FINANCIAL LITERACY : A COMPARISON BETWEEN THE YOUTH OF INDIA AND USA

Dhruv Vij ...................................................................................................................... Manuscript Info Abstract ......................... ........................................................................ Manuscript History Received: 20 August 2020 Final Accepted: 24 September 2020 Published: October 2020 Financial literacy is a critical aspect of our lives. When taught early, it provides life skills for young adults to make use of now as well as in the future. It can help individuals go from surviving to thriving. Financial education isn‘t taught in schools and colleges but is very essential to live in these times. A person not only learns how to survive in a capitalist world, but also how to grow and preserve their money. This project focused on what young adults currently know about money management and to provide recommendations to increase their financial acumen. The research also compares the responses of several questions from students in India (New Delhi) and students in the United States (Massachusetts).The goals of this project were three fold: 1. Conducted research on the literacy models used to assess knowledge and skills regarding financial literacy in general; 2. Created a survey instrument based on the research and administered the survey to participants; 3. Created a set of recommendations and observations based on the survey results in the form of an infographic.To accomplish this goal a simple questionnaire, created from a composite of several internationally known literacy programs, was administered to individuals of ages 18-22. A series of 15 recommendations resulted from the analysis of the survey results and were disseminated through the use of an infographic. One of the results was that only 50% of the indian population knew in detail about the concept of interest and inflation rates.

Financial literacy is a critical aspect of our lives. When taught early, it provides life skills for young adults to make use of now as well as in the future. It can help individuals go from surviving to thriving. Financial education isn't taught in schools and colleges but is very essential to live in these times. A person not only learns how to survive in a capitalist world, but also how to grow and preserve their money. This project focused on what young adults currently know about money management and to provide recommendations to increase their financial acumen. The research also compares the responses of several questions from students in India (New Delhi) and students in the United States (Massachusetts).The goals of this project were threefold: 1. Conducted research on the literacy models used to assess knowledge and skills regarding financial literacy in general; 2. Created a survey instrument based on the research and administered the survey to participants; 3. Created a set of recommendations and observations based on the survey results in the form of an infographic.To accomplish this goal a simple questionnaire, created from a composite of several internationally known literacy programs, was administered to individuals of ages 18-22. A series of 15 recommendations resulted from the analysis of the survey results and were disseminated through the use of an infographic. One of the results was that only 50% of the indian population knew in detail about the concept of interest and inflation rates.

…………………………………………………………………………………………………….... Introduction:-
Financial literacy is a major topic for youth in India as well as the rest of the world. Unfortunately, few understand its relevance and value nowadays. Financial literacy is the mix of one's knowledge, skill and attitude towards financial matters (Sekar M. & Gowri M. 2015). The OECD (The Organization for Economic Cooperation and Development) defines financial literacy as --A combination of awareness, acquaintance, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve individual financial well-being.‖ Individuals today need to be more responsible for their finances than ever before. Financial literacy forthe general population is often focused on better planning of retirement life, gradual wealth accumulation and better financial decision making (Van Rooij et al 2012). The questions that young adults have are not only related to their future retirements but also for everyday money matters for their immediate use every day. Young adults and teenagers are just starting their planning for their future careers and the ability to make financial commitments and decisions may have significant benefits in their lives. To be financially literate becomes important from the initial stages of one's

Importance Of Financial Literacy
People are not aware of basic concepts of finance such as the working of interest compounding, the difference between nominal and real values, and the basics of risk diversification. Knowledge of more complex concepts, such as the difference between bonds and stocks, the working of mutual funds, and basic asset pricing is even scarcer (Lusardi 2008).
Financial literacy is mainly important because people with low financial literacy are less likely likely to plan for retirement (Lusardi and Mitchell 2006,2007a, less likely to buy any stocks (Van Rooij, lusardi and Alessie 2007), less likely to choose mutual funds with lower fees (Hastings and tejeda-ashton 2008), and more likely to have problems with debt(Lusardi and Tufano 2009).

