Last day I met with some of my school friends. They were discussing something about investment schemes being provided in India by Insurance Companies. They all were happy thinking that they will be crorepati after their retirement if they start to invest now through annuity investment every year.

But when I had interaction with them on this topic and asked how you would be crorepati unless you understand the key difference between Insurance and Investment.

They said, "There is no difference between Investment and Insurance because in both the case we shall be getting a lump sum amount after a specified period of time."

At that point they had mistake having not known that difference between those two terms as I have mentioned above.

This is just one factor that people are not understanding. Despite this, there are many more things to learn which tell you that you are not financially literate.

Lets us learn one by one those factors which will tell you that you are not financially literate.
So let's go.......

You are continuously increasing your saving bank account

On the basis of data taken from the RBI official website, it is found that from 1980-81 to 2018-19, the total saving account deposit with commercial banks has tremendously INCREASED from ₹ 10,937 Crore to ₹ 40,31,177 Crore.

You can cross-check this data taken from the RBI website. Link is this CLICK HERE

This is the blunder we have been doing since 1980-81 in India. This is the reason we can say we are not financially literate.
The Important Reason Why You Need to be Financially Literate

Let's understand what is the problem in this.

In India, total inflation is 3.4% which is almost equal to the interest rate that we receive on our saving bank account

Now suppose the cost of a smartphone is  ₹ 10,000 in India. So considering the inflating rate, the cost of the smartphone shall be much higher in comparison to today's price and today saving account deposits with presently available interest rates shall not be capable to buy that smartphone.

In short, the value of our money which we have put in saving bank account is drastically falling. It is basic interest rate is not higher than the inflation rate.

Not maintaining reasonable liquidity and not making wise investments as well

Do not save money on a rainy day or for a medical emergency or for any reason motivated by fear. You have insurance for that. And this is the thing that we generally do. Save money so that money can work for you by earning interest! Always remember one of the core principles of prosperity is "Money works for You!" Penny is a wonderful servant and an awesome master

Living in this culture is a challenge and a blessing. One of the blessings is that we have created an economic system whereby anyone can become rich and financially independent, which can be defined as the situation in which a person's money is earning so much money for them that the person will never have to work for money to pay his living expenses.

In our culture, there is a caste system that decides the fate of a child before its birth. Today, in India, anyone with average intelligence and physical health can obtain financial resources and invest out of them in such a way that the money makes money for that investor.

If the investor contributes systematically to their savings plan for a specified period of time, the interest compounded on that savings principle alone can earn a lifetime salary, salary, commission, or contract fee. There are many options that help you obtain compound interest and one of them is mutual fund investment.

It is reported that Albert Einstein once said that "compound interest is the greatest force in the universe."

We should hold financial assets to the extent that we don't have to go to earn another penny and continue to live at our current level until we are 100 years old.

If you have not already done so, I ask you to ask a question, "How do I make money for myself?"

Lack of Knowledge of investing in the stock market (wisely)

Investing in the stock market can make money work more efficiently for me than the money invested in the so-called safe way. The traditional view is that investing in the stock market is very risky for the average person so do not believe it! The rate of return is much higher than the nominal rate of interest paid on passbook saving accounts, money market accounts, or treasury bills.

Media is given great attention to people who make and lose big fortunes in the stock market. Less media attention is paid to those who just continue quietly, month after month, year after year, to create financial assets that ultimately equate to financial independence.

If you haven't already done so, start reading and talking to people and do everything you can to become financially literate - to understand how our economic system works and you can do it for yourself. How can work Information is readily available. You can start by reading the financial section of your newspaper if you do not know how to initiate it. You can read the "Economics Times". You can watch "ET Now or NDTV Profit" on Friday nights. Bookstores are full of books that can help you get started. (An excellent book that  I enjoyed and recommends A Random Walk Down Wall Street: Talk about stock markets which popularized the random walk hypothesis!)

Do you know people who invest in the stock market with good results? If yes, ask them how they got started. Ask them how to invest. Stock Exchanges like NSE, BSE often offer introductory courses on investment for a nominal registration fee. If your employer offers a savings and investment plan, talk to the benefits coordinator and find everything that can tell you about the benefits available there.

A word of caution: Do not trust everything a financial service professional can tell you. Get many opinions. Many financial services professionals are honest individuals who are following their own bliss and who are sincerely committed to the interests of their customers. However, few, to pay the minimum balance of their month's credit card bill try to ensure that you decide to use the services of a financial professional, you will need many interviews and a lot of cosmetics before choosing one.

Conclusion

Don't save money in saving bank account for a long period because inflation will reduce the value of your money. Keep investing in a good portfolio so that you can get a good return income from that. Keep getting a good knowledge of the stock market from various sources to increase your knowledge. 


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Disclaimer 

The information provided in this article is for general informational purposes only. All efforts have been made to provide accurate information in this document; however, it should not be perceived as professional or legal advice. The reader should consult a professional before making any decision based upon this document. Under no circumstance, the author nor the publisher shall have any liability to you for any loss or damage of any kind incurred as a result of the use of this information.