When The Literate Act Illiterate – Finance With Chinmay

Being an independent financial advisor, I have met hundreds of people to manage their finances. Most of them are either graduates or postgraduates in engineering, science or commerce. Being highly educated they are academically literate. But to my surprise, I found most of them financially illiterate.

Let me give you an example. Last night I was discussing tax deductions and other tax related stuff with my friend-cum-client who has master’s degree in engineering. Surprisingly, he didn’t even know how much tax he pays and the ways to reduce the tax.

This prompted me to write this article as most of us have just started earning or are about to start, we need to understand the importance of financial literacy.



Financial Literacy has been defined as ―”the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being”.

Personal financial literacy is more than just being able to balance a chequebook, compare prices or get a job. It also includes skills like long-term vision and planning for the future, and the discipline to use those skills every day.

To put in simple words, financial literacy is the ability to understand how money works- how to make it, spend it, save it, invest it and most important how to grow it.



-As there are many financial options are available in finance world like saving, investing, lending, borrowing, spending financial literacy can help people to make best possible decision about those options

-According to a study, those with low financial literacy borrow more, have less wealth and end up paying unnecessary fees for financial products

– Research on financial literacy shows that most people don’t understand the concept of compound interest and some don’t seek out financial information before making financial decisions. Lack of financial literacy education is responsible for the lack of money management skills and financial planning for business and retirement.

-People fail to plan for the future and take financial risks without realizing it. Problems of debt are severe for a large proportion of the population because of financial illiteracy. Youth on average are less financially capable than their elders.

-Financial education can benefit people of all ages and income levels. For youngsters who are just beginning their working lives, it can provide basic tools for budgeting and saving so that expenses and debt can be kept controlled. Financial education can help families acquire the discipline to save for their own home and/or for their children’s education. It can help older workers ensure that they have enough savings for a comfortable retirement by providing them with the information and skills to make wise investment choices with their individual pension and savings plans. Financial education can help low-income people make the most of what they are able to save and help them avoid the high cost charged for financial transactions by non-financial institutions.



Achieving basic financial literacy is not as difficult as it sounds but is requires some efforts. It’s never too late to improve your financial literacy.  You can achieve it by understanding the concepts like

  • Time value of money, compounding and discounting
  • Financial budgeting & forecasting
  • Savings and Investments
  • Taxes & Insurance
  • Asset allocation
  • Risk & Risk diversification


“Your level of financial literacy affects your quality of life. It affects your ability to provide for yourself and family, your attitude to money and investment, as well as your contribution to your community. Financial literacy enables people to understand what is needed to achieve a lifestyle that is financially balanced, sustainable, ethical and responsible.”



Chinmay Madgulkar is an Electronics & Telecommunication engineer from the University of Pune. He has completed his MBA in Finance from Xavier Institute of Management & Research and is a Management Trainee – Equity at Taurus Mutual Fund. He is also a Mutual Fund advisor.

You can connect with Chinmay on LinkedIn here.