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Should Financial Planning be Included in School Curriculum?

12 min read

How will it be if financial planning is included in the school curriculum? Financial literacy is a crucial life skill regardless of who you are or what you do.

Students should also understand the fundamentals of money management, including how debt works, why it’s not a good idea to go on a shopping spree with a credit card, how to budget within our means each month, the value of saving, and how to maximize your savings. Nonetheless, relatively little of this material is taught in school.

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Image Source- jstinvestments.com

What is Financial Planning and What Does it Involve?

Financial planning is a systematic method to achieving one’s life objectives. A financial plan serves as a road map for the journey of life. In essence, it enables you to maintain control over your income, expenditures, and assets, allowing you to manage your money and accomplish your objectives.

If you examine the above instances closely, you will see that they all have one thing in common: money. You must have a sufficient financial cushion to accomplish your objectives and aspirations. More significantly, you must have the appropriate amount of money at the right moment.

For instance, if you wish to spend Rs. 10 lakh to fund your daughter’s college tuition, you must increase this money by the time she reaches 18. Certainly not a year later. This is the point when financial planning becomes critical.

Financial planning includes the following tasks –

  • Calculating the net worth (both assets and liabilities)

This may be a house and a vehicle, cash in the bank, money invested in a plan, and anything else of worth that you possess. Additionally, credit card debt, school debt, an ongoing mortgage, and a vehicle loan may be included.

  • Estate plan 

Arrangements for your heirs’ protection and benefit. 

  • Tax-cutting strategy

A tax approach that seeks to minimize personal income taxes to the degree permitted by the tax law.

  • Plan for long-term investment

A strategy that is tailored to your particular investment goals and risk tolerance profile.

  • Plan for comprehensive risk management

This covers an examination of the life and disability insurance, as well as personal liability, property and casualty, and catastrophe coverage.

  • Retirement plan

Whatever your objectives, your plan should include a strategy for collecting the necessary retirement income.

What Should a Good Financial Plan Include?

Many people may question, “Do I really need a financial plan?” Certain individuals believe that saving consistently in bank recurring deposits or mutual fund Systematic Investment Plans (SIPs) adequately allocates their money to assets. Ad hoc investments, on the other hand, result in poor use of your financial resources.

A financial plan allows you to create a roadmap for achieving all of your financial objectives and assists you in building a contingency reserve for any unexpected expenses.

8 major components of a good financial plan –

  • Estate plan

At the very least, you should prepare a will that details your last intentions about your property, dependents, and who should manage your estate. Additionally, you should maintain current beneficiary designations on your insurance plans and retirement funds. Additionally, consider appointing a power of attorney to make financial and health care decisions on your behalf in the event you become incapacitated.

  • Insurance coverage

Insurance is critical for mitigating financial risk—but you should not overpay for coverage you do not need. This must contain a life insurance policy, a home owner’s policy, a disability policy, and a health insurance policy.

  • Emergency funds

When the unexpected occurs—for example, if you lose your job or are faced with an unexpected medical bill—an emergency fund may help you avoid having to dip into your long-term savings to make ends meet.

  • Retirement plan

According to an ancient adage, you’ll require about 80% of your current salary in retirement. As is the case with every general rule, there are many exceptions. Therefore, as retirement approaches, make careful to sit down and fine-tune your retirement budget. This should be your primary objective, since you may borrow for the majority of other purposes but not for retirement.

  • Debt management plan

While debt is often regarded as a four-letter word, not all debt is negative. A mortgage, for example, may help you create equity—while also boosting your credit score. On the other hand, high-interest consumer debt, such as credit cards, has a significant impact on your credit score. Additionally, each dollar you spend in financing costs and interest is a dollar that cannot be used for other objectives.

  • Budget and cash flow planning

Budgeting is really where the rubber meets the road in terms of planning. It may assist you in determining where your money is being spent and where you might make cuts to achieve your objectives.

