Money Management Skills among the Youth in Mumbai

Abstract

The financial preparedness of our nation's youth is essential to their wellbeing and of vital importance to our country’s economic future. A person having the right financial knowledge and understanding will be in a position to survive through any sort of difficult times and will be in a better position to overcome the adverse effects of global depressions and meltdowns. It is the need of the hour today, to increase financial literacy and awareness especially among the youth. The result of the 50-questions questionnaire survey reveals that the youth of Mumbai city’s knowledge of important financial concepts is not satisfactory. To probe further how well equipped the youth population in Mumbai is to make financial decisions, the researcher did a more detailed analysis. This piece of primary research tries to probe into the level of financial literacy among the youth in Mumbai. The actual fieldwork was conducted from April to November 2011. The survey was administered through face-to-face interviews at the respondents’ place of work, residence or study. The quality and consistency of the survey was further assessed using Cronbach's alpha. The reliability of the 50-questions survey is 0.78. The large Cronbach alpha indicates that the questionnaire is reliable, which further increases its validity. Computation of Financial Literacy Scores A mean score of financial literacy has been devised by evaluating the knowledge of the respondents in five main areas of financial literacy: 1. Basic money management 2. Savings and investment knowhow 3. Credit cards and Debit cards 4. Insurance 5. Basic knowledge of the Indian financial system A series of 50 questions on financial literacy were tested in the survey. The number of questions in each of these key areas is given in the table below: Table-1: Format of the Questionnaire Administered to Assess the Level of Financial Literacy of the Youth in Mumbai Indicator of Financial Literacy Number of Questions Basic money management 12 Savings and investment knowhow 12 Debit cards and credit cards 12 Insurance 2 Basic knowledge of the Indian financial system 12