© Amity Management Analyst

2022 Vol IX, No I (Jan-June)

Jan - June - 2022 Financial Literacy Among the Different Economic Classes in India 25

Financial Literacy Among The Different

Economic Classes in India
Dr Prashant Yadav
Assistant Professor, Symbiosis Centre for Management Studies (SCMS),
Symbiosis International (Deemed University) (SIU), Noida, India
E-mail: prashant.yadav@scmsnoida.ac.in

Akshit Seth
Symbiosis Centre for Management Studies (SCMS),
Symbiosis International (Deemed University) (SIU), Noida, India
E-mail: akshit.seth26@gmail.com

Abstract:

This paper aims to study the Financial Literacy among the different Economic Classes in Indian capital
city of Delhi and how this impacts on investment decision making process of different age groups. Each
individual’s financial needs are differ from other, though they may live in the same geographical area.
We have used survey method for collecting data and probability sampling technique has been adopted.
The data collected has been processed and simplified in the form of tables, charts and graphs. The results
reveal that investors are investing in order to ascertain the future needs and to earn high profits. Most
of the investors do not invest in share market, out of those who invest in share market like to trade as
investors rather than speculators or hedgers. Only a few investors know about online trading but they
are well aware of bank deposits, insurance and real state. Investors are willing to take high risk if they
get high returns. Many investors are not using the services of financial advisors yet because they don’t
know how to find out a trustworthy advisor. From the research it is observed that awareness is required
about the new and existence products and services available in the market, so aggressive promotional
activities have to be incorporated.

Keywords: Financial Literacy, Economic Classes, Risk and Return, Stock Markets, Investments

Introduction: investing. Investing, insurance, real estate, paying

Every country’s economy depends on investing, for college, budgeting, retirement, and tax planning
which is a component of savings. Money invests are just a few of the personal finance decisions that
in a variety of opportunities that are available to are covered in this topic, which focuses on how to
the people, acting as the catalyst for the country’s handle personal finances effectively.
prosperity. The Indian financial market presents
a variety of options for investors. Even while it is Financial literacy also includes being knowledgeable
undeniably not the best or deepest market in the about key financial concepts and principles, like
world, there are acceptable opportunities for the time value of money, debt management, financial
regular individual to invest his funds. Spending planning, compound interest, and managing debt.
idle resources and getting a return on them are
necessary for acquiring a given amount of money A person’s financial wellbeing may suffer as a
to achieve a particular life goal and set aside money result of poor financial decisions made as a result
for unforeseen circumstances. To cover the expense of a lack of financial literacy. The Financial Literacy
of inflation is one of the key reasons why one must and Education Commission was subsequently
invest intelligently. The rate at which the expense of established by the federal government to offer
living rises is known as inflation. Financial literacy is resources to those who want to learn more about
the knowledge of numerous financial concepts, such financial literacy.
as managing personal finances, handling money, and
26 Amity Management Analyst Jan - June - 2022

