FINANCIAL EDUCATION

                                         Financial  Education

Financial Inclusion and Education are two important elements in the Reserve Bank of India's developmental role. Towards this, it has created critical volume of literature and has uploaded on its website in 13 languages for banks and other stakeholders to download and use. The aim of this initiative is to create awareness about financial products and services, good financial practices, going digital and consumer protection.

The Financial Education Programme for Adults (FEPA) was launched by the NCFE in the month of September 2019. FEPA is a Financial Literacy Programme designed and implemented to spread financial awareness among the adult population such as Farmers, Women groups, Asha Workers, Anganwadi Workers, Self Help Groups, Employees of Organization, Skill Development Trainees etc., This programme is conducted in line with the targets of National Strategy for Financial Education and the focus have been given to Special Focused Districts (SFDs). This programme expects to substantially contribute to NCFE’s vision of a “Financially aware and empowered India”.

IMPACT OF FINANCIAL LITERACY ON SOCIETY

Financial literacy plays a crucial role in shaping societies and has a significant impact on individuals, families, and communities as it is linked with their financial attitude, behaviour, knowledge and financial skills.

Financial education enables an individual to understand about the basic financial concepts and enable them to take sound financial decisions. It also instigates an individual to have the good financial habits and positive financial attitude, which in turn helps them to create confidence in their finance management and positive impact on their mind-set.

Key ways in which financial literacy affects society:

1. Personal Financial Stability: When individuals possess financial literacy skills, they are better equipped to manage their money effectively. They can create budgets, save, invest wisely, and avoid excessive debt. This leads to greater personal financial stability and reduces the likelihood of financial problems.
2. Economic Growth: A financially literate society can contribute to overall economic growth. As people make informed financial decisions, they are more likely to invest in productive assets leading to the expansion of businesses and job creation. This, in turn, can boost the economy at the local, regional, and national levels.
3. Reduction in Financial Stress: Financial stress can have a negative impact on mental health and overall well-being. Financially literate individuals are better equipped to handle financial challenges and are less likely to suffer from stress related to money matters. This leads to improved mental health outcomes and a happier society.
4. Retirement Preparedness: Financial literacy is critical for retirement planning. When people are knowledgeable about saving and investing for retirement, they are more likely to build sufficient retirement corpus and avoid facing financial difficulties during their retirement years. This reduces the burden on social welfare systems and ensures a better quality of life for retirees.
5. Consumer Protection: A financially literate population is less vulnerable to financial scams and predatory practices. They can make informed choices when it comes to financial products and services, reducing the likelihood of falling victim to fraudulent schemes.
6. Responsible Citizenship: Financially literate citizens are more likely to understand the implications of public policies related to taxation, government spending, and economic issues. This leads to a more informed and engaged citizenry, contributing to better decision-making in governance and public affairs.
7. Enhanced Financial Stability: The spillover effect contributes to an overall increase in financial stability within the community. As more individuals exhibit responsible financial behavior, the risk of financial hardships and defaults decreases, resulting in a more stable and prosperous society.
8. Inter-generational Impact: When parents are financially literate, they can pass down these skills and knowledge to their children. This creates a positive cycle of financial literacy across generations, promoting long-term financial security and resilience within families and communities.

FINANCIAL PLANNING FOR RETIRED PERSONS

Retirement Planning is all about ensuring that after retirement, one can take care of his/her expenses through a regular stream of money. Hence we need to have a proper plan about how we are going to deal with savings and expenses post our retirement.

Here are four simple steps that can help you arrive at an ideal retirement plan.

Step 1 – You need to calculate how much money you require to lead a comfortable life in your post- retirement year Account for aspects like increased medical/health costs.

Step 2 – Have a very clear idea of any amount to be received in a lump sum at the time of retirement like EPF money.

Step 3- Choose the right retirement plan that enables you to meet your post-retirement expenses. Combine all the available options so that you have a diversified basket, cutting down reliance on one or two options.

Step 4- Start investing early in the retirement so that you have time on your side. It will allow you to enjoy the power of compounding.

Retirement planning is the process of meeting your financial goals post retirement. This can happen – 50% through the proper management of your finances and 50% through execution of your plans. Make advance provision for your anticipated financial needs that will arise in the future. The entire game is having the right amount of money at the right point in time in the future.

Retirement Plan Options

 Each of these can be used to create a retirement corpus that can fund your post-retirement life. Ideally, one should use a combination of them.

