Why financial literacy is important and its benefits

Published on: Nov 18, 2023

Gen Z, Millennials, and all the generations above them have been giving immense importance to investing. This means that learning about the economy and various financial aspects is key. Not only will financial literacy play a huge role in deciding the type of investments that need to be made, but it will also help mitigate risk factors and, in turn, reduce losses associated with investing.

Since the area of investing is vast and varied, multiple factors come into play while gaining thorough knowledge regarding the field.

Knowledge about banks and their services: Banks and the services they provide have been an integral part of the system. Since their inception, banks have been used for all that they can offer like deposits, withdrawal of money, savings, facilitating transactions, etc. Other products and services like credit and debit cards, and loans, are playing an increasing role in daily life. Technology has also made it possible for banks to provide investing opportunities in mutual funds, stocks, etc. Financial literacy for students and even adults can equip them to make full use of the facilities provided by banks

Different investment opportunities: Exploring different investment options and its benefits can be helpful for each person to tailor their portfolio based on their comfort and budget. Some popular investing opportunities to choose from can be

Each will have its conditions and advantages that can help with understanding different investment scenarios and markets

Awareness of the modes of channels for transactions: One of the reasons why financial literacy is important is because the knowledge can provide significant insight into methods of payments. Financial transactions can be conducted with the help of multiple methods and options. The traditional system of using cash is still in place along with other mechanisms like checks, and credit cards, using online apps like GPay, wire transfers, etc. For businesses and day-to-day transactions, multiple modes can be used.

Vigilance regarding financial scams: Financial frauds and scams are on the rise. However, recent statistics have suggested that financial literacy and awareness have reduced the volume of bank fraud cases in the country from 17.42 billion dollars to 7.62 billion dollars. Scamsters target senior citizens and also attempt to gain the trust of people and dupe them of their money. Banks and other institutions have started sending alerts to their customers to make them aware – for example- not sharing OTP or PINs with anyone. Cybersecurity systems within banks have also helped mitigate bank fraud.

The vastness and benefits associated with the financial world have made most people in today's times be a part of it. Eventually, it becomes vital to be aware of the nuanced concepts that govern the principles of investing and managing debt. Knowledge regarding the options, types of transactions, channels for investment, etc. will make it easier to participate in this journey and alleviate risks.

References:
https://www.cnbctv18.com/economy/improving-awareness-of-financial-fraud-among-indian-consumers-14406592.htm
https://www.forbes.com/sites/truetamplin/2023/09/21/financial-literacy--meaning-components-benefits--strategies/?sh=5bed42fd68cd
https://in.indeed.com/career-advice/career-development/what-is-financial-literacy-why-important#:~:text=Financial%20literacy%20also%20helps%20you,to%20navigate%20certain%20investment%20markets