Learning how to make a budget, keep track of taken into account while making an acceptable
your spending, pay off debt, and prepare for investment. The study’s findings indicate that most
retirement efficiently are the key components of males choose to invest for larger returns at a higher
gaining financial literacy. These actions may also risk, whilst women prefer to do so for the protection
involve receiving financial professional counselling. of their money. In an effort to comprehend the
Understanding how money works, setting and investing preferences of investors from the middle-
accomplishing financial objectives, and dealing with and lower-income groups in society, Nanavati Nihar
both internal and external financial issues are all part K.(2009) determined their investing psychology and
of the topic’s education. pertinent preferences, 25 investors in Ahmadabad’s
suburbs participated in a market study.
The development of self-sufficiency through
financial literacy enables people to achieve financial According to a thorough examination of the survey,
stability. People who are knowledgeable about the this group prefers investments that have a high rate
topic have should be able to respond to a number of of return and are safe, secure, and tax advantageous.
inquiries regarding purchases, including if a product The limitations of the study are also due to the
is necessary, whether it is affordable, and whether skewed perception and wary respondents. N.
it is an asset or a liability. This area shows how a Geetha and Dr. M. Ramesh (2016) used a survey
person’s thoughts and behaviours around money are method to investigate the investors’ investment
applied to his daily life. Financial decision-making choices in Kurumbalur, Tamil Nadu. Following data
is demonstrated by one’s level of financial literacy. analysis and interpretation, it has been determined
This ability can assist someone in creating a financial that respondents from Kurumbalur have a medium
road map that shows what they earn, what they degree of knowledge about different types of
spend, and what they owe. All socioeconomic levels investments and are unaware of the stock market,
and ages are impacted by financial illiteracy. Many equity markets, bonds, and debentures. According to
people who lack financial literacy wind up being research findings, investing in insurance, NSC, PPF,
victims of excessive interest rates, fraud, predatory and bank deposits are more important for all age
lending, and subprime mortgages. groups. A respondent’s income is a significant aspect
that influences their portfolio. They are aware of
several investment options, such as insurance, PPF,
Review of Literature bank deposits, little saves like post office savings,
SreePriya and Gurusamy (2009) made an effort etc., but are not aware of this new service or the
to evaluate the saving and investing habits of the stock market. A study on mutual fund characteristics
various classes of investors. To determine the mind- and investor behaviour was conducted by Nicolas
set, factors affecting investors to save, and investor P.B. Bollen in 2006. The findings show that there is
preferences for saving, a thorough analysis was substantial evidence that cash flows into socially
conducted. With the help of this study, the issue conscious funds are more sensitive to lagged good
that investors were having could be resolved and returns than cash flows into conventional funds.
new issues might be avoided. Professors CA Yogesh
P Patel and CS Charuly Patel (2003) conducted Mutual funds have become popular in recent years
research on people’s opinions on investing (private as a tool for good financial health. Mutual funds
sector). The goal of this study is to examine and have enabled families profit from the success of
comprehend the differences in how individuals Indian business in addition to contributing to
perceive various investment options, as well as the growth story. This essay examines market
the behavioural patterns of investors in the private research on investor saving and investing habits
sector. It also seeks to shed light on the variables as well as their preference for investing in mutual
Jan - June - 2022 Financial Literacy Among the Different Economic Classes in India 27

funds. Namakkal Taluk (2008), India’s Tamil Nadu fact that the data description is truthful, exact, and
Using the questionnaire method, V.R. Palanivelu methodical. In this descriptive research, a structured
and K.Chandrakumar (2012)conducted a study on questionnaire was used to gather primary data from
investing choices among wages in the Namakkal investors and non-investors, and the secondary
district of Tamil Nadu using a sample of 100 investors. data was collected from books, websites, Journals,
The findings reveal that 40% of respondents chose Magazines etc.
insurance, 24% of respondents’ investment goals
were safety, and 23% of respondents’ investment
goals were tax savings. 36 percent of investors make
Survey Method:
investments on a quarterly basis, while 24 percent The survey method is a way of acquiring data
make investments on a half-yearly basis. 100 people that involves posing questions to persons who are
were surveyed, and 42 percent said they were saving deemed to be knowledgeable. It is formalised to
for future needs, while 6 percent said they were create a list of questions. Typically, a transparent
saving for a house. strategy is employed. Questions on the respondents’
demographic interests and opinions are asked of
them.
Objectives of the Study
1. To study the Financial Literacy among the
different Economic Class investors towards
Sampling:
different attributes such as risk-return matrix, In order to conduct empirical field studies, it is
liquidity, safety, etc. while investing their necessary to gather information or data from the
money. field directly related to the study units. Sample
refers to a portion of the population. Sampling is the
2. To study the important issues and challenges process of selecting a sample from a wider number
faced by the investors during the time of of populations. The primary goal of sampling is to
investment in various investment options. make inferences about the population. Sampling
is a method that aids in understanding the
3. To study the Investment decision of different characteristics of the population.
class of people, (in terms of age group,
education, etc.)
Sampling Procedure:
4. To study the investor’s preferences and The sample respondents were chosen based on
perceptions regarding financial products convenience sampling method in the study by
available in the market and the impact of picking up samples from different places and
income level for investment decision making different economic classes of investors. The
process. information received was collected through
structured questionnaire framed using open ended
Descriptive research: and closed ended questionnaire.

