The Need for Financial Literacy
Education is one of the fundamental pillars needed to build a prospering and evolving society. In our world today, where finance and economics form the core of all operations, financial literacy is not merely an option chosen by a few but an integral part of the system adopted by a majority of the population.
Financial Literacy: Meaning
By acquiring financial literacy and education, a person develops the ability to understand the workings of the economy and financial markets to effectively utilize financial resources, skills, and management techniques which would help them make more effective decisions regarding their finances. Money is the indispensable fuel of our society, which forms the foundation on which our world runs. Financial literacy helps build a clearer and better understanding of how different aspects of money work like investments, budgets, expenditure, etc.
The Fundamental Elements of Financial Literacy
- Budgeting
A budget helps to streamline, allocate, and monitor money, which has proven to be one of the most effective methods of handling finances. Nowadays, multiple smartphone applications help users develop budgeting skills and provide easy-to-navigate platforms for creating and organizing budgets.
- Interest Rates
An underrated component of the financial world, interest rates, is crucial to analyzing and gauging savings and expenditures. Interest rates are everywhere, governing monetary channels that decide the future of global finances; banks, financial institutions, lenders, borrowers, and many other members of the financial community rely on interest rates. Global and domestic factors determine interest rates targeted to get maximum returns while remaining viable.
- Savings
Savings are an integral part of the financial system that is mostly not effectively followed, leading to a burdened future. It is advisable to start learning and practicing saving early on in life to attain deeper knowledge to optimize savings.
- Credit-Debit
Debit-credit is the balance on which the financial system runs. Understanding how to protect and increase your credit value and meet your debts is one of the most effective ways to secure the future.
- Security
With digitalization paving the way for modern finance, data, monetary security, and safety have become critical parts of gaining financial literacy. Understanding how your data is stored and utilized and whether or not you should share a particular piece of information is more important than exploring new platforms that provide exciting services.
The Importance of Financial Literacy in Fintech
The fintech industry has boomed in recent years, disrupting the financial world. With most financial services and products shifting to digitalized platforms, it has become imperative for users to understand and be aware of what the fintech industry is offering and how it affects them.
Financial literacy in today’s day and age has a slightly different derivative from how it used to be. With online and neo banking, e-payments, cross-border remittances, quick loans, etc., the mere understanding of the five components of financial literacy is not enough. While these components still form the base of financial literacy, several other aspects have also emerged as fundamentals of financial knowledge. Some of these aspects include:
- Data Sharing
Digitalized platforms require users to share their data, which is mandatory for all trustworthy platforms. However, users need to be wary of identifying honest platforms from fake ones, which could prove detrimental to the user. Protecting financial data and personal information is the most critical aspect of adopting digitalized financial platforms.
- Diversified Investments
In today’s day and age, people are not solely relying on fixed deposits and mutual funds from banking institutions for investment purposes. Various streams of investments are available nowadays, like digital gold, cryptocurrencies, NFTs (non-fungible tokens), etc. Exploring such investments is an effective way to enhance financial security as these investment platforms hold relevant positions in today’s world, providing competitive rates and colossal returns.
- National and International Regulations
As remittances within national and international boundaries are easier to carry out now than earlier, it is important to know and understand the regulations and compliances surrounding them. Proper documentation, secure platforms, and trustworthy senders or receivers are a must to carry out digital payments.
- Services and Products
With technology increasing its versatility by branching into different forms like voice technology, artificial intelligence, etc., there has been an explosion of fintech services and products that have disrupted our existing financial system. Therefore, users need to explore the different services and products in the market to enhance their user experience. Products and services like e-cards, e-wallets, voice recognition, eKYC, etc., can help users handle their financial activities more efficiently.
- Security
Data security and safety are the prime most significant aspects of digitalized finance. While carrying out online transactions or feeding personal data onto digital platforms, it is crucial to protect data at every step.
Final Thoughts
Like all other forms of education, financial literacy is a significant step toward a brighter and more securer future. While exploring the various aspects of fintech and finance in general, users should learn more about the services offered and how they can effectively use them. The need for financial literacy nowadays is so high that fintech organizations are creating embedded education bundles and platforms that would help users develop better financial knowledge and, in turn, make more informed decisions.
