Basic financial literacy–Ignorantia juris non excusat

Have been procrastinating a while since finishing STP last month for most of the regular tasks and that includes writing in the blog or reading a book.  But this study by Livemint gave some inspiration to write over the weekend.

Pretty interesting article posted by Live mint, which has questions from Youth Money Olympiad 2014. Straight forward basic financial awareness questions related to Banking, Credit , investments and basic of economics like Inflation. These are not even getting into deeper areas like stock market trading, option & futures etc. But the % of responses given below the questions is scary. They did this break up with City wise (link), and Chennai was the lowest. Not surprising from the land I come from – where most of our relatives are LIC agents selling some Jeevan-X endowment policy and a lot of misselling . I still remember my mother was sold by one of my relatives, a classic LIC endowment policy on my name, when I was at my 17 years old. At that time she was the bread winner of  the family . Who is to be blamed in this situation - the misselling done by my relative or the lack of financial awareness from my mother at that time.  At this juncture-my Law professor’s statement comes to my mind – “Ignorantia juris non excusat”, Ignorance of law is not an excuse to a mistake.

So we can keep blaming misselling in the industry – I was missold a Ulip , endowment policy , pension plan etc. We can also crib that the regulator is not doing anything about it, but that is not going to change anything for us and until we take personal accountability of our own personal finance. If we take effort to understand the basics of managing our own finance – keep it as simple (and also sensible) as possible without buying any complicated product there is enough we can progress in this. There is enough written about this in books in amazon. Maybe start with a a simple book (but powerful) like Retire rich invest 40 a day. I read this book when I was 24. I wish I had read this book even before. Well have I become an expert at it now, the answer is a definite No. I am still baby crawling to understand this huge world of knowledge. But have got couple of simple lessons, keep your thinking simple, disciplined in taking action, and do not have over confidence on your intelligence and forget that we are very very biased in our decision making. I am not searching for most optimal solution but a satisficing solution and accept the fact that I am bound to make mistakes and keep learning from them. (Bounded Rationality it is!)

Financial literacy is so important and the best place to start is at home with kids. Teaching them to handle money on their own, living within a budget and not blowing that away when they are kids. That makes the learning easier and not preaching them not to have maxed out the credit card when they are in college or on their first job. So why don’t they have basic personal financial education as a course in school, and please don’t force them to grade this so badly that kids start hating this subject like some subjects like Economics. Making personal finance knowledge teaching fun and interesting for kids to learn is probably an area to be explored big and that is one of my interest to get in later maybe !

Update : Pretty interesting quora discussion where Jimmy Wales talk about expectation setting. Read Quote of Jimmy Wales' answer to Jimmy Wales: What advice would Jimmy Wales give to the young generation? on Quora