Financial Literacy

Financial Literacy

The Reserve Bank of India (RBI) has launched the National Strategy for Financial Education (NSFE): 2020-2025, the second one after the NSFE 2013-2018, to create a financially aware and empowered India. The Strategy aims to empower different sections of the population to make informed choices about their financial wellbeing, by developing the requisite knowledge, skills, attitudes and behaviours.

This is to be achieved through the “5 C strategy” of Content creation for schools, colleges and training establishments, Capacity building of financial service intermediaries, Community participation through an appropriate Communication strategy and lastly, enhancing Collaboration among various stakeholders.

Why is Financial Literacy important for students?

Enhance understanding: Students develop a thorough understanding of money management, enabling them to make informed decisions. By gaining financial knowledge, they become more confident in managing their finances, which encourages healthier financial habits throughout their lives.

Preparation for the Future: Early exposure to financial literacy prepares students for future financial responsibilities, such as managing student loans, saving for higher education, and investing to achieve their life goals.

Program Structure at School Level

Financial literacy incorporates a variety of interactive activities and real-life applications to make learning about finance engaging and practical:

• Basics of Money: This section introduces the concept of money, its history, and its various forms (coins, notes, digital money). This foundational knowledge sets the stage for understanding more complex financial concepts later on.
• Needs vs. Wants: Students learn to differentiate between essential items (needs) and non-essential items (wants), fostering better spending habits and thoughtful decision-making regarding their purchases.
• Introduction to Banking: This part covers basic banking concepts, including the purpose of banks, types of bank accounts (like savings accounts), and how banking services can help manage money.
• Savings and Expenditure: Students are taught the importance of saving money and how to track and manage their expenses. They are encouraged to set aside money for future needs and avoid unnecessary spending.
• Budgeting: This section introduces the concept of budgeting, including how to create a simple budget and track income and expenses. This skill is crucial for effectively managing finances.
• Types of Savings Accounts: Students receive an overview of various savings accounts, including their features and benefits. They learn about interest rates, account types, and how to choose the right account for their needs.
• Advanced Banking Concepts: This part delves into more sophisticated banking topics such as digital banking, different types of financial institutions, and the role of central banks like the Reserve Bank of India (RBI). This understanding helps students grasp the broader financial system.
• Investment Basics: Students are introduced to various investment options, including mutual funds, bonds, and Unit Linked Insurance Plans (ULIPs). They learn about the risk-return relationship and how to make informed investment decisions.
• Financial Planning: This section provides a comprehensive overview of financial planning, including setting financial goals, managing debt, and preparing for future expenses. Students learn to create a financial plan that aligns with their personal goals and circumstances.