Need For Measuring Financial Literacy
The U.S. Senate Committee on Banking, Housing and Urban Affairs reported in 2002that the fastest-growing group of bankruptcy filers was those age 25 and younger. These high levels of debt may also prevent young workers from taking advantage of employer-provided pensions, tax-favored assets, or building up a buffer to insure against shocks: 55% of young adults report they are not saving in either an individual retirement account (IRA) or a 401(k) account, and 40% do not have a savings account that they contribute to regularly (USA Today/NEFE 2006).
These debt loads are of particular concern given recent evidence that young people may lack sufficient knowledge to successfully navigate their financial decisions: for instance, a National Council on Economic Education study of high school students and working-age adults showed widespread lack of knowledge among respondents regarding fundamental economic concepts (NCEE 2005), confirming evidence provided by the Jumpstart Coalition for Personal Financial Literacy (Mandell 2004). Policymakers have become so concerned about young people's finances that the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 included several provisions specifically targeted at protecting younger credit card consumers. For instance, credit cards will no longer be issued to young people under the age of 21 unless they have an adult co-signer or can show proof that they have the means to repay the debt; college students will be required to receive permission from parents or guardians in order to increase credit limits on joint accounts; and those under 21 will be protected from pre-screened credit card offers unless they specifically opt in for the offers.
Understanding financial literacy among young people is thus of critical importance for policymakers in several arenas: it can aid those who wish to devise effective financial education programs targeted at young people, and it can also aid those who wish to devise legislation to protect younger consumers ( Lusardi, Mitchell and Curto 2009 ). It is crucial to know where the youth is facing problems in the matters of finance so that steps can be taken to amend them. These steps are included in the results section as the recommendation to the countries.

Input By Financial Institutions To Improve Financial Literacy Of People
For decades, government and non-profit organizations have been trying to address what they see as a serious gap in the curricula of our K-12 school systems. Nationally representative organizations such as the Council for Economic Education (previously known as the National Council on Economic Education), Junior Achievement, the Jump$tart Coalition, and the National Endowment for Financial Education are among a growing group of supporters that have recognized the problem and are taking action to address it. Financial institutions have also joined the effort and, in some cases, devoted significant resources to the field. They often provide financial support to existing nonprofit financial education programs, and some develop propri-etary financial education programs and materials. But a few financial institutions have adopted financial educa-tion as a functional unit in their retail banking services.
Banks are uniquely positioned to provide financial education, as they can bridge theoretical economic con-cepts, such as scarcity and opportunity costs, with practi-cal -money-in-the-pocket‖ services, and supplement them with the necessary financial products. Access to low-cost financial products is particularly valuable for -unbanked‖ and -underbanked‖ clients (those that do not have bank accounts, or who have accounts but underutilize them); connecting financial education with financial products allows all individuals to become fully integrated in the traditional financial system, setting them on the path to wealth accumulation.
Financial education helps consumers by offering them the knowledge they need to make sound financial de-cisions and secure their economic futures. But banks can also benefit from financial education in a number of ways. At a time when competition in retail banking is fierce, targeted financial education programs can open new roads into untapped populations, such as the im-migrant and underbanked markets. In addition, finan-cial education programs can also create goodwill at the community level and strengthen relationships with local customers and community partners. In some cases, banks can also receive Community Reinvestment Act credit for providing financial education to low-and moderate-in-come individuals.

What Teens Value In Financial Literacy
According to the National Financial Educators Council, the top 3 most sought after financial education topics that young adults want to know more about are Moving out on your own, Paying for college, and How to purchase a car. The top 5 influencers of the youth's future financial situation are present financial situation, financial behaviours, financial sentiment, financial education, and financial systems.
The annual back-to-school survey conducted by Capital One (2007) asked teens what they would most like to learn about money. Teens expressed interest in learning about how financing works for large purchases such as a car or home (74%), investing money (72%), identity theft and how to protect themselves (68%), saving money (62%), budgeting (58%), checking accounts (55%), and credit cards (55%). Only 14% of this group had taken a class on money management and 52% were eager to learn about money management.
Likewise, Schwab (2007) found that teens want to learn about money matters when they questioned 1,000 teens between the ages of 13 and 18 using an online survey. Teens said they were motivated to learn about budgeting, saving and investing so they can pay their bills (88%), stay out of debt (88%), not have to rely on others for money (85%), be able to take care of their family (77%), and buy the things they like (77%). Sixty-three percent of these teens said they were knowledgeable about money management; yet when probed about spe-cific areas of knowledge, only 41% indicated they knew how to budget their money, 34% indicated they knew how to pay bills, and only 22% knew how to invest money to make it grow.

