FINANCIAL PLANNING: Make financial literacy part of school studies

Looking back at the sessions I conducted last year, a couple of sessions done for a set of school principals gave me a lot of satisfaction.These were school principals who were starting financial literacy programs in their schools. Interestingly, most of these educators were from tier-II cities.

My own experience in dealing with educational institutions has been dismally poor. A majority are interested in financial literacy only if it can lead to some interviews or jobs and K-12 schools are indifferent to this life skill. Generally, life skills are taught only till class five or six and financial literacy is not part of these classes.

Financial literacy is more than a nice-to-have skill. It is a necessity in today's world. Every individual needs this skill for their benefit. Young people today are not prepared to manage money once they start working and that's probably the reason household debt is growing at a much faster pace than household savings in India. Most participants of my sessions (who are of different age groups) tell me that they find it difficult to save more than 15% of their take-home salary. Besides, they have high exposure to traditional products, which do not even beat inflation and will not help them achieve their goals.

The issue is that most people find managing money difficult simply because they haven't been exposed to this and the financial system itself is not easy to understand. Parents also do not talk with their wards about money habits or walk the talk.

Teaching personal finance to children through their formative years translates to tangible benefits as they enter adulthood. Firstly, they would be better equipped to live independently and within their means. These days, it has become a norm for parents to support working children even at the cost of their own retirement. Secondly, they would be able to make better financial choices.

Financial literacy needs to be integrated with the curriculum at schools and colleges and here are some more steps that can be taken by education boards -

(1) Introduce financial literacy as early as class three, and have a graded course for older students. As a parent, I would any day prefer life skills to be taught over history or even languages, for high school students. Colleges also must have a compulsory credit course on financial literacy, focusing on how to start one's financial life for final year students.

(2) Train teachers in personal finance as they themselves need this literacy. Given that a high percentage of teachers are women, training them would have a larger impact as that they can influence their children and others around them.

(3) The National Centre for Financial Education - NCFE (which is promoted by the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority) conducts a yearly financial literacy test – National Financial Literacy Aptitude Test. Like National Talent Search Examination (NTSE), this test must be compulsory for all students.

Parents and students may look upon introduction of an additional course as a burden. But remember, the beautiful thing about learning is that no one can take it away from you.

The writer is director, Finsafe India and co-founder, Womantra