1. National Pension System – The NPS is a voluntary, defined contribution retirement savings scheme regulated by PFRDA. It is designed to enable the subscribers to make optimum decisions regarding their future through systematic savings during their working life. For more information one can visit https://www.npstrust.org.in/

2. Public Provident Fund – This is a popular long term investment option which offers safety with attractive interest rate and returns that are fully exempted from Tax. Investors can invest minimum ` 500 to maximum`1,50,000 in one financial year. For more information one can visit https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx

3. Senior Citizen Savings Scheme (SCSS) – A government scheme which is an apt choice of investment for those over 60 years of age. SCSS is available through many banks and post offices across India.. An individual can invest a maximum amount of ` 15 lakh, individually or jointly in an SCSS account. For more information one can visit

https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx

4. Pradhan Mantri Vaya Vandana Yojana – The aim of the scheme is to give senior citizens a form of regular pension. The scheme can be purchased from LIC in offline as well as in online mode. The scheme can be purchased by paying lump sum amount ranging from ` 1.5 lakh to maximum ` 15 lakh for monthly pension. For more information one can visit https://licindia.in/Products/Pension-Plans/Pradhan-Mantri-Vaya-Vandana-Yojana1

5. Reverse Mortgage – Reverse mortgage is a relatively new way of financing against real estate. A reverse mortgage enables a senior citizen to receive a regular stream of income from a lender (bank or a financial institution) against the mortgage of his/her home. The borrower (i.e. the individual pledging the property) continues to own the property and is allowed to reside in the property, till the end of his/her life and receives a periodic payment on it. Upon the death, the house goes to the lender. While calculating the reverse mortgage amount, the lender factors in your age, the value of your property, current interest rates and the specific plan chosen. For more information , one can visit https://nhb.org.in/RML/guidelines.php

MAHILA SAMMAN SAVINGS CERTIFICATE

Mahila Samman Saving Certificate (MSSC), a new small savings scheme launched in the Budget 2023 to promote investments among women. MSSC is a single-holder account that can be opened at any Post Office across the country. Mahila Samman savings scheme is a one-time scheme that is available for a tenure of 2 years.

1. Who can open:-

(i) By a woman for herself.

(ii) By the guardian on behalf of a minor girl.

2. Deposit

(i) Minimum of rupees one thousand and in multiple of rupees one hundred.

(ii) Maximum limit of rupees two lakh in an account or all account hold by an account holder.(iii) A time gap of three months shall be maintained between the existing account and the opening of other account.

3. Interest

(i) Deposit shall eligible for 7.5 per cent interest per annum.

(ii) Interest will be compounded quarterly and credited in account and paid at the time of closure of account.

(iii) Account opened or deposit made in-contravention of rules will be eligible for interest @ PO Savings Account.

4. Withdrawal

40% withdrawal of eligible balance can be taken after one year from the date of account opening.

5. Pre-mature closure

(i) On the death of the account holder

(ii) On extreme compassionate ground (i) Life threatening decease of account holder (ii) death of the guardian on production of relevant documents.

Note:-Scheme interest will be paid on principal amount.

(iii) After six months of account opening without mentioning any reason.

Note:-Scheme interest less by 2 per cent will be paid e.g. 5.5%.

6. Maturity

(i) After two years from the date opening eligible balance will be paid to the depositor.

7. How to open account

(i) Submit Account Opening Form, KYC Document (Aadhaar and PAN card) , KYC form for new account holder, Pay-in-Slip alongwith deposit amount/cheque at nearest post office.

Financial Education Is Our Greatest Asset

Financial education is defined as the process by which financial consumer or investor improves their understanding of financial products, concepts and risk and through information, instruction and / or objective advice, develop the skill and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help and to take other effective actions to improve their financial well-being (OECD, 2005). Some of the key learnings on financial education, which everyone should be aware about:

• Do not work for money, let the money work for us. We must have heard the very famous phrase “live to work or work to live”. Most people work to live. Most people having financial problems, either they stick with the problem or ask for a pay raise to their employer. Else, they start searching higher paying jobs so they can earn more money. This is the cycle most middle and working-class people fall into. On the other hand, successful people “make money” and do not work to earn it. In other words, they buy assets that generate income.

• Learn to differentiate between assets and liabilities. An asset is something that puts money in our pocket and a liability is something that takes money out of our pocket. In this sense, successful people acquire assets i.e. Gold, Real estate, Securities, Gold Bonds, Invest in Pension Schemes, FDs, other return generating investments which yield profit and gains for them. On the other hand, most other normal people add liabilities. This is the main difference that can interrupt the future development of someone’s personal finances.

• Do not work to earn money; work to learn. Work should be used as a platform to improve the skills we already have. We should find a job where we can learn the skills. Learning can make us much more knowledgeable and can equip us with unique skills to improve our professional situation.

• Money is not our greatest asset. Normally people thinks, more money will solves all our problems; but if we think so, we might have problems in our entire life. If we are prepared to be flexible, open mind, and keen to learn, the chances to get richer may increase. Intelligence solves problems and produces money, and money without financial intelligence may quickly lose.

