National Education Day: Why Financial Education Is Essential To Reduce Wealth Inequality And Address Longevity Challenges

National Education Day is observed in honour of Maulana Abul Kalam Azad, the first education minister of independent India, on his birth anniversary. This day commemorates Azad's invaluable contributions to India's educational landscape and underscores the importance of education for societal progress and upliftment. Education can significantly alter one’s life trajectory for the better. However, it is not limited to schools and colleges; the aim of education goes beyond imparting knowledge, and fostering a lifelong love of learning and critical thinking. It is a day to reflect on the need to continually improve the quality of education, empowering people to lead meaningful lives and equipping them with financial literacy to manage resources effectively.

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Why Is Education Important?

The day serves as a reminder of the critical role education plays in individual lives and national progress, it is something that must not be overlooked. As the Ministry of Education states, “India’s path to global leadership is closely linked to the strength of its education system.” This underscores that a country’s growth relies heavily on the education level of its citizens, encompassing both technical expertise and essential life skills. Financial literacy, now seen as a vital life skill, is essential for a high quality of life.

Financial Literacy: A Vital Life Skill

The World Economic Forum and Mercer report, Longevity Economy Principles: The Foundation for a Financially Resilient Future (January 2024), emphasises that without access to adequate financial education, people may fall “prey to others’ predatory financial behaviors; this issue is particularly stark for those in old age”.

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There is a close relationship between financial literacy and the well-being of an individual. It is because of the prudent decision-making one can make in matters involving finances and securing and ascertaining a secure old age. Notably, the financial literacy level for India is at 27 per cent, according to the NCFE Financial Literacy and Inclusion Survey, 2019, whereas for Europe, the US, and Australia it is much higher, ranging between 55 per cent and 75 per cent.

Research data shows that only one-third of the global population is financially literate. The study included 140 countries and reported, “Financial literacy is strongly correlated with income level and educational attainment, when adequate financial education is not distributed equitably, it can lead to deepening wealth inequality”. Besides, “This lack of financial literacy has a significant impact, in retirement, on financial stress, as well as financial security”.

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Financial Education And Old Age:

While retirement age has remained almost the same for years, life expectancy has increased globally due to medical advances. Considering this, it is not difficult to imagine a financially difficult old age for someone who has not planned finances due to lack of education, especially financial education.

In the future, when the elderly population will become a significant portion of the total population, National Education Day is a reminder to focus on education, learning, and being better, underlining the need for financial education.

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Longevity Issues And How Financial Education Can Address It:

With the increasing life expectancy, inequitable financial education can impact the quality of life and vice versa. As the report says, “Widening wealth disparities are linked to inequalities in life expectancy and health”.

The primary challenges in old age are decaying health, financial constraints, and loneliness. Amid increasing life expectancy, these issues are only going to aggravate. Wealth disparities would also hamper sustainable development, among various other social issues.

Needless to say, a focus on providing quality education to learners and a deeper penetration of financial education can go a long way in building a secure, sustainable, and growing society.