So, there’s a survey that Visa International did recently across 28 countries, gauging the level of financial awareness amongst people in each country. They seem to have interviewed almost 1000 families in each country, a good sample size, and hence the results need to be taken seriously.
They asked 5 questions from each person :
• Do you have and follow a household budget ?
• How many months’ worth of savings you have set aside for an emergency?
• How often do you talk to your children aged 5-17 about money management issues?
• To what extent would you say that teenagers and young adults in your country understand money management basics and are adequately prepared to manage their own money?
• At what age do you think governments should require schools to teach financial literacy to children, so that they can better understand money management issues?
In the above 5 questions, India ranked respectively 18th, 14th, 23rd, 3rd, 24th. India had an overall ranking of 23rd, when 25% weightage was given to the first 3 questions and 12.5% each to last 2 questions. Overall weighted score for India was 35%.
So, we are in the bottom 40% among countries on preparing and following a budget for our homes. Goes with my general perception that as a race, we are not exactly the best planners. Various half-left bridges and buildings, flyovers-to-nowhere are testimony to that. As is the absence of strategic planning teams in companies, or the “toothlessness” of the Planning Commissions.
We are OK in having an emergency fund saved for some months of going without income. A general culture of fewer firings and company shut-downs gives us more comfort on “job security” – one of the biggest aspects that middle-class and lower-middle-class youth still clamour for while seeking a job in India.
Unsurprisingly, we are very poor in talking with our children about money. Why to bother them, correct ? Or what will they understand ? Or why to include them in our worries ? Actually, forget about talking about money, we are poor in talking to our children. Period. The chief wage earner of most families is still the father of the family and he is too busy to spend any time with his children.
The most damning statistic comes next with most of us believing that our young adults and teenagers understand money management. On what basis ? First, we don’t speak with children about this and then we foolishly believe that they will get this on their own. This is classic ostrich-in-the-sand phenomenon ! As I remember from a poem taught in my school days from the Buddhist Dhammapada – a fool who knows that he is a fool is a pundit in that at least !! We do not know and think that we know. Very dangerous.
To compound the above problem, we don’t think that we need to teach basics of financial awareness in schools. We don’t want to talk with children on the basics (of course, most of us grown-ups do not know the basics ourselves), do not think it is important to teach them in schools and then, for some reason, believe that we have a bunch of upcoming youth who are savvy.
The scene across the world
India scored 35% overall weighted score across the 5 questions. Brazil was the best placed with 50% (USA was 45%) – so the solace to us is that no country in the world scores very high on financial awareness. As a practitioner, for me, 50% is also a low score and we have a huge challenge in injecting seriousness into the issue of “financial awareness”. Financial Planning is still practised only by a few curious families in India. With increasing number of people moving into private sector jobs, the proverbial safety net of pension is disappearing. Private jobs themselves are no longer secure to last till YOU want them to. Families are getting nuclear and children are emigrating – many of them are not going to be there to tend to you. In such a changing situation, better to take care of your long-term financial plan.
But it will have to start with awareness first !!!