• Reduce the spending as much as possible. It is advised to have as little debt or low as possible because, in the end, it hampers the financial freedom we want to achieve and hence reduce the liabilities. Debt is a double-edged sword that most people hold without training. Some figure it out and manage to get through their early encounters with debt unscathed. Others injure themselves and their loved ones without intending to. We should always keep in mind the difference between the “positive” debt, like a mortgage, and the “negative” debt, like quick loans.

• Do not depend exclusively on financial advisors. We all have great insights into the finance that makes up our own personal finances. Getting help from any financial advisor can be useful, but we also need to have control over our own money. Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime, accordingly, learning fishing instead of borrowing it from someone. Learn how to invest because nobody will do it better than us.

National

Reserve Bank of India

Reserve Bank of India, Financial Education

Securities and Exchange Board of India

SEBI Investor Education

Insurance Regulatory and Development Authority

Consumer Education Website, IRDAI

Pension Fund Regulatory and Development Authority

Ministry of Finance

Ministry of Corporate Affairs

Ministry of Rural Development

Ministry of Electronics and Information Technology

National Bank for Agriculture and Rural Development

Small Industries Development Bank of India

National Payments Corporation of India

National Institue of Securities Markets

National Stock Exchange

Bombay Stock Exchange

Association of Mutual Funds in India

Association of National Exchanges Members of India

International

OECD

International Organisation of Securities Commission

Australian Securities and Investment Commission

World bank

Finra

Alliance for Financial Inclusion

360 degrees Financial Literacy

Council for economic education

NEFE

US Department of treasury

Institute for Financial Literacy

Mymoney

Alison

Money smart week

Propsper Canada

Practical money skills

Rosen digital

Money Smart School Program (MSSP)

This is an initiative of the NCFE to provide financial education in schools for improving financial literacy which is an important life skill for the holistic development of each student. The program is based on two pillars; education and awareness and aims to establish a sustainable financial literacy campaign that will empower an entire generation.

SALIENT FEATURES OF MONEY SMART SCHOOL

NCFE invites schools to voluntarily introduce financial literacy as a part of their existing curriculum for students of Class VI to X.

NCFE and CBSE had jointly developed the study material for students of Class VI to X, a set of five Financial Education Workbooks.

Our financial literacy curriculum has been developed in such a way that it integrates with the existing subjects for different classes.

Schools can send their teachers to NCFE’s Financial Education Training Program (FETP) for school teachers for training purposes. Alternatively, we can also arrange a training program for interested schools separately at their own premises.

These NCFE certified Money Smart Teachers would facilitate in conducting financial education sessions for students in their respective schools. For evaluation of its students, schools can encourage them to participate in NCFE’s National Financial Literacy Assessment Test.

Schools may also decide to conduct their own evaluation in which case NCFE will provide them with all necessary support.

BENEFITS FOR THE SCHOOL

The foremost benefit for schools implementing the Money Smart School program is that their students after becoming financially literate will be better equipped to deal with today’s complex financial products and services and exhibit prudent behaviour and attitude when it comes to managing their own money. Apart from this other benefits include:

Schools implementing this program will be certified as Money Smart Schools.

A certificate and a badge will be issued by the NCFE which the schools can put up on their website and social networks.

Training and development programs for its teachers free of cost from time to time.

Students will be better equipped to perform in the National Financial Literacy Assessment Test.

NCFE will facilitate school/students to visit financial sector regulators where they can gain a perspective on how the regulatory mechanism in our country works. Schools shall get priority in  future endeavours of NCFE and shall be part of the social media campaign of NCFE regarding Money Smart Schools

Basic Financial Education

RBI has prescribed the following content for basic financial education:

Financial Literacy guide, Financial Diary and set of 16 posters prepared by RBI

Special camps booklet prepared by NCFE for people newly inducted into the financial system which captures the fundamental tenets of financial wellbeing such as savings, borrowings, concept of interest and compounding, time value of money, inflation, relation between risk and rewards etc.

Sector Focused Financial Education

The content covers relevant topics in the banking sector such as ATMs, payment systems such as NEFT, UPI, USSD, awareness about sachet portal, keeping away from Ponzi schemes, fictitious emails/calls, KYC, Exercising Credit Discipline, Business Correspondents etc. A Financial Awareness Messages (FAME) booklet comprising of 20 messages for the general public and five Posters on financial literacy for the Financial Literacy Week have been made available on the Financial Education webpage of RBI’s website.

Public Awareness Campaign

Important press releases, statements, regulatory guidelines, speeches, clarifications and events are tweeted on RBI’s twitter handle ‘@RBI‘ and videos are relayed on RBI’s YouTube link. A separate Twitter handle ‘@RBI says‘ and Facebook page ‘RBI Says’ publish messages and information of interest for greater awareness and understanding of the Bank’s functions. Reserve Bank of India envisages limited two-way communication and engagement over social media and monitors its social media presence.