  • Net worth statement

Because any strategy has a baseline, the next step is to calculate your net worth. Create a list of all your assets (bank and investment accounts, real estate, and valuable personal items) and another listing of all your liabilities (credit cards, mortgages, student loans). Your net worth is equal to the sum of your assets and liabilities.

  • Financial goals

You cannot create a plan until you know what you want to achieve with your money—so whether you create it on your own or with the assistance of a professional, your plan should begin with a list of your objectives, both large and little.

Why Financial Planning is Important?

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Benefits of Financial Planning
Image Source- wallstreetmojo.com

  • To handle your money effectively

It may be challenging to meet the demands of your family members. While your eldest kid is preparing to enter college, your teenage son may want to attend a space camp over the summer. Planning is critical in personal money. It not only assists you in comprehending the requirements of various family members but also in determining how to meet them. However, this requires prudent money management.

For instance, conserving money in a bank account is preferable to spending it all. This is not, however, the optimal method to invest your money. In contrast, other investments such as mutual funds may provide higher yearly returns. Thus, when you recognize your family’s requirements and put your money to work effectively to meet them, you may anticipate positive outcomes.

  • To accumulate a retirement fund

People are increasingly enjoying longer retired lives as a result of newer medications and major medical advancements. This is unquestionably a positive development. You may spend more time with your family, pursue your interests and ambitions, and travel the globe. However, there is one critical issue you must address: how will I pay all of these expenses? 

You must have a sufficient financial cushion to guarantee that you enjoy your retirement years to the utmost. This is feasible if you have a financial strategy in place that offers a steady stream of income after retirement.

  • To establish a reserve fund

The future is inherently unpredictable, and anything is possible at any moment. Consider the following example to illustrate this concept.

Consider a parent who took out an education loan to cover the cost of his daughter’s college education. Simultaneously, he is accumulating money for his upcoming retirement, which is a few years away. However, an unexpected medical emergency strikes the family. Regrettably, his lack of medical insurance means he must pay for medical costs out of pocket. This depletes his retirement fund and adds to his financial obligations.

Numerous individuals find themselves in similar circumstances. And, although hoping for the best is admirable, it is essential to prepare for the worse. A sudden job loss or an unanticipated medical catastrophe may wreak havoc on your finances. This is why you should maintain an emergency reserve to cover such expenses. Financial experts urge investors to maintain a contingency reserve equivalent to six months’ income. This may be put in a liquid fund to provide fast access to funds in the event of an emergency.

  • To tackle inflation

Consider the last time you took your family to a multiplex. You’re likely to recall your grandparents saying, ‘Everything was so inexpensive back then.’ That is true. Twenty years ago, movie tickets were about Rs. 40, not the current Rs. 500. Similarly, chocolates, coffee, clothing, and gasoline, among other everyday items, were much cheaper ‘back then’. Inflation is the term used to describe the process through which prices increase over time. It refers to the gradual rise in the cost of products and services over time. And if you’re not cautious, it may quickly deplete your funds. Here is a basic illustration of its impact.

Consider the following scenario: a chocolate bar costs Rs. 10 today, and you have Rs. 100. This amount is sufficient to purchase ten chocolate bars. Consider keeping Rs. 100 in a bank that provides a 5% yearly interest rate for the following year. You have Rs. 105 at the end of the year.

However, let us suppose that the price of the chocolate bar rises to Rs. 11 during the course of a year. This implies that you will have to spend Rs. 110 next year to buy the same ten chocolate bars. However, since you only have Rs. 105, you fall short of Rs. 5. This is how inflation eats away at an individual’s money. It erodes buying power over time, requiring you to spend more on the same products.

You may fight inflation by investing in assets that provide a higher rate of return over time. However, financial preparation is essential for this.

Why Personal Finance Should Be Taught in Schools?

Financial literacy has never been more critical in today’s society. For decades, India’s education system has been unable to provide its people with even the most fundamental financial skills and information necessary to navigate an increasingly difficult financial environment. Due to the enormity of changes in the financial environment over the last several years, it is critical that we include financial literacy into early high school curricula and provides students with the information necessary to manage their own money. In that sense, like with any learning, financial literacy should ideally begin at a young age and progress through financial planning in order to enjoy the benefits.

