Why Financial Literacy is Crucial for Young Indians?
In a rapidly changing economic environment, young Indians must make several financial choices from their early 20s, ranging from managing student loans to making investment choices. Let’s explore how being financially literate transforms real-life outcomes compared to being financially unaware.
Making Informed Investment Choices
Financially literate individuals understand the power of compounding, diversification, and risk management. They research before investing, compare products, and make informed decisions that align with their financial goals. They view investments as tools for growth rather than get-rich-quick opportunities.
On the other hand, those without financial literacy often make impulsive choices based on hearsay or market noise. They are more likely to fall for high-risk or misrepresented schemes that promise quick profits but often lead to financial loss and discouragement.
Maintaining a Strong Emergency Fund
A financially aware person recognises the importance of an emergency fund, a financial buffer against sudden expenses like medical emergencies, job loss, or significant repairs. By consistently saving a small portion of income, they reduce dependence on high-interest loans and maintain peace of mind during tough times.
In contrast, financially unaware individuals tend to overlook this critical safety net. Without an emergency fund, they struggle to manage crises and may resort to costly credit options, resulting in long-term setbacks.
Using Credit Responsibly
People with financial literacy know that credit can be a powerful tool when managed wisely. They pay their bills on time, track their credit score, and understand the impact of interest rates on loans and credit cards. This responsible use of credit helps them qualify for better rates on future home loans or business funding.
Those who are financially uninformed often misuse credit, overspend, delay payments, or borrow more than they can afford. Such habits lead to heavy debt, higher interest costs, and damaged credit profiles that take years to rebuild.
Planning Insurance and Retirement Early
Financially literate youth understand that financial planning extends beyond short-term goals. They prioritise life and health insurance early in their careers and see these tools as protection for themselves and their families. They also begin saving for retirement in their 20s or 30s, ensuring long-term security.
On the flip side, financially unaware individuals often delay these critical steps, assuming they can worry about insurance or retirement later. This delay can result in higher premiums, missed benefits, and a future burdened by financial uncertainty.
Taking small steps, such as learning to read a bank statement or evaluating insurance policies, can make a massive difference over time.