Over the years, RBI is constantly reaching out to the common man through outreach programmes, financial literacy initiatives, space in mass media and social media platforms, etc. Reserve Bank of India also empowers the members of public by informing them about facilities and services to expect from banks and financial institutions through ‘Public awareness campaign’ which aims to educate the members of public regarding their rights and responsibilities in banking related matters. The campaigns are done on a regular basis in newspaper, TV, Radio, Cinema, Digital channels, SMS and hoardings, under the tagline ‘RBI Kehta Hai‘.

For the video spots, at present, some cricketers and badminton players who are employees of the Reserve Bank of India and also are a part of various IPL/PBL teams have been roped in. The stories in these video spots work at many levels. Apart from the main message, the story line also builds an immediate emotional connect with the audience and the conversational script helps keep human interest alive in a dry subject like nitty gritty of a bank account.

The public awareness campaign of the Reserve Bank of India started in 2017 and gathered steam in 2018. Advertisements on Basic Savings Bank Deposit Account (BSBDA), Safe Digital Banking, Limited Liability and Ease of Banking for Senior Citizens were released in popular events such as the Indian Premier League (IPL), the 2018 FIFA World Cup, Asian Games, Kaun Banega Crorepati (KBC), Pro Kabbadi League, Pro Badminton League and India-New Zealand One Day International.

A film on BSBDAs explains how opening of this account obviates the requirement of minimum balance. A film on Safe Digital Banking cautions the public about sharing card and PIN details while carrying out digital transactions. Another film on Limited Liability explains the recourse available in the event of card fraud. A film on ‘Ease of Banking for Senior Citizens’ elucidates facilities like doorstep banking available for senior citizens. These films, using cricketers and badminton players, who are employees of the Reserve Bank of India, were widely disseminated in media advertisements.

A unique feature of the public awareness campaign is the missed call element: upon giving a missed call to the number 14440, the caller will receive information through a pre-recorded Interactive Voice Response System (IVRS), avoiding the miscommunication or over-communication of a call centre approach. In the non-Hindi speaking regions, mobile phone subscribers receive messages in English and regional languages, so that the connect with common person is immediate and all encompassing.

Financial Awareness and Consumer Training (FACT)

Globally, youth are becoming financial consumers earlier in their lives than ever before and making financial decisions (credit cards, education loans) that can have lasting consequences, if not well managed.

As they prepare to graduate and enter the workforce, taking on increased financial responsibilities, it is essential for youth to acquire the skills needed to set financial goals, avoid potential pitfalls, and know where to seek assistance when necessary. Additionally, understanding their rights and responsibilities as financial consumers is crucial.

To address these needs, NCFE has introduced FACT (Financial Awareness and Consumer Training), a program specifically designed to provide financial education to young graduates and postgraduates. This program covers topics relevant to this demographic, aiming to positively impact their financial well-being. By equipping the youth with the knowledge and skills necessary for informed financial decision-making, FACT contributes to building a financially savvy and responsible generation.

The five core principles of financial literacy, as outlined by the U.S. Financial Literacy and Education Commission, are Earn, Spend, Save & Invest, Borrow, and Protect, guiding individuals to manage money wisely for financial stability and goal achievement. Mastering these areas involves understanding income, budgeting spending, planning for the future through savings and investments, using credit responsibly, and safeguarding assets and identity

Earn: Focuses on understanding your income, maximizing earning potential, and taking advantage of benefits like retirement matching.

Spend: Involves making informed choices about purchases, living within your means, and budgeting to avoid overspending.

Save & Invest: Building emergency funds, setting aside money for future goals, and growing wealth through investments.

Borrow: Using credit wisely, managing debt effectively, and understanding interest costs for essential purchases.

Protect: Taking precautions against fraud, identity theft, and accumulating the right insurance to safeguard your financial health.

The Big Three—a trio of financial literacy questions—evaluate understanding of compound interest, inflation, and risk diversification, three fundamental financial concepts that we encourage you to learn about, as they are stepping stones to sound financial decision-making.

In finance, the "5 Cs" primarily refer to the 5 Cs of Credit: Character, Capacity, Capital, Collateral, and Conditions, a framework lenders use to assess a borrower's creditworthiness for loans, evaluating their history, ability to repay, financial strength, security, and economic factors. 

Regardless of income or wealth, number of investments, or amount of credit card debt, everyone's financial state fits into a common, fundamental framework, that we call the Four Pillars of Personal Finance. Everyone has four basic components in their financial structure: assets, debts, income, and expenses.