Methodology:-
The following methodology section explains how the methods to achieve each of the project goals was accomplished . A step-by-step arrangement of the way in which the experiment was carried out are given below:5

Research Methods:-
Information on how to assess the financial literacy of people was ascertained by reading and studying search papers online. I searched for the keywords--papers on analysis of financial literacy‖. I learnt more about the official institutions that take up these kinds of activities under them (for example OECD). I learnt about their methods and the sample space they used for their experiments. I used the search engine -Safari‖ for my research purposes. Information on how to assess the financial literacy of people through surveys was accessed by reading and studying research papers online. A search for keywords such as--papers on analysis of financial literacy‖ and -scholarly articles on financial literacy‖ allowed for easy access of information.

Participant Survey
A participant survey based upon the research from section 3.1 was created. The surveys consist of 30 questions derived from information accumulated through a review of various other professional surveys and research papers. The survey was sent to 30 people and results were recorded anonymously through the survey tool. The welldocumented and widely used -Lusardi-Mitchell questions‖ on inflation, compound interest, mortgages, bond pricing, and diversification were included to guarantee the comparability with previous studies.
An example of 7 of the survey questions are shown below with the full survey found in Appendix A. Do you maintain financial records? What do you do with your pocket money? How often do you ask for extra money from your parents? How often do you borrow money from friends and family? Do you intimate your parents about the expenditures at college in advance?
The survey was answered online starting on June 18 , 2020 and open for participants until XX. After reviewing several survey platforms, I decided to use the survey platform -Surveygizmo.com‖ because it provided me a smooth user-friendly interface with built-in analytics generators.
Prior to the survey question, the following an introductory statement listed below was read by each survey participants: " I invite you to participate in my research project. This survey aims to find out and compare the level of financial literacy among 30 individuals ages 18-22 in India and the United States. This survey is anonymous, you will not be asked to give your name or any information that tells how you answered the survey questions. Your decision to participate in this research is voluntary. Thank you very much. " Beyond the survey for literacy knowledge in India a smaller number of individuals from the United States of America were also presented with the survey as well. This secondary aim was to compare the level of financial literacy of a developing economy like India and a developed economy like the United States.
Third, the results from this survey were analysed using surveygizmo.com and conclusions were developed to form a set of recommendations. The results would hopefully provide each country with an idea of where they lack.
Dissemination Of Results Method 1. The methods for dissemination of the results beyond this research paper was chosen to be the use of infographics because they were both aesthetically pleasing and could contain the important information and results. After reviewing several infographic generating platforms, graphicmama.com was chosen because of its attractive and at the same time clear result giving graphs. In constructing the infographic, the following guidelines were observed: 2. The goals was to build a visually appealing infographic that clearly and 3. concisely communicates complex information to diverse audiences. 4. Graphical elements to include (e.g., charts, maps, icons, pictures, tables) were included in the template. 5. The color of background and font can be easily changed. 6. Use of diverse literature tools, credible articles and peer-reviewed journal articles, and other quality professional sources could be integrated. 7. Information was reliable and had a transparent purpose. 8. Use at least 3 quality professional sources in material. 9. Cite your sources such as APA or MLA on the graphic, usually at the bottom) as well as be sure all information is current. 10. Use evidence and practice-based data, compelling statistics, easy-to-read fonts, complimentary colour schemes, simple charts, bold graphs, and other graphics to disseminate information in quick and easily digestible format.
From these guidelines an infographic was created and is shown in the results section.

