Why students need to be financially literate

Being financially literate helps students gain practical experience of handling money and develop good monetary behaviour

Updated - July 08, 2023 04:26 pm IST

Managing your finances gives you the opportunity to learn and build a solid foundation for a better future. 

Managing your finances gives you the opportunity to learn and build a solid foundation for a better future.  | Photo Credit: Freepik

Youngsters have always found it difficult to define the boundary between need and want. While many feel that this is not really essential, as the youth do not handle finance, a couple of factors are overlooked. First, the consumer market is overflowing with a diverse range of products and services that target youngsters. Those in their late teens and mid-20s often tend to overspend owing to social media influence and peer pressure. Second, there is a difference between handling core finances and developing the basics of the same. Administering personal finance demands maturity and experience. Nevertheless, understanding the boundary between needs and wants, based on the concept of utility, is important. The decision-making conduct at this age can have a long-term influence on their lifetime financial behaviour. Thus, financial literacy becomes vital for facilitating the development of good monetary behaviour, which in turn enhances financial security in the long run.

Also read: Why students in India need to learn about NFTs

Decrypting utility

Utility is a metric that helps one understand how or why a particular product/service is useful and may vary from person to person. Youngsters are most often not aware of the real utility of a product/service, as their buying behaviour is influenced by their peers. Understanding this metric through monetary diligence (awareness of financial behaviour) helps gain insight into how their money is being spent, and the value they are receiving, thereby assisting in making more informed decisions about their spending habits. Keeping a log of the small amounts received can help them plan and anticipate their spending need. This, in turn, will allow them to make mindful choices about what is important for them.

Inception point

For most youngsters, college is usually their first exposure to the real world. Money management is, perhaps, one of the most essential skills this world demands. Being financially literate can provide students practical experience that will eventually help them solve problems in the future and become more responsible for their financial decisions. Budgeting helps one understand how much money is coming and how much is going out. It is a key step toward understanding how much money you have coming in and going out. To be in control of the money, develop habits that will help you save money and avoid financial crises.

At such a young age, managing your finances gives you the opportunity to learn and build a solid foundation for a better future. Creating a realistic monetary roadmap will help youngsters pay their own bills and be financially secure and resilient. The benefits of developing monetary knowledge may not produce immediate results, but, in the long run, good monetary behaviour will definitely enhance your future.

The writer is Chief Strategy and Trading Officer at Vantage .

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.