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Us millennials belong to a generation of highly inquisitive people, with copious levels of curiosity and a plethora of avenues to satiate it. What is lacking are proper mechanisms and informed guidance to better navigate through the various streams of information being thrown at us left and right. Given the advent of smartphones and the age of the internet, the entire world is literally at our fingertips, but as is the case with the inefficient allocation of resources, we’ve been granted much too power, and not proportionate brainpower to justify it. The same reflects in the way we handle, rather, mishandle our finances.

Then again, it is not entirely our fault. What most of us would probably do is to go through a couple of YouTube videos on the subject, or would painstakingly read Robert Kiyosaki’s bestseller, and try to extrapolate those learnings to real life. But that isn’t how the cookie crumbles. Managing one’s finances is an art, one that requires discipline, patience and an open mind.

If we speak about the general level of financial literacy in the country, we come to the conclusion that it is staggeringly low. As per a recent study conducted by the Securities and Exchanges Board of India (Sebi), only 27% of the Indian population is financially literate.

In such a situation, it becomes all the more important that financial literacy as a discipline is included in students’ curriculum, from their formative years. Unfortunately, that has not been the case, and for good reason. Firstly, no one really knows how to teach financial literacy, and hence experts on the subject are very hard to come across. Teachers generally lack this knowledge themselves and are hence ill-equipped to teach this further. Moreover, finance is often a taboo subject at home and isn’t spoken about openly. Parents are generally reluctant to discuss financial matters with their children, for two main reasons. The first one is that they are probably insecure about their methodology when it comes to handling finances, and the other one, that they themselves are not confident about their knowledge on the subject matter. Another reason why the majority of our population is not financially literate is that the world of finance, when taken as a whole, is very intimidating. Financial jargon is complex, difficult to grasp and this hinders people from delving deeper.

It is of utmost importance for any citizen to be well-versed in the world of finance, credit systems and debt management. Financial literacy constitutes the synergy of these three elements and help us in making responsible decisions. An inherent lack of literacy on the subject matter is exactly what is keeping people from amassing their dream retirement corpora, as they end up investing in savings or insurance schemes that offer minimal returns. Low financial literacy has left millennials massively unprepared for unprecedented financial crises.

Let us take the case of an unsuspecting urban college-going student who had only recently stepped into adulthood. The student stumbled upon an app launched by a fintech company, whose business revolved around granting payday loans. He was fascinated by the prospect of easily procuring small loans, which could be repaid at a convenient pace. The student inevitably got hooked and therein lied his undoing. Bewitched by the ease of procuring these funds, he lost sight of the exorbitantly high numbers that were piling up in the form of interest. This is a very small example, but it goes on to illustrate how problematic a lack of awareness about the implications of debt instruments can be, for loan defaults once appearing on one’s credit report tend to stay there for seven years, and this renders him/her unable to gain access to credit in times of need.

Inducing the nitty-gritty of personal finance in the lives of youngsters in their formative years could actually go a long way in shielding them from future uncertainties, and better sustain themselves by being able to explore all possible financial products and options. Not only that, it would help them be better equipped to reach their financial goals efficiently and mitigate their expenses through regulation.

An improvement in financial literacy will have a positive impact on the entire population and would substantially enhance their ability to provide for their future.

Financially literacy is a tough nut to crack, but when mastered, it can ease life’s burdens tremendously. Obviously, an early headstart for the same would be of significant help, and this is what we need to start working towards.

Anand K. Rathi is the managing partner and head - strategy at Augment Capital Services LLP.

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