Results:-
The following are the results based on the survey finding testing financial literacy of youth from 30 people in New Delhi, India and from a smaller cohort of 8 people from Massachusetts in the USA as a comparison. Dissemination of several of the results lead to the development of an infographic that could be displayed in educational settings.7 Survey Results from India students ages 18 to 22: When individual students were asked -Which is FALSE concerning credit cards?‖ only 48.3% of the people were able to answer correctly. A summary of the correct responses are listed on chart A. The responses were -17.2 % believed they could use their credit card for an advance credit; 17.2 % said they could use the card for more than their line of credit, whereas the participants believe that if your credit limit is $10,000, and you utilise a credit $4,000, then interest would be charged on $10,000; The rate of interest on your credit card is normally higher than you can earn on a deposit; A credit card company will not charge you interest if you pay off the entire balance by the due date; You cannot spend more than your line of credit .
-Please tell me whether this statement is true or false. -Buying a single company's stock usually provides a safer return than a stock mutual fund.‖ with 34.5% of the people refusing to answer as shown in chart B. The responses offered were -true; false; do not know; refuse to answer. The large -don't know‖ response rate was particularly troubling, as previous research has found that -don't know‖ answers identified respondents with very low levels of financial knowledge ( In a question about interest rates -If interest rates rise, the price of a Government bond will...‖ and prices of government bonds, only 39.3% answered correctly as shown in chart C. The responses were -increase; decrease; remain the same; be impossible to predict.
When asked -Term Insurance Means...‖, 42.9% answered correctly as shown in chart D. The responses were -It is the policy wherein the insured gets death benefit if any contingency happens within the policy term; The insured is, however, not entitled to receive any survival benefit if he outlives the policy term; These plans are relatively cheaper than endowment policies and money back policies; All of the above; None of the above.
On the other hand, when asked -You have just graduated from college and found a job earning $40,000 per year. You will pay $600 per month for five years for education loans. What should you do to improve your financial health?‖ 79.3% people answered correctly as shown in chart E. The responses were -Cut expenses and use your savings to pay down debt; Keep the same spending pattern as in the past; Apply for a consumer loan for a new car; Use your credit card to pay for a vacation in Switzerland; None of the above.
In a question -A high-risk and high-return investment strategy would be most suitable for‖ 62.1 % answered correctly as shown in chart F. The responses were -An elderly retired couple living on a fixed income; A middle-aged couple needing funds for their children; A young married couple without children with good cash; All of the above because they all need high return; None of the above because they are equally risk averse. While an equal number of people(36.7% each) maintain very detailed or no financial records, 26.6% people maintain minimal records as shown in chart I.
Also, 53.3% people save a portion of their pocket money in the bank, 40% save it at home, and 6.7% spend it fully as shown in chart J.
Finally, 76.7% people never borrow money, 16.7% borrow once a month, and 6.7% borrow 2-3 times a month as shown in chart K.
-Survey Results Comparison with a Small Cohort from USA : Results for 7 questions were given with the exact wording to 8 students in the United States.
When asked, -Imagine that the interest rate on your savings account was 4% per year and inflation was 6% per year.
After one year, how much would you be able to buy with the money in your account?‖, 75% answered correctly as shown in chart L. The responses were -More than today; Less than today; Exactly the same; Do not know.
In a question -Which of the following is FALSE?‖, only 25% answered correctly as shown in chart M. The responses were -As shareholders of a firm, you have a right to tell fund managers what securities to buy; A mutual fund is a diversified collection of securities used as an investment vehicle; A mutual fund is an investment corporation that raises funds from investors and purchases securities; Your ownership in a mutual fund is proportional to the number of shares you own in the fund; None of the above.
. While 75% of the people maintain minimal records, an equal number of people maintain detailed or no records(12.5% each) as shown in chart N.
Also, 75% save a portion of their pocket money in the bank and 25% spend it fully as shown in chart O.

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Finally, 75% of the people never borrow money, 12.5% borrow once a month, and 12.5% borrow 2-3 times a month as shown in chart P.

Creation of a Infographic
A review of the survey results along with the lower than optimal number of students who responded correctly to the survey the following information dissemination infographic was developed. The infographic could be displayed in places such as banks, Financial institutions, School and activity centers to encourage financial literacy education.

Analysis & Recommendations:-
The following represents the analyses and final recommendation of the results obtained in the survey that was available from 18 June 2020 to 7 July 2020.

Analysis of data
The following represents the gender backgrounds of the survey participants: Charts Q & R (respectively).
The results of the survey indicate that about 50% of the people in India knew in detail about credit cards while almost 60% of the people knew about the different risks associated with the stock market. While only about 40% answered correctly about interest rates and government bonds, almost 80% knew what strategy to follow to pay back one's education loans. Surprisingly, in a country in which only 44% of the people are covered by health insurance (According to a report titled ‗Indian Life and Health Insurance Sectors' from a firm called Milliman), more than 72% of the people knew the answer to a question about health insurance. In addition, only 2% of the population is involved in the stock market directly or indirectly, more than 60% of the people knew about the stock market and the risks involved with investing in it. Surprisingly, with only 28% of the population having term insurance in the country, more than 42% of the people knew in detail about it.
The following tables represent the comparison of several survey questions from participants in India and the United States. This table showed that a greater number of people in the USA knew the correct answer than in India by a margin of more than 20%. This table showed that a greater number of people in India knew the correct answer than in the USA by a margin of more than 10%. This table shows that the habit of maintaining financial records is more widespread in indians than in americans. This table shows that indian people prefer to save pocket money at their homes and banks while americans either spend it fully or save it at the bank. This table shows that most people in both the countries prefer not to borrow money from their friends and family with less than 25% in both the countries borrowing some money.

