’s age, what about online shopping? Which one will help save money? Is it possible to make monthly lists and buy all grocery needs in one outing? Involve the parents too. In the next parent-teacher meeting, discuss strategies with them on how together you can improve their child’s financial understanding. Let them give small tasks like making shopping lists and tallying the shopping bill to their children.
Students can prepare their birthday budget and share in the class and optimize the budget with the help of friends and teachers.
Small savings through piggy banks and yearly financial goals: Most children have their own piggy banks and if they don’t ask them to start using one. Let them maintain a diary with financial goals (take a look at the table below).You can also organize monthly savings competitions, introduce the concept of kharikamai or earning small amounts of money doing chores like cleaning the house, watering plants, etc. Let them keep track of their earnings and expenses in their diary.
I will save INR during 2022-23 by controlling my expenses, savings from pocket money, etc.
My saving metre in INR
| Month | Amount Saved | Month | Amount Saved |
| April | October | ||
| May | November | ||
| June | December | ||
| July | January | ||
| August | February | ||
| September | March |
Suggest that parents open bank accounts for their children so that they can deposit small savings. Let the child also visit the bank and deposit the amount saved along with the parents. Encourage parents to explain to their children through passbook entries how their savings are growing through interests earned.
Financial literacy clubs: You can start financial literacy clubs. Some of the activities which can be organized through the club are regular interactions with parents or professionals about the “what, why and how of savings”, discuss and analyze financial implications of day-to-day decisions, etc. The club can also organize slogan writing on saving money along with organizing monthly competitions.
Teaching how to use resources optimally: For our survival we depend on natural resources, which we need to preserve. As these resources deplete, they cost more. Let us teach our children to conserve, preserve and use less. For instance, if they need to buy stationery, let them walk to the nearest grocery store instead of going to the fancy stationery two lanes away on the scooter.
Reduce, Reuse and Recycle (3R): Practice the 3R approach to financial literacy. Let us keep children away from the “use and throw lifestyle” and help them imbibe financially and environmentally viable lives. Let us teach our children that their value is not decided by the clothes they wear or by the things they carry, their value is decided by their integrity, knowledge, skills and value systems.
“Can I manage without it” test: It is a well-known fact that once money is converted into material things, its value goes down. For instance, if you have purchased something for Rs. 100 and then immediately try to sell it, you will get less than Rs. 100 for it. Today’s children are impulsive buyers, easily bend to peer pressure, take advantage of a scheme or bumper sale. Let us teach them to ask, “Can I manage without it?” before buying anything. Let them practice saying, “I will buy when I need it, not due to a sale or a festival dhamaka offer.”
Implicit aspects of financial literacy: Implicit aspects of financial literacy stand for anticipating future expenses and initiating strategic actions to prevent untoward future expenses; this is equally valid for the parents. Health, skills, values are very important parts of financial literacy. Let us help children imbibe the skills and values of mindfulness so that future expenses can be controlled.
Challenge and change traditional practices: Is there a need to cover textbooks and notebooks? Let us teach children to keep their notebooks and textbooks neat and tidy without covering. After all textbooks and notebooks have covers. Similarly, is gift packing required? Lots of paper, cello tape, etc., is wasted for gift packing, which is anyway ripped and thrown aside.
Co-curricular activities related to financial literacy: World Thrift Day is celebrated globally on 31st October and on 30th October in India* in order to create an understanding about the importance of savings. We can extend this day to “Savings Week” and encourage students to save electricity, water, money, etc.
These are a few small steps that each one of us can take to carefully assess our financial resources, realize our financial limitations and use this knowledge to carefully monitor our expenditure. Due to limited resources, it is important that we are mindful of our economic constraints such that our future is not put at stake.
*After Prime Minister Indira Gandhi’s death on October 31, 1984, in India, Thrift Day began to be observed a day earlier.
The author is a second year undergraduate student majoring in political science and psychology at Beloit College, Wisconsin, USA. She can be reached at guptass@beloit.edu.
