One app for all your study abroad needs
Financially literate individuals can manage debt responsibly and avoid falling into cycles of debt. They say, ‘Making money is easier than managing it.’ Every individual, young and old, must know what financial literacy is. It allows us to make informed decisions regarding budgeting and money management. Today, we will discuss an essay on financial literacy for students.
Table of Contents
Long Essay on Financial Literacy
We all love spending money and buying new stuff for ourselves and our loved ones. A lot of people work very hard all their lives and save a huge sum of money, but they are not able to manage it. This is because a lot of us are not aware of financial literacy. According to the Reserve Bank of India, more than INR 18,830 crores is lying unclaimed in Indian banks. This money belongs to people who have not claimed it in more than ten years. And no, it is not black money.
It is hard to believe that, people can save so much when they don’t know how to spend or manage their money. Most people save money or build assets even in their retirement years. There are four reasons for doing so:
- Unforeseen costs
- Legacy
- Fear of running out of money and
- Feeling secure
Quick Read: Essay on Money
Importance of Financial Literacy
Financial literacy is as crucial as education. We know that money once spent cannot be recovered, and that is where financial literacy helps us out. The first step in understanding the importance of financial literacy is to ask yourself this question, ‘why earn money if you can’t spend it?’
- Financial literacy can help us develop budgeting skills. All students who are dependent on their parents for their monthly pocket money can learn how to allocate their money wisely, prioritize expenses, and save, if possible.
- Simple financial concepts like interest rates, loan terms, and credit scores can help us make informed decisions regarding borrowing money.
- The more you save and invest, the more you will have for your future. Financial education will allow you to invest and save your hard-earned money safely.
- Financial education can make us independent and self-sufficient. It provides exposure to investment strategies and options and financial planning so that we can build wealth over time.
- Financial education can save us from online scams and fraudsters, who are always ready to devour our money.
- We can mitigate or manage our financial risks by purchasing insurance coverage, planning unforeseen expenses, and investing wisely.
- A lot of people work hard, even in their retirement years. Financial literacy can help people understand concepts like retirement accounts, employer-sponsored plans, and Social Security benefits to make informed decisions about saving for retirement.
Quick Read: Essay on Voting Rights in India
Digital World
The 21st century is a digital age. There are over 5.35 billion internet users in the world. Our traditional ways of making transactions are now being replaced by digital transactions, like card payments or something more unique, the UPI.
Financial literacy is turning the wheel of economies all over the world. Financial literacy allows people to benefit from digital services, such as government schemes, online payments, e-commerce, health services, etc. Most smartphone users are making digital payments, but that does not mean that they are financially literate.
Financial literacy in the digital age is crucial to learning about stocks, bonds, mutual funds, trading platforms, and cryptocurrency markets. With financial literacy, we can create budgets, analyze spending patterns, and make informed decisions about saving and investing.
Quick Read: Elections in India Essay
Earn, Invest, and Save
Financial literacy involves the cycle of earning, investing, and saving. A person can have one or more sources of income, like salary, wages, bonuses, commissions, etc. Financially literate individuals can easily enhance their earning potential by pursuing education and career opportunities.
Before making any investments, financial literacy differentiates between assets and liabilities. Everybody wants to invest their money in assets with higher return rates. However, investments often involve different types of risks, such as market, liquidity, currency, and inflation risks.
Experts say that we must save at least 12 per cent of our income. We all need money in times of emergencies, and that is where our savings come into use.
Quick Read: Essay on A Stitch in Time Saves Nine
Conclusion
Economists say that financial literacy is an important skill to survive in the digital world. The knowledge and skills offered by financial literacy are important to managing our money effectively and becoming financially independent, economically stable, and socially mobile.
FAQs
Ans: Financial literacy is as important as education. We know that money once spent cannot be recovered, and that is where financial literacy helps us out. The first step in understanding the importance of financial literacy is to ask yourself this question, ‘why earn money if you can’t spend it?’
Financial literacy can help us develop budgeting skills. All students who are dependent on their parents for their monthly pocket money can learn how to allocate their money wisely, prioritise expenses, and save.
Ans: Financial literacy can help students develop budgeting skills.
Students can learn how to manage their personal finances.
Students can make informed decisions about their financial steps and invest wisely.
Financial literacy can help students learn how to avoid falling into debt traps.
Students can develop their long-term financial goals and develop plans to achieve them.
Ans: Financial literacy refers to the knowledge and skills about the financial tools, concepts, and processes required to make informed decisions about personal finances. A financially literate person can manage his or her finances more effectively than someone who does not have the required knowledge and skills.
Popular Essay Topics
For more information on such interesting topics, visit our essay writing page and follow Leverage Edu.