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Three Steps to Shifting the "Ind-Illiterate" Mindset about Finances - Outside View by PersonalFN

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Three Steps to Shifting the "Ind-Illiterate" Mindset about Finances
Jan 1, 2016

India is a land of contrasts. In ancient times, women in this sphere of the world enjoyed right to education, ownership, right to choose whom they marry, etc. But in the medieval ages, Indian society regressed and got trapped in a vicious circle of economic depression, illiteracy, and social-cultural injustices. Lack of social and economic reforms pushed India to its nadir. Fiefdoms overpowered wisdom. Patriarchy controlled the social system. However, in this time, first world countries were reforming and advancing socially and economically. Little has changed even now.

In the international human rights arena, India is infamous for their gender bias. For example, even among educated people, female foeticide (stree Bhroon Hatya) was commonly practiced until recently. Now, it's seen not only a serious crime, but also a blot on humanity. This happens out of an '18th century mindset', and still haunts Indians today. Social upliftment and financial upliftment go hand in hand.

India progressed enviously post-independence in many industries. In 1947, India's literacy rate was a mere 12%, which rose to 74.04 % by 2011. It's sad that the female literacy rate is around 65%, while the male literacy rate has been 80% or so. Today, though women walk shoulder to shoulder with men, India is still forced to run schemes such as 'Beti Bachao Beti Padhao' (save girl child, educate girl child). It begs the question: Are we an educated progressive society or just a country of people who are deemed literate because they aren't "angootha chaaps". Also, are we going to ape western culture selectively?

Colonisers provided educational facilities to Indians, as it was necessary for them to have local support to run the administrative departments. It opened doors to some excellent literature and introduced the modern day language-English, which might have allowed Indians to understand western culture better. But, there was one catch; Indians weren't meant to be highly educated. Hence, another '18th century mindset' is a lack of pro-activeness Indians carry even today. We will only learn things that are absolutely necessary, or when they are forced to learn.

This is quite evident. There may not be a place on this planet where Indians haven't reached doing business and earning money. But when it comes to securing and multiplying that money by investing wisely, Indians may be lagging behind. Concepts pertaining to financial matters pioneered in prosperous western countries, but aren't taught in India.

A few months ago, Forbes magazine's world billionaires list featured 90 Indians, but crores of Indians still find it difficult to make both ends meet. And those who earn well are concerned about tax savings but ignorant about investing. The reason? Nearly 76% Indians are financially illiterate. Oh yes, you read it right.

A survey conducted by Standard & Poor's Financial Services LLC recently, revealed this startling fact along with many more unbelievable findings. Globally, 1.5 lakh people were surveyed across 140 countries. Surveyor quizzed participants on 4 financial concepts-Numeracy, Risk Diversification, Inflation, and Compound Interest.

Key findings of the survey:

  • 3/4th of Asians are financially illiterate
  • Australia, Canada, Denmark, Finland, Germany, Israel, the Netherlands, Norway, Sweden, and the UK are the most financially literate nations. Clearly, Europeans dominate the show
  • Just about 14% Indian participants knew risks and importance of diversification
  • Out of those opting for loans, 25% were financially illiterate
  • 4 in 5 women were found financially illiterate
  • Close to 50% respondents didn't understand the concept of compound interest
  • 44% were had no clue about the concept of inflation

Now, here's where it gets really interesting...

  • Of the richest 60% of Indian society, only about 26% are financially literate.

You may think these findings may not be accurate and dependable. And they might be or might not be. But, PersonalFN believes a large section of Indian society is financially illiterate, and that's a fact. Like you, lakhs of people read PersonalFN posts and many of them share their feedbacks and raise questions. This first-hand experience of PersonalFN is good enough for it to trust the broader findings that came forth. You may not extrapolate stats on the national level, yet we would be mistaken to equate growing literacy levels in general as indicative of progressive financial literacy.

PersonalFN had identified this problem decades ago, and haven't missed any opportunity to spread awareness among people about all things that concern their personal finances.

Do you know, what's so typical about Indians, especially Indian men, when it comes to finances? Many a times, they don't discuss financial matters with their better half. 'Today's woman' either has little interest in participating in financial matters, or she has been kept out. Admittedly, It would be unfair to point a finger at Indians, when clearly even as per the worldwide survey report, more women are financially illiterate than men.

What are the steps to change this?

At least in India, there is no formal course in the primary educational system that teaches children the importance of financial planning. (We still follow the system bestowed on us since the British Raj era). Although things are changing, they are shifting at snail pace.

Below, PersonalFN provides you with a three-step solution to improve financial literacy in your family:

  1. Educate yourself more formally. You may read trusted online content, take up a short course, or approach a professional financial advisor.

  2. You may introduce and/or insist on the women in your family participating in financial decisions and matters. This is the most significant step we can make in our communities, as the mother plays an unparalleled role in the upbringing of children. If she's financially literate, there are higher chances that she will pass on the tenets to your children.

  3. Provide children with explanations and smaller tasks to inculcate prudence with finances and the habit of saving in them.

PersonalFN writes about unbiased, practical, relevant information that helps people manage their personal finances, and now we have been working on bringing together like-minded people on one platform. Financial awareness, literacy, and freedom is too important to ignore. Remember, the hand that rocks the cradle rules the world.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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