Here are a few reasons why we at Aviva think it is critical for our educational system to begin incorporating financial knowledge into current curricula and making learning more relevant to today’s students:

  • Substitute practicality for monotony

Apart from the textual curriculum, there is an inherent requirement for practical participation. For example, by teaching children how to create and manage a bank account in a virtual environment rather than via lectures, children will be better able to grasp real-world ideas. Additionally, children must be taught how to handle their own investment portfolios in order to avoid feeling bewildered when faced with real-world financial choices. Only through the development of these skills can children become responsible citizens, thus enhancing their quality of life and the overall functioning of Indian society. Notably, gaining firsthand experience with different financial ideas while in high school enables students to better connect to these teachings not just with their peers, but also with other adults such as instructors and parents.

  • It’s simpler to walk on familiar ground

We live in a time when millions of individuals are trapped in crushing debt due to a lack of knowledge on how to handle their money properly. To be honest, unless kids are provided with the necessary opportunities beginning in high school, they, too, are doomed to financial hardship. 

Then there’s the little issue of the plethora of financial products with which a person must get acquainted in today’s world – from mortgages and loans to investment choices such as mutual funds, futures, and even credit cards. 

Early on, including a financial planning lesson in their curriculum may significantly enhance their understanding of at least some, if not all, of these financial items, while also guaranteeing that when these children grow into adults, they have a greater familiarity with financial issues.

  • Getting Started Early and Making a Difference

Implementing financial literacy in high school may be beneficial in a variety of ways. To begin, a child’s brain is similar to a sponge; he or she has the ability to absorb knowledge due to the brain’s rapid development at that period. 

This equips him/her with the capacity and motivation to learn almost anything and everything thrown their way. Thus, by providing youngsters with the necessary abilities, they will be much more capable of making important financial choices throughout their adult life while also understanding how money works.

  • It is the generation of consciousness

Currently, due to a lack of financial literacy, the average population is ignorant of even fundamental financial concepts such as earning, saving, and spending.

By beginning financial education at a young age and maintaining it throughout their schooling, we can assist mold our country’s future people into a financially aware population, thus empowering them to make sound financial choices.

To successfully navigate today’s difficult financial environment, financial education must begin at the grassroots level, since it is unquestionably a necessary life skill. Aviva has made it a goal to educate its clients and the general public about the need of financial literacy via a variety of informative blogs and articles on financial problems and trends written in an approachable manner. Students must start to learn the basics of finance from class 6th itself. 

Indian Government Schemes, Initiatives, and Programs for Educating Students about Financial Planning

The government of India is trying hard to implement financial planning in the school curriculum. However, it may take a little time. You can visit the official website of the National Strategy of Financial Education by the Reserve Bank of India. Here you will find some information as to how the government of India is planning on teaching financial planning to students. 

For the purpose of learning financial planning, you can do the following- 

  • Watch shows like ‘Your Money’ on CNBC Awaaz, ‘The Property Show’ on NDTV channel, ‘Wealth Manager’ at Boomerang TV India, ‘Smart Money’ at Boomerang TV India, etc. 
  • Reading various newspapers like TOI, The Hindu, The Economic Times, The Indian Express, etc. 
  • Reading magazines like Capital Market, Fortune India, Business Today, Forbes Today, Business India, etc. 
  • Reading blogs from websites like – MoneyTap, Basunivesh, Jago Investor, GoodReturns, etc.     
  • You can also take help from your teachers, friends and family.

The Gist

Until financial management courses are taught in schools, it is up to the parents, or the students themselves to teach them or learn the fundamental concepts of saving, debt management, and budgeting in order to ensure their financial security throughout their lives.

Additionally, if you believe your own abilities are inadequate, it is never too late to improve. There are many great books and websites available to brush up on the fundamentals.

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