As an adult I always thought that financial education should be part of school curriculum to make dealing with money in real life easier. Schools teach you addition and subtraction, they teach you simple and compound interest. But what they don’t teach you is how this is immediately applicable to your bank accounts, and to income and spending once you start working – which is what schools are preparing you for.
‘Financial literacy’ – The SEBI way
Wait a minute. In the first paragraph I was talking about ‘Financial literacy’ and suddenly we landed in ‘investing in the stock market’! Is something wrong in this picture?
The answer is a resounding YES! In the guise of ‘Financial literacy’, SEBI wants to make school-goers into investors or is it really traders they want to produce so that they generate revenues for SEBI? Do they want to enlighten the high-schooler that he can throw some money at the stock market, do some compound interest calculation and before he turns 30 or 40, he could be a crorepati?
‘Financial literacy’ – My way
One of the very fundamental things that we deal with from childhood till death (does us apart) is money. As kids we receive money from relatives as gifts, or we are asked to do some shopping for our mother’s kitchen. We often hear adults talk about it all the time. As we become teens, our need for cash increases and so do the demands we make to our parents. When we start working cash becomes king and continues to be so through out adulthood and in to old-age. So, why not we learn how to earn and manage this ‘money’ thing in a prudent way?
As a result I imagined that we should teach our high-schoolers the basics of money including:
- How to account for money – income vs. spending, keeping and balancing accounts.
- Banking – What is the meaning of savings? What are Fixed Deposits? The instructor can then introduce them to how Simple and Compound Interest increases the money in their accounts.
- Insurance – The need for insurance and the basic types (like life, health, auto).
- Investing – Stocks, Mutual Funds, Real Estate etc.
- Taxes – Though not directly relevant to above, is definitely a factor that decreases wealth. So some basics might be in order.
- Entrepreneurship – Though not directly a topic for ‘financial literacy’, entrepreneurism when done successfully leads to wealth creation. So students can learn that taking up a day job or running a grocery store are not the only ways to earn.
As a side, I would suggest that all high-schoolers and even adults read Robert Kiyosaki’s ‘Rich Dad Poor Dad’ book. There are other useful books in the series and many other useful books from various authors but nothing is simple and easy to understand like this one.
SEBI has identified a missing link in the education system. However SEBI is taking a very narrow and a self-serving approach to this which I think is not what parents nor educators would like to see. Instead this could be something that the education department headed by Kapil Sibal can look into as a prospective course that could be introduced country-wide. One idea is that this could be part of a Public Private Partnership (PPP) in education where there can be knowledge sharing and sponsorship from the banking, securities, mutual fund and insurance industries. This holistic approach to financial literacy might gain wider acceptance from all stakeholders like students, parents, educators, education ministry and the sponsors.
The students coming out of this education scheme would understand the importance of every Rupee, how to earn it, grow it, account for it and manage it better irrespective of their parent’s financial education or socio-economic status. We would lay the foundation for a society where individuals can take responsible financial decisions as they move through college and life.
What are your thoughts?