The reseed from this chapter will enable students ® get familiarized with the concept of financial literacy » know why financial literacy is important for every individual > understand the basic terms associated with financial literacy INTRODUCTION ‘The whole world has agreed that India is a country with massive growth potential and opportunities. But there is one big social evil which has continuously put a dampen on this growth potential ie,, poverty. According to the Oxford dictio- nary, poverty means “the state of poor”. Now, there are many reasons for such widespread poverty in the country and one of them which is agreed by all is a lack of financial knowledge. Everyone knows that resources are limited be it at a world level, national level or personal. The ability to derive the most out of these scarce resources is the need of the hour. Thus, we can say that financial literacy is the first step out of poverty. The research by Linfield (2011) revealed that people belonging to the age of 25 to 34 years is the “fastest-growing bank- ruptcy demographic’. There exists a strong argument for the requirement of financial literacy among all demographics. This book aims to provide basic skills one must possess to attain financial self-sufficiency for oneself and the family. FINANCIAL LITERACY Financial literacy refers to the knowledge and understanding of various finan- cial skills one must have to make efficient and informed financial decisions. It included skills related to saving, investment, taxation, etc. A financially literate person is better off at attaining his/her life goals than a non-financially literate one, The main objective is to safeguard oneself from financial fraud and distress. 13. — A ae seen EONS saree emi a oe he te We pie ancl He said tae tT By Sie a a i Saat te ay you do mt eet IMPORTANCE OF FINANCIAL LITERACY Honea nig Important because © provigg ict arc in IE HIE era | se zen at en ltt icin eas eamttln Fara ey {eur anced ancl nee ad al oe to mac Ser pee nae money acct tea ction alton inane ons ad ah meas es Sn pel neon snd sacs nee ate css can a0 ep spore “ir oa opt the Bes de sts: one ofthe yout hough the mex popula Sart repair understand i, a ia valet Iemay inpac the ‘Ses ais nereases ane dsepine and Mnaneal opportune a ition eye crack ar sving monty ase a tera wil ensure ones financial we-being and wil also protect pooge tures, doit volleetian, poor credit assessments, victims of financial eee ‘other negative consequences. ae ean anyone's Me. Conse ti example, give you S100 and a nick sees, However, ie teach them the way they can earn a i ercetage of return an mutual funds with slightly more risk, now tneretced sm cman teeta cy og i ie ren sh po Tease ance end peptay nena ee tn the current scenario, more people aro interested in tax-free Investment?ners AHIREANE PMH May, onc erat parson ie vr se nancial emergency ig his/her financial gol of achlevind s [5 som ce her Man ens ve cote | hte re ms etn fo sks ses! Basic VOCABULARY FINANCIAL LITERACY | ‘panel rapa isthe te wht is aid by a pry oa ercotge Rae Served ie 16 ‘as. to summarise * ve ase ener Frere eae ae, Assot anaes someting ti al eerie me se a rope "sea te cath ini us monetary Vale be, 120 be gy fo generate reEURSr and tree = eral elude things eee aitane Switch” nit an Switch 62 9 o ‘este customs by oder se found 0 Be nor er. egal tae actice and del at to god (0B a va gly However, is very Beaty Spc Be 4 re sale frl/sea whore the stg | ot Gas ott scm nara Se th Meso aed tm the ayer afte | Bank ‘Abeaktso for-profit eal insttion ‘ach von fers saving, brs Rh [a ers nee dsempation of MaancilIiteracy and he pe ast nel ee eee Bankruptey irkuptey is leg stuaon which ses when person is mot able heretic sbkgatons Under ts algal procooding sit send pueda cocredbuknup sre std onder to py of at ‘Nincog lable and obgetane Its ao 2 fesh start for the py Srounable to honor thi Sans. = | ‘espns uretay at porrower rowers 9 parson ho recive or as something ‘nba nention behind ths ft ear Bak cat en th someone eet Forename eee rach prs wl etl» borrower a the BOE whlch belongs t some ‘thin 9 speced ce Ira perso tales 213” sudost Pc A ets esope indulge in akg in be ond at re aes at es Seals aa amine Tea comparison shopping — carrion shopping oo ofthe popstar strtegcs weed by noople