Recommendations:-
Based on the analysis of the survey results, the follow recommendation have been developed : 1. The government, to achieve financial literacy, should follow the process of : overview of national strategies for financial education, developing a diagnosis to inform the national strategy, establishing institutional and governing arrangements: the role of stakeholders in the national strategy, setting and achieving objectives, evaluating and funding the national strategy, ensuring effective and innovative provision of financial education 748 2. The financial services industry could make financial literacy a more forceful platform and put more energy into an industry-wide effort to increase attention, shape policy, fund new research, experiment with new learning techniques like gamification, and encourage their customers, whether they be businesses or individuals, to take a more active role in boosting financial literacy among kids in their communities. 3. Banks could provide financial education to people as it is beneficial to them too in the long run. Building a successful bank-based financial education program requires several important ingredients. First, the program priorities have to be clearly defined. The bank must decide what it hopes to accomplish through the program and focus on achieving that outcome. Second, a standardized, high-quality curriculum should be employed. Third, delivery mechanisms must be appropriately designed, for example, consider whether the program will be instructor-led, delivered directly by bank employees, or dependent on an indirect delivery channel such as a third party community partner. 4. Mechanisms like money games, simulation games and soap operas should be designed and adopted globally, which would yield positive results on financial behaviour of the youth (Tufano et al 2010). 5. According to the survey, the youth of India lacks knowledge in basic topics such as credit cards, interest rates and government bonds, term insurance , etc. and these should be reinforced to the public through advertisements generated for public interest, online free courses with multiple regional languages to cope with India's multitude of languages spoken in every corner. 6. In the USA, the youth especially lacked knowledge in the topic of mutual funds. Topics like these should be included in the high school education of students, with extra credits for classes covering topics like hedge funding, bonds and interest rates etc. 7. Curricula for elementary school children should also serve as an age-appropriate introduction to core concepts about money (e.g., the use of bills and coins, the purpose of money) and markets (e.g., how goods and services are exchanged), and how institutions facilitate the interaction between individuals and the exchange of goods and services because familiarity with core concepts influences the ability to attain specific knowledge and skills and, ultimately, to successfully make sound financial decisions. 8. Financial education that includes opportunities for student participation, discovery, and exploration-in other words, -Participatory Learning‖-can have a strong, positive impact on financial literacy. Participatory learning can have a powerful impact on the development of financial literacy in two ways. The first is by providing an important context for knowledge and skills. Second, participatory learning provides opportunities to engage in financial decision-making, allowing students to learn through trial and error in controlled settings. 9. Books such as -Rich Dad Poor Dad ‖ should be there as supplementary books in the school curriculum to promote financial learning. 10. Parental involvement is one of the key factors that affects the learning of finance in a child.
Parents play an important role in how children develop financial norms, attitudes, knowledge, and behaviours, perhaps even more so than other factors such as youth work experience or financial education itself. Children frequently identify their parents as both their primary and most preferred source of financial information, and parents both implicitly and explicitly teach their kids about finances, often providing them with their first experiences and interactions with money. By participating in adult financial behaviours-like accompanying a parent to the bank to deposit a check-children receive early context and familiarity with money and financial institutions that can inform their financial literacy later on. 11. Another promising way to promote parental involvement in the long-term financial literacy of their children is through the use of child development accounts (CDAs), savings accounts established at birth or the beginning of grade school that can be used toward college or retirement. CDAs have traditionally encouraged saving by providing an initial seed deposit, matching parental/participant contributions, and requiring no minimum balance. Evidence suggests that CDAs promote accumulation of assets and improve individual saving rates, and that the incentive structure is a key driver of these positive financial behaviours. 12. Some additional work can be done in India on the knowledge of investing in the stock market and mutual funds, and saving a portion of their salaries either at home or the bank in the USA.

In conclusion:-
Financial literacy is a form of education that should be given to the youth starting at a very young age, such as primary or middle school. Nearly all of the countries lack something in their financial education and this can be overcome by giving basic financial values to children at early ages, with complex topics being introduced at later stages.