Sometime back, I wrote to Ajay Shah with a question. I asked for his help in understanding the impact of financial literacy/awareness on our Economy. Is it a worthwhile topic for doing some research, I asked.
Ajay Shah’s initial response was, “Financial literacy is quite important. But is it a really big deal? I’m not sure. Example: Is the sale & use of cars adversely affected by the fact that many people can’t drive and many people don’t have “automobile literacy” about basic things like CRDi engines? I think high GDP growth inevitably creates knowledge about things like CRDi engines or currency futures. Knowledge is the consequence of GDP growth.”
My response was: I agree with the automobile example. But let me give some examples of financial illiteracy:
My point is that a more literate populace would buy better financial products and thereby leading to better utilisation of the money. Things like better saving, improved efficiency of the money in turn might have some effect on the Economy.
Moreover, isn’t the Economy all about aggregate household behaviour? And household behaviour about the family’s finances must impact the economy, I think..
Ajay Shah responded: The trouble is: How do you do it? Given the weak capacity of the Indian State at doing things, how would you go about making a difference?
The questions linger on! Assuming that financial literacy is important, there are more questions that follow.
1. How do we achieve better financial literacy in India?
2. What is the best way to teach financial awareness to people who don’t think they require this education?
3. How does buying an insurance product different from buying a car?
What do you think? Would be great if you can share your thoughts on this.
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Very true!
Have tried to answer some of these questions through my blog post Financial Literacy should be made mandatory
Look forward to know your inputs on it.
@Manish Misra A big hurdle in spreading financial literacy is the understanding that which programs are useful. I mean, there is little research to point out the efficacy of general financial training programmes.
But, as you have pointed out, workshops and roadshows can provide a one to one training.
I’ve sent a email to you. Let’s connect.
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The big question is how to get people to take financial literacy seriously. Any agent selling mutual funds and ULIPS can convince people to put exorbitant sums of money in their product but when you try to educate people to learn and take their own investment decisions there are so many hurdles. I hope people who read these posts wake up to it and take investing sensibly seriously !
@Sumi A friend mentioned that personal finance is very interesting and he has been following few basics of investment over the years. But he also mentioned that the kind of products that is on offer is a bit confusing.
So even though he reads up such posts, it doesn’t really help.
Would personal finance workshops at the workplace would have an impact?
It will increase awareness for sure. Many people find it difficult to understand softwares and actually implement what they are reading, so a practical training will be beneficial.
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