Are Malayalis Financially Literate?

Let’s begin the discussion on whether Malayalis are financially literate or not with a few disclaimers:

  • Firstly, this is not an economic or financial article with mind-boggling jargon like Sensex, ETFs, NFTs, crypto, SIPs, etc.
  • This article is not expected to be pedagogic.
  • This piece is purely subjective from a layman’s perspective, with personal opinions and outlooks.
  • Finally, to the financially literate, you may want to skip this.

Over the years, several discussions have happened over the need for ‘sex education‘, which is slowly paving the way for sex-ed at schools after the strict instructions from the Kerala High Court in August 2022. Commendable efforts.

I believe it’s time to initiate discussions on the need for ‘financial education’ at schools, as the younger generations need to know how to survive. One might argue that financial literacy is redundant as students learn and get employed, and thus they survive. This notion is what deprives us of financial freedom, according to Robert Kiyosaki; author of ‘Rich Dad, Poor Dad‘. (NB: This book and its author will be continuously mentioned in the article, so please retain this name if you are unaware of it.

Before exploring its other aspects, let’s define ‘financial literacy’.

What is ‘Financial Literacy’?

In its simplest terms, financial literacy can be defined as the understanding and awareness of an individual to utilize money effectively. This can be done through financial skills like personal financial management, budgeting and investing.

We all think our way of handling money is the right way to move forward. Each approach might be right for an individual based on their income, risk appetites and time. But whether it is the best approach for that person, in the long run, is a question to ask.

This is where our learnings from schools and homes matter. Our academics teach subjects in which an individual can specialize and gain jobs. Once employed, the individual earns, which can be used for sustenance, leisure and savings in a fixed deposit for the future. Doesn’t it sound like a great approach used by many in your surroundings? This is the same life described by Dulquer Salmaan in ‘Bangalore Days’. Nothing is wrong in this process, but what if an untoward incident forces that individual to pour his/her entire savings into it? This one incident can leave the individual in complete debt or misery. What if the person had invested his/her savings in other financial setups or used techniques to gain profits from his/her idle savings? This is where financial education matters.

Why does ‘financial education’ matter?

Our education teaches us to ‘Work, Earn, Save, Repeat’, thus forcing us to work until we have saved enough to provide for our families and have the leisure of quitting our jobs. But how long will one work for financial freedom, till their 60s or 70s? This is why this attitude is not always the best approach. This paves way for the next question; what other choice do we have?

The best answer to this question is given by the aforementioned author, Robert Kiyosaki, in his book ‘Rich Dad, Poor Dad’, “Don’t just work for money, let money work for you.”

If you think about it, this is a life-changing statement.

We, Malayalis in particular, work our asses off throughout our life to earn extra to save so that we may be able to retire and live peacefully in our old age. Our forefathers did that, and our parents still do, so what better option do we have? Have we made money work for us when we have worked our entire lives for money? The best a Malayali would have made money work for them is through the trusted investing option of “Fixed Deposits”. This is never a bad option, but rather a good option itself. But our problem arises when we seclude ourselves in such plans alone, not letting ourselves open to the vast possibilities available.

Let’s take a scenario in Kerala for a better understanding of our Malayali mindset.

In the past decades, for an arranged marriage setup in Kerala, the bride’s family would look out for grooms with government jobs. Now, why are government-employed lads ranked higher on the matrimonial scale? Simply because they have job security and a guaranteed pension upon their retirement. Not to sound a chauvinist, but this was their investment outlook. They saw money generation even after retirement. To many Malayalis, government jobs are their way of investment, as it provides money, even while they aren’t working. This is also a great approach, but not the only one.

One can earn money from other investment options without directly working for it. Robert Kiyosaki describes an investment as a money-generation technique which does not involve your time or energy. According to most financial experts, loans and debts are never the way to easy money. An alternate income generation source must be established for such sudden requirements.

Robert Kiyosaki’s “Rich Dad, Poor Dad”

To those who have read this book, you can skip this section as this section discusses my takeaways from this masterpiece financial text.

Robert defines four key financial terms: income, expenditures, assets and liabilities. Now, income and expenditures are self-explanatory. Assets are your additional income-generating tools, while liabilities are the money-draining tools. He demonstrates that an individual has to build his/her assets so that their assets are greater than the liabilities. He explains the need for a cash flow from the income to the assets column, which will then flow for the expenses and liabilities column.

He identifies a common misconception of a majority population, which can also be observed in Kerala as the acquisitions of homes, cars, etc., over loans as a liability rather than an asset. When most Malayalis dream of having a home as their asset, Robert classifies it as a liability when it cannot generate income but rather drain your money.

Another major perspective he provides in his book is to start investing in an individual’s 20s. This will give time for the person to fall back, learn and still move forward than failing when they no longer can take risks. This is a great call for youngsters to try experimenting when they can rather than keeping their money idle. One might think in their 20s that they’ll start investing later as they don’t have enough to sustain themselves. Here is where financial planning and budgeting come to play.

I have made conscious efforts not to mention the various financial techniques or investment options available, as the best way to know about them is by exploring the options oneself. This article focuses on the need for financial literacy, irrespective of age. If you look at it, I have not answered the very title of this article, as I believe financial learning begins with one’s mindset. With the availability of various resources today, several Malayalis have realized their need.

I want to conclude with a personally inspired thought, “Nammal enthinu ithre kashtapedanam, nammal undakune paisa kashtapedatte; athale Heroism”.

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