Descriptive data and features about the population or Sample Unit: Both the investors/non-investors is
phenomenon being examined are part of descriptive the sampling unit for my study.
research, commonly referred to as statistical research.
The who, what, where, when, and how questions Sample Size: Due to time constraint the sample size
are answered by descriptive research. The research was restricted to 100. Out of 100 samples 88 were
cannot define what a casual scenario is, despite the taken for analysis purpose, because 12 did not fill
28 Amity Management Analyst Jan - June - 2022

questionnaire fully hence left. • Majority of investors approached share brokers

for the better advice for their investment since
brokers have practical exposure towards stock
Results and Findings market.
• Due to lack of advice and risk the female
and undergraduates are not investing while • Majority of investors are availing the services
comparing with other category. of financial advisors because they don’t have
time to take decision; they need help with
• Self-employed and professionals are investing asset allocation. Those who are not availing the
more compared to business people services said they need own control over their
investment. Most of the investors would like to
• The age group 20-30 and 31-40 is investing more deal with Sharekhan & Kotak security due to
compared to any other age groups. the less brokerage charge. Most of the investors
said they trade with IIFL because of the good
• Majority of investors are investing in order investment tips provided by the broker of IIFL.
to ascertain the future needs and to earn high
profits. Most of the investors prefer young- • Majority of investors have heard about IIFL
unmarried stage to invest; according to them this Company, though they are not trading with the
is the best stage to start investment. company yet. Through the networking of friends
and relatives most of the investors are influenced
• Majority of investors prefer to invest regularly; to deal with IIFL, because of IIFL’s post sale
it may be in banks, insurance or in equity services.
market. Most of the investors do not invest in
share market, out of those who invest in share • Majority of investors are satisfied with the IIFL’s
market like to trade as investment rather than services.
speculation or hedging.
Recommendations
• Majority of investors do not aware about online
trading and do not know how to buy or sell • At the survey conducted upon 100 people, 88
shares online, only those investors know about are already investors in one or other way and
online trading who trade in share market. the remaining 12 are not interested in it. So
there is huge scope for the advisors to convert
• Majority of investors think inflation is a those 12 participants into investors through their
significant risk associated with investment and convincing power and great communication
they would like to go for long-term investment. skills.

• Majority of investors aware about bank/ other • Out of the 88 investors only 38 investors are
deposits and insurance rather than equity market investing in share market and the remaining 50
and mutual funds. investors are not investing in share market yet.
So they should try to convince these 50 investors
• Majority of investors are willing to take high to invest in share market as IIFL is mostly known
risk-high return as most of the investors are for equity service provider.
young in age. Most of the investors are investing
in real states and banks because the returns are • Out of the 88 investors 68.2% are already using
guaranteed. advice of financial advisors and the remaining
Jan - June - 2022 Financial Literacy Among the Different Economic Classes in India 29

for taking investment decisions. Though sometime

31.8% do not use. So there is a huge scope for
they are in the trap of some kind of illusions such
the company to capture this untapped segment.
as less research and overconfidence, they consider
The financial institutions have to provide the
multiple factors and get diversified information
awareness programs for the public in order before deciding any kind of investment. The main
to know about the investment patterns. The purpose of this study was to find out whether the
financial service providers have to concentrate age group and investment decision making patterns
on the age group of 41-50 and above 51 years, are independent or dependent with each other and
because this people will get almost retired so that develop some important strategy to the investment
they can invest. managers to help them in designing their investment
schemes by considering these views of investors.
• In order to increase the awareness of investment From the research it is observed that awareness
options the company should not concentrate is required about the new and existence products
only on equity product but also company should and services available in the market, so aggressive
promotional activities have to be incorporated.
concentrate on various investment avenues like
mutual funds, fixed deposits, insurance, bonds
etc.
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