Importance Of Financial Literacy In Life Of A Common Man

Ms. Dharana Agrawal

Assistant Professor,

Faculty of Commerce and Management, Kalinga University, Raipur

dharana.agrawal@kalingauniversity.ac.in

Financial security is an initial yet an important stage in the hierarchy of needs to be fulfilled in an individual’s life. Knowledge of finance enables an individual to efficiently and effectively satisfy this need. Financial literacy is the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing that are essential for an individual’s long-term success and stability. Financial literacy exposes one to the financial world. An individual understands how to use bank accounts and investments to grow money, especially important as a responsibility for your retirement planning. As lifespans increase, so does the need to save for retirement. Financial literacy helps you prepare for the future without relying solely on social security. Equipping them with financial literacy, empowers them to navigate the complex financial world and achieve long-term financial well-being. Also, gaining financial literacy at an early age motivates an individual to become financially independent and helps to grow.

Financial literacy enhances an individual’s capacity to make informed financial decisions. Financial knowledge is key to smart money moves and a secure future. Learning how to handle one’s finances allows one to prepare budget, save, invest, and manage debt wisely. This translates to better financial decisions and less stress. Financial literacy makes an individual a smarter financial decision-maker. It applies to everyday spending, big investments, loans, and retirement. Knowing about interest rates and investing helps avoid bad debt and make choices that allows one’s wealth to grow over time. It also helps to spot scams, like high-interest payday loans, and choose better options. Informed consumers also lead to a healthier financial market, benefiting the economy.

Financial literacy can also help reduce economic inequality. Financial education isn’t always available to everyone, which can trap people in poverty. By learning about finances, individuals improve their own situation and contribute to the economic health of their community. For example, understanding credit can help families buy a home or invest in education, building wealth. Reaching your financial goals, like a house, education, or a comfortable retirement, needs a plan. Financial literacy equips you to make a plan and manage your money to achieve those goals. Without this knowledge, it’s harder to reach them, and you might make costly mistakes that hurt your future.

In short, financial literacy isn’t just learning something, it’s a foundation for a good life. It gives you the tools to manage your money, make smart choices, reach your goals, and navigate the financial world. This is why financial education for everyone is important, not just for individuals to succeed, but also to create a fairer society. Financial literacy empowers people, and making it part of education from a young age and throughout life can build a financially aware and secure society. Financial education isn’t a luxury, it’s a must-have. By giving people the skills to manage their money well, financial literacy benefits individuals and society as a whole.

References:

[1] https://www.oecd.org/finance/financial-education/37087833.pdf

[2] https://fastlane-education.org/archive/teaching-financial-literacy/

[3] https://www.pfgteam.com/blog-01/why-financial-literacy-important

[4] https://www.cambridge.org/core/journals/journal-of-financial-literacy-and-wellbeing/article/importance-of-financial-literacy-and-its-impact-on-financial-wellbeing/A5DBBF9D6F0696E5FD3733241EE28E66

[5] https://cepr.org/voxeu/columns/financial-literacy-importance-new-field