Financial literacy is an important life skill. By acquiring knowledge and understanding in areas such as personal finance, societal financial aspects and effective planning, individuals can make informed decisions and establish a strong foundation for their financial well-being.
With the availability of educational resources and a proactive approach to financial awareness, the concept of financial literacy has gained significant attention over the course of the past few years. But to consider oneself financially literate, there are several key aspects that Nepali youth should be well-versed in:
Saving and investing
Saving is earning, you must have heard that saying a lot. But, investing plays a crucial role in financial literacy as it enables Nepali youth to accumulate wealth gradually.
Knowledge about the importance of saving money regularly either in saving accounts or fixed deposits with various interest rates and schemes is crucial here. So is understanding various investment options, such as stocks, bonds, mutual funds, real estate, and retirement accounts, can help build wealth over time.
Understanding risk and return (on investment), depreciation, compounding interest, diversification of assets, and long-term investing strategies enable them to make wise investment decisions aligned with their financial goals. It is crucial to emphasise the importance of starting early and staying consistent.
Banking and financial products
Knowing how to choose and use bank accounts, credit cards, loans, and other financial products wisely is essential for managing money and avoiding unnecessary fees or penalties.
Nepali youth should familiarise themselves with the banking system and basic financial products. Understanding how banks operate, opening savings accounts, and utilising services like online banking and mobile payments provide convenience and security.
Moreover, learning about other financial products such as fixed deposits, recurring deposits, and insurance policies helps in making informed decisions to grow savings and protect against unforeseen circumstances.
Understanding different types of debt, interest rates and repayment strategies can help individuals make informed decisions about borrowing and managing debt effectively.
Credit plays a significant role in financial management. Nepali youth who want to develop their hold on financial literacy should understand how credit works in the market. Responsible borrowing practices ensure they maintain a good credit history and access favourable borrowing terms when needed.
Educating themselves about different types of loans, such as student loans and home loans, helps them make informed decisions and avoid unnecessary debt burdens.
To start one’s journey to financial literacy, Nepali youth need to develop a fundamental understanding of personal finance. It is a good way to judge one’s understanding is knowing how to create and maintain a budget.
Budgeting not only helps track income and expenses but also enables one to make better financial planning and be responsible about their spending. Saving regularly ensures the accumulation of funds for emergencies and future goals too. Additionally, managing debt responsibly is crucial to avoid financial pitfalls and maintain a healthy credit profile.
A major part of the budgeting is to save for the future. So setting short-term and long-term financial goals, such as saving for emergencies, buying a house, or planning for retirement, helps individuals prioritise their financial decisions, and enhance their financial literacy.
Setting financial goals is essential for Nepali youth to achieve their dreams and aspirations, more so with the feeble economic market of Nepal.
They should learn to set SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals and create a roadmap to attain them. This applies to prioritising goals, creating budgets, and identifying saving and investment strategies aligned with their objectives. Also, regularly reviewing and adjusting the financial plan ensures progress towards their goals.
As a responsible citizen who wants to enhance their financial literacy, being aware of consumer rights and making informed purchasing decisions become crucial for Nepali youth.
One should be aware of their rights as a consumer, including protection against fraud and unfair practices. Learning about financial scams and frauds prevalent in society helps them make informed choices and protect themselves from scamming individuals, you hear such news every now and then.
To be financially literate, one should also stay updated on financial news and trends, including changes in policies, regulations, and market conditions, to make informed financial decisions.
Understanding other economic concepts
To enhance financial literacy, Nepali youth have to widen the range of educational resources they have. They can attend financial literacy workshops, seminars, or webinars conducted by financial institutions, non-profit organisations, or government agencies. Online platforms, blogs, and podcasts can offer valuable insights into personal finance and investment strategies.
You can also read books on personal finance and following reputable financial experts can broaden your knowledge and understanding.
Understanding economic concepts include having a basic understanding of economic principles, such as inflation, interest rates, supply and demand, and tax concepts–income, deductions and filing processes. Knowing the importance of various types of insurance, such as health, auto, home, and life insurance, and knowing how to evaluate and select appropriate coverage can provide financial security.