Globally, education as a percentage of GDP is estimated to be less than 6 percent with public expenditure allocated by governments to education as a sector remaining well below 20 percent. Disparities become even more starker between low-income and high-income countries with the latter spending a significant share against a backdrop of an already well-established knowledge infrastructure.
As economies strive for enhanced standards of living for the masses, the role of the knowledge economy in achieving these goals remains pivotal. Empirical studies positively affirm the impact of secondary school enrolments and higher education expenditure on economic growth. Even as countries push to trim their fiscal positions to achieve the aforesaid objectives, the giant strides made by Artificial Intelligence, Machine Learning and Robotics offer a glimmer of hope through interventionist mechanisms aimed to reach a wider population on the edifice of technology. Disruptions emerging out of Industrial Revolution 4.0 and Web 3.0 have only galvanized the momentum.
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Against this backdrop, the role expended by financial skills to achieve the wider economic goals, and indeed the SDGs mandated by the UN assumes significance. It is no longer uncommon to see teenagers discussing the plight of the global economy considering recent episodes of bankruptcies witnessed in the US and elsewhere. The ‘surreal’ conversation surrounding the price trajectory of Bitcoin in high schools is far more common than periodic tables. Indeed, the concerns regarding unsustainable debt levels in developed countries and their impact on fiat currencies (such as the US dollar) make discussions on cryptocurrencies and alternatives like Central Bank Digital Coin (CBDC) significant and pertinent.
An onslaught of major events including the foregone pandemic and geopolitical tensions imply inflation is now a major challenge impacting consumers across the spectrum in all walks of life. A direct ramification of inflation is evident in the cost of capital translated literally into higher interest rates exacerbating the debt burden. Students relying on educational loans to gain access to the top 300 universities in the world have started feeling the pinch necessitating a nuanced understanding of practical strategies to navigate the debt portfolio without compromising their cherished educational goals. The recent decision by the Supreme Court of the US striking down President Biden’s promised poll agenda to forgive students’ loans reinforces the need to build financial scenarios early in life to cope with the challenges thrown up in an uncertain environment.
No wonder, a slew of startups, particularly in the UAE have sprung up to impart financial education right from the high-school level to sensitize students about savings, expenses, and investments. Such initiatives are laudable as they ultimately help prepare students looking for a transition into the University. Start-ups including Cashee offer a portfolio of products including zero-frills accounts to develop awareness about financial discipline early on.
As societies make the transition from sustenance to aspirational living, financial literacy has evolved as the ‘Force Majeure’. An early intervention right from the University entrants imbibing skills and practices in Finance would make it much easier as they enter the workforce and start navigating the trade-offs between saving and spending.
Opportunities for credit-based consumption, fuelled by readily available credit cards, present an attractive prospect to individuals with balanced or debt-free financial situations. However, it’s important to approach such opportunities with caution to avoid any negative impact on one’s financial well-being.
Among the essential concepts that must be embedded early among our youth is the fundamental principle of compounding. Lastly, just as the principle of compounding remains the foundational pillar of finance, the towering peak can be only built on the principle of discipline and time. Something championed by the legendary Warren Buffett, if one were to invest in the shares of Berkshire Hathaway at $12.64 earning compound interest at 19.74 percent per annum, the price would have grown to $521,385 in 59 years, and that sums it all up.
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