Financial Literacy:
Financial literacy is the awareness, knowledge, attitude, behavior, and skill needed to understand and use financial tools to make informed financial decisions and achieve personal financial well-being.
It can be developed through reading, listening to finance podcasts, following financial content, or consulting a financial expert.
Key Components:
Budgeting: Understanding how to create and maintain a budget.
Saving and Investing: Knowing the importance of saving and the basics of investing.
Credit Management: Understanding how credit works and how to manage debt.
Financial Planning: Setting financial goals and developing plans to achieve them.
State of Financial Literacy:
According to the National Centre for Financial Education, only 27% of Indian adults are financially literate.
Globally, less than a quarter of young adults feel confident in their financial understanding.
Financial Inclusion:
Financial inclusion refers to efforts to make financial products and services (savings, credit, insurance, payments, etc.) accessible and affordable to all individuals and businesses, particularly marginalized and low-income groups.
Key Components of Financial Inclusion:
Access to Financial Services: Ensuring that financial services such as banking, insurance, and credit are available to everyone. This involves the establishment of physical banking outlets in underserved areas and the provision of digital financial services.
Affordability: Financial products and services should be priced to be accessible for all segments of society. High costs can be a significant barrier, particularly for low-income groups.
Financial Literacy: Educating individuals about financial products, services, and management is essential. Financial literacy empowers people to make informed decisions about their finances, including saving, investing, and managing credit.
Usage: Beyond access, it’s crucial that individuals actively use financial services to achieve financial stability and growth. This includes engaging with banking services, utilizing credit responsibly, and taking advantage of insurance products.
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