Paarth Dhar, who runs Fin One, a financial awareness platform by Angel On, emphasizes the importance of financial literacy to ensure a stable future.
Financial education: a growing need
In India’s booming economy and digital age, financial education is more crucial than ever.
According to the Reserve Bank of India, only 27% of Indian adults are financially literate, and only 24% of Indian women meet basic standards.
Dhar points out that this gap highlights a significant need for targeted financial education, particularly among younger generations.
A 2019 report from the Global Financial Literacy Excellence Center (GFLEC) highlights that better financial education is strongly correlated with better financial outcomes, such as effective savings behavior, credit management, and investment choices.
Dhar points out that as ambitions increase, so does the need for financial education to help individuals achieve their goals and avoid financial pitfalls.
Youth aspirations and financial reality
According to a Mintel study, 77% of today’s youth aspire to own a home, 59% dream of owning a car and 55% hope to travel abroad. Yet, 69% of Indian households still lack financial security.
Dhar stresses that financial education is essential to turning these aspirations into reality.
He suggests several strategies to achieve financial stability:
Mastering Budgeting for Control
Dhar advises starting with a budget. “A monthly budget helps individuals manage their finances effectively, covering essential needs, savings, and future goals like buying a car or a house,” he explains.
It notes that 27% of global users aged 18 to 34 use budgeting apps, which can automate savings and help track financial goals.
Early Understanding of Compound Interest
Compound interest is a powerful tool for wealth creation. “Investing early allows you to benefit from compound interest, a key principle of wealth creation,” says Dhar. Regular investments through systematic investment plans (SIPs) can lead to significant wealth over time, he adds.
Rationalize spending
Dhar warns of the impact of impulse spending fueled by FOMO and the YOLO mindset.
With online shopping expected to reach 300-350 million users by 2025, it is essential to teach young people how to control their discretionary spending and focus on long-term goals.
Build a strong credit score
A good credit score opens the door to better financial products. “Paying your bills on time and managing your debt responsibly are key to building a strong credit profile,” says Dhar.
He notes that financial education can help young people develop good credit habits from an early age.
Empowering the next generation
Financial education is as crucial as traditional education.
It enables individuals to make informed decisions, manage debt and create wealth.
Dhar points out that in a country where 70% of households lack financial security, financial education is not only beneficial but necessary.
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