me, seniors saving for retirement – should be able to receive and understand information about the costs and risks of mutual funds and other investment products, so that they can make better financial decisions as to what will work for them. today we have to recognize that the greatest threat arises from the asymmetries of information and power between financial institutions and poor consumers, an imbalance which grows as customers are less experienced and the products they can choose are more sophisticated, an imbalance which holds real potential for negative outcomes due to institutional abuses or ill - informed client decisions. financial education is an important tool to address this imbalance and help consumers both, accept and use the products to which they increasingly have access. because it can facilitate effective product use, financial education is critical to financial inclusion. it can help clients to both, develop the skills to compare and select the best products for their needs and empower them to exercise their rights and responsibilities in the consumer protection equation. financial education spans the informal and formal financial sectors, supporting clients ’ access to, and more importantly, use of, diverse financial services. when we speak about financial education as a lay person, we are usually referring to a set of skills that allow people to manage their money wisely, some understanding of essential financial concepts and an appreciation of the trade - off between risk and return. but let us ponder a bit deeper for a while, is it only this? let us think from the point of view of a poor person who does not have any regular income, who is not actually literate and who has never accessed any formal source of banking services. do we mean that such persons, and bis central bankers ’ speeches surely they form a significant part of our population, have no financial literacy. financial diaries studies, as presented in portfolios of the poor ( collins et al, 2009 ) a book available in the cab library, i recommend you read or in cash - in, cash out : financial transactions and access to finance in malawi ( stuart et al, 2011 ), have demonstrated that most poor people are good financial managers in familiar environments where a majority of financial transactions occur either informally or involve money stored at home. you will all agree, money has its own language and to understand it you need not necessarily be literate. it is almost like any other basic need such as hunger, sleep, etc. the understanding of which comes naturally to all. this is possibly the reason that we feel confident to impart financial literacy to all those also

who are not formally literate. more formally, financial education and awareness can take many forms, which include, instruction in personal finance concepts, the financial services landscape, the development of the skills, attitudes and behaviors needed to make the right decisions for the individual. financial education primarily relates to personal finance, which enables individuals to take effective action to improve overall wellbeing and avoid distress in financial matters. it is the ability to know, monitor and effectively use financial resources to enhance the well - being and economic security of oneself, one ’ s family and one ’ s business. financial education is not about just markets and investing, but also savings, budgeting, financial planning, basics of banking and most importantly about being “ financially smart ”. to understand financial planning, a person should be financially literate to understand the importance of preparing household budgets, cash - flow management and asset allocation to meet financial goals. in india, a large section of population still lack access to basic financial services from the formal financial sector and hence moving towards universal financial inclusion is both a national commitment and a policy priority. financial literacy is considered an important adjunct for promoting financial inclusion, consumer protection and ultimately financial stability. financial inclusion and financial literacy need to go hand in hand to enable the common man to understand the need and benefits of the products and services offered by formal financial institutions. we in the rbi have defined financial inclusion as the access to appropriate financial products and services needed by vulnerable groups, such as weaker sections and low income groups, at an affordable cost, in a fair and transparent manner by mainstream institutional players. so, from the financial literacy perspective, it essentially involves two elements, one of access and the other of literacy which enables usage. the most fundamental reason why people should strive to become financially literate is to help them reach their personal financial goals. whatever the specific goal, the payoff from financial literacy is an improved standard of living and a sense of confidence about the future. financially literate individuals are more likely to engage in sound financial planning early in their lives. this enables them to plan for retirement, fund the education of their children, and accumulate more assets. from a national perspective, the payoff is large. which is the target group? everyone in the system, be it the users or the providers of financial products / services, need to be financially literate. in the indian context, the users are broadly categorized as the financially excluded resource - poor, the lower and middle income groups and the high net