How financial literacy helps fight economic inequality

Let us imagine this scenario. Two people earning the same amount of money. But one of them manages to save, invest, build wealth and live with dignity while the other struggles with debt, poor decisions and money stress. What do you think made the difference?

It is financial literacy.

In today’s modern world, knowing how money works is a the most important superpower. It is not just about learning how to save or budget. It is about being able to breaking cycles of poverty, challenging inequality, and creating a future where everyone has a fair chance, regardless of where they come from.

If you are a high school student, especially in a boarding school, you might feel that topics like “economic inequality” are for adults or government bodies to worry about. But here I would like to share a secret! You too can be part of the change. And it all begins with understanding what is financial literacy all about.

Financial literacy essentially means having the knowledge and skills to make smart decisions about money. This includes things like budgeting and spending wisely, understanding needs versus wants, saving and investing, avoiding debt traps, using financial tools like UPI, bank accounts, credit cards and planning for the future. It is like learning how to drive before you actually hit the road. If you know how to manage money, you are less likely to make a crash financially.

Now let us see the connection between financial knowledge and inequality. You would agree that there is an unfair difference in how income and wealth are distributed in society. While some people live in luxury, others struggle for fulfilling even their basic needs. Economic inequality affects access to quality education and health care, active employment, safe housing and even food and clean water. And believe it or not, lack of financial education is the main reason why this gap keeps widening.

So how does financial literacy help in fighting this economic inequality?

Firstly, financial literacy helps people escape the debt trap. In many low-income households, people fall into debt, not because they are irresponsible, but because they lack awareness. They might take loans from local moneylenders with very high interest rates or use credit cards without understanding penalties or get trapped in “Buy now, pay later” schemes. In contrast to this, a person who is financially literate will know how to compare loan offers, will know what “interest rate” actually means, will try to build and protect her/his credit score and will know when not to borrow. This knowledge prevents her/him from sinking deeper into poverty due to poor borrowing decisions.

Secondly, financial literacy encourages saving and investing, and not just earning. Many families earn decently but still live salary to salary. Have you ever wondered why? This is because they do not know how to build an emergency fund, use a savings account, invest in safe instruments like PPF or mutual funds and take advantage of compound interest. Financial literacy shifts the mindset from just spending to saving and growing wealth, even with small amounts. All this matters because wealth-building, not just income, is what creates actual long-term security.

Thirdly, financial literacy helps women and minorities take control. In many communities, women and minorities are often excluded from financial decision-making. They are told that money matters are not for them. But when girls and young women learn how to budget, open bank accounts, or understand how loans work, something amazing begins to happen! They gain confidence, autonomy and voice. Programs that promote financial literacy among women have shown better child health and nutrition, higher school attendance for girls and increased household savings.

Do take time to download and visit my app Naayika, which is a chatbot I have made to provide replies to any query raised by women entrepreneurs about loan schemes. This chatbot also replies to queries raised by persons with disabilities, regarding any scheme they can avail benefit of.

Fourthly, financial literacy also stops generational poverty. When parents do not understand money, their children often grow up repeating the same financial mistakes. But if a young teenager learns the importance of saving early, how to avoid scams, how to use digital payments responsibly and what financial aid or scholarships are available, they can break the cycle. A financially literate generation does not just help themselves. They help their families, communities and future children make smarter choices.

Fifthly, financial literacy enables fairer participation in the economy. Without financial knowledge people tend to avoid banks out of fear, they are excluded from government welfare schemes, they get exploited at work because they do not understand wages or contracts. But when people are financially literate, they learn how to open zero-balance bank accounts, use UPI or mobile wallets safely, access government schemes like PM Jan Dhan Yojana or Atal Pension Yojana and protect themselves from fraud. In short, they become full participants in the economy and not just passive consumers.

So do you wish to explore how you too can be a change-maker even in High School! Let’s see how!

- Start with yourself

• Learn how to track your own spending

• Make a simple budget for your pocket money

• Open a minor bank account with your parents

• Try using UPI to pay responsibly

• Understand the value of saving ₹100 a month

- Teach your friends - Not every friend around you might know how interest rates or credit cards work. Share what you learn. Start small group discussions or even a finance club. Make it look cool to be money-smart.

- Use digital resources - There are amazing free tools out there:

• RBI’s Money Kumar videos

• NCFE (National Centre for Financial Education)

• Khan Academy’s personal finance course

• Apps like Birdfin, Akudo, or Fyp (designed for teens)

- Reach out to underserved communities - Do you go home during vacations to a village or small town? Could you teach a younger sibling, cousin or domestic worker’s child about saving or banking? It does not have to be formal. Just explaining what a bank account is or how to avoid fraud calls can also make a huge impact.

- Push for financial education in schools - Ask your school to include financial literacy workshops. Suggest fun modules or guest speakers. Schools that teach economics or business can easily include it in life-skills classes.

To conclude, I would say that though economic inequality is a tough, complex problem. But one thing is for sure, financially educated individuals are harder to exploit and are better equipped to thrive. Financial literacy does not solve inequality overnight. But it surely gives people the tools to fight back, stand tall and build something better.

As a high school student, you are at the perfect stage to learn and share. The earlier you start, the bigger your impact will be not just on your own future, but on the lives of those around you. Why not take up a challenge this week? Learn a new financial concept and teach it to one person. You never know whose life you might change.