We are living in a period of unprecedented economic prosperity where many of us are becoming more and more prosperous. This prosperity also brings with it a tendency to spend and make financial decisions that may not be in one's best interests.

Unfortunately, we are also living in an era of unprecedented 'time poverty'. As a result, though it has become very important for us to become financially literate -- and ensure that our families are financially literate as well -- many of us still do not know how to manage our money. Even today, making money is easier than handling or managing it with responsibility and tact.

In order to understand money, one must have a basic understanding of what it is all about, its importance in everyone's life and how to make wise decisions when it comes to money. Just the other day, I read an article on how financial literacy will be part of the CBSE curriculum next year onwards.

What exactly is financial literacy and why is it important?

Financial literacy means understanding:

~ Income, expenses and savings
~ Budgeting
~ Assets -- real and financial -- and liabilities
~ Insurance and its purpose
~ Investments and how to make money work for you
~ Taxation
~ Risk management, asset protection
~ How to handle situations such as disability, divorce, starting a business, inheritance
~ Wills, trusts, intergenerational wealth transfer

Financial literacy is important because it affects your day-to-day life as well as your future.

For example, often people buy insurance as an investment. This is a big mistake, but you will only understand your error if you have basic financial literacy.