X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Three Steps to Shifting the "Ind-Illiterate" Mindset about Finances - Outside View by PersonalFN
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

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.

Disclaimer:

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.

Equitymaster requests your view! Post a comment on "Three Steps to Shifting the "Ind-Illiterate" Mindset about Finances". Click here!

  

More Views on News

The Right Financial Advisor Is Around the Corner (Outside View)

Mar 10, 2016

An opportunity to find an impeccably trustworthy and competent financial guardian is in the offing.

Why financial planning should be dull and boring (Mutual Fund Corner)

Feb 29, 2016

Most financial planners come out as whiz kids who throw around financial jargon. But financial planning can be actually easy, provided one follows a disciplined approach.

What Are E-Wallets And How To Use Them (Mutual Fund Corner)

Feb 12, 2016

PersonalFN highlights the benefits of parking a portion of your expenses in e-wallets and using them efficiently.

Is Consumption Boom Over In India? (Mutual Fund Corner)

Feb 2, 2016

Mutual funds take a bearish call on the FMCG sector. The sector has started playing out due to a combination of slower growth and expensive valuations.

How to Find a Saint Amongst Sinners? (Mutual Fund Corner)

Feb 1, 2016

Ethical practices help build long lasting relationships, and healthy long-term business relationships are often mutually rewarding. But PersonalFN is of the view that the financial services industry in India seems to have forgotten this.

More Views on News

Most Popular

A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

Aug 10, 2017

Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

Aug 10, 2017

Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

Signs of Life in the India VIX(Daily Profit Hunter)

Aug 12, 2017

The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

Bitcoin Continues Stellar Rise(Chart Of The Day)

Aug 10, 2017

Bitcoin hits an all-time high, is there more upside left?

5 Steps To Become Financially Independent(Outside View)

Aug 16, 2017

Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

More

Become A Smarter Investor In
Just 5 Minutes

Multibagger Stocks Guide 2017
Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS