Financial health is an important aspect of overall well-being that is often overlooked or misunderstood by many individuals. It is crucial to understand the significance of financial education and awareness in order to make informed decisions about money management and investments.
Unfortunately, a vast majority of highly educated individuals lack even the basic understanding of financial principles, largely due to the lack of emphasis on financial education in schools.
One of the fundamental components of financial education is understanding the concept of inflation. Inflation, the silent killer of wealth, refers to the decrease in the purchasing power of money over time. With current inflation rates ranging from 5-8% per annum, it is essential for individuals to ensure that their investment returns exceed the rate of inflation in order to maintain and grow their wealth.
However, instead of focusing on building wealth through prudent investments, many individuals fall into the trap of creating liabilities by taking out loans for high depreciable items, indulging in excessive consumption, and succumbing to unnecessary social obligations.
The lack of financial awareness often leads individuals to overspend on luxury items, such as expensive cars, extravagant home décor, and other non-essential expenditures.
This, in turn, leaves little to no room for investment and savings, ultimately hindering financial growth. Moreover, the tendency to make emotional purchases without conducting thorough research further exacerbates the problem, as many individuals fail to consider the impact of inflation on their investments.
In conclusion, it is evident that financial education and awareness play a crucial role in ensuring one’s financial health. Without a basic understanding of financial principles, individuals are prone to making poor money management decisions that can significantly impact their long-term financial well-being.
Therefore, it is imperative for individuals to prioritize financial education and take proactive steps to make informed financial choices, thereby safeguarding and enhancing their financial health.
Author can be reached at Irshad@bp.sharekhan.com