tense rereading, Under tie while ishing pureeee custome indus 0 reg Te hormalves : Sepamet hey tee o Shane fom. Te ono proving thr Most ME naval ndvices ‘ind st nage Tn Bhebeal hope wid to hap sak othe income and expensoe of 2 Tugets in order ta oneure the appropri fre contol equi It ier the los cout beg petarred. EveTY 1 es compare ohapins tay far gene Be nn nigiea Ub as Ck credit Cait ra nana attangemen bevween two partis where one pry borrows ee har proved tis ety hens people taking iG se rie sa or hoe propery which ese sare ste a one a8 ‘rena oar iret payment fa be made in slog instalment ae lsebated serore any Years which ceduces the financial burton To oe ida Exapes of ered ee credit cards and Pak oa credit card ere card 5 card ality provided by banks and other credit fsteuions A ret ts can be use ale anata transact wp 1 a certain ane ie ine meviod sy 1 month All tke cout accumulates ter Phe B06 se ee peo co be pid eff by th lander afterwards within given Sime ieee pelt in rapavonnt rele felt cargos Tec avalible ie cart expe dat credit report ‘credit report sa document stating the roi history ofan individu. estates a een narnaton about sn nana oe alt pasioon ve Bending= it oan repayment, TH OT Heng silt Neat seore and epenling on ae Pheer om nowavelay oie cee tans an at ofa ftosbnsave ade ean Credit score jramber which pen Ne Hod Acrsiacoe ated aT ror tte hice tM) ‘worrover wil be able 10 PONE report. In Indie, che credit score is issyog Telarc and Experian and I anges omy Sa Shozd compas BEC Fhe une of recevng ced at yet a ~ pesivard nitro mans Fam No See mou is rectly deducted ron wpa ofr suc > fib. Dest bein mney a irae hy ini thot torromed by ane party om othe They £0 bein reir cards, cr tone, Home loans et. They fang ge ane seco, unsecured, FevOWng Emergency fund Aan emergency find ithe po! of mosey ch Is kept ade fr some uncer ‘tens whiny or may ho aera ey bappen they Bave a etre) pment isnt we eng of Indu Thre uncertan events | fie jo sso nerpectad ei bls The fl eof the emerge fd ule Duce 6 mnt lary ca 2 months salary Ie shoul be Hope 1 FMR sets eh can be easy omer to sh expense an x a individual's pola of ve, he expense athe mount of money vil {Spent by an addual on fisher winged. te included spendieg on food ‘Seen, traveling Busi, et One souks mle sare that her expenses Siejueiied and nat inured om Impuis, to ensue final slp. locame 4 the money eared! by ax individual throug aiflerent eurees ike [yank snes activity aa Invetment fe ese main source of ance (ErSazatning one's teinood Income ean be chase! into gross income 2nd fet income. Cross income i hau inedme saad itspecive af ny COs Net income ls the total pros Income less heats (expe). ures theertainpercoeage ofthe principal amount thatthe lender nan from tho borrower forth lean faci Irean be easier! ato simple neerest tnd compound intrest. Simple Interests ealeulted an the tial pineal ‘mount borrowed, Compound interest i calenlsted on the principal amount 35 ‘elas she intrest aecamuloted shreughout the Jets Need vs, Want “The easence of personal financial planning is the cassention between ed dnd sar The neo is somthing whieh an individual cannot compramise te Sieh epenss re bound to Incr ke fond, education shelter ete Wants ave frmething whieh an Individual desire and thy can be ostpore like hacary Sint ele bag, ce opportunity cost opportunity cs the value a ose wile choosing between two oF more erates For example, an han hs to decide eter ae ner investmnt toy ho ifr ome more tine and then ral If he/she eho sea ov espera i ewe ys ww {Sul hve eoened i He/she hold he/Ner investment for more tne Ie applies eit ie ew seenay yoursel it —— Poy yur i th ln cy DeTitta an cree rn se sin a peso ner Predatory lending ry ts mem nd cos eon ee “Heaney ano fe i ig ae tga cara ba eee Sates force then take meet Soros mye epee Seto to i ts See ey inet etd Principal piney th eres dost nt ot money hie s Borrowed by a9 india etna intrest om rutect72 {BH tts wi dale appro 7.2 (72/10) yeas Te tig ee simated the presence of cripounding. Time value of money ‘inc we of ney oF TM ea concep which saes eh tho vue of a stony sac th some asthe ve ofa rupee ithe ature Le, wnt se fy nes fae pursing pomee Thus, people prefer money watey ‘ne an nero ass some sd vale offered ich compen forte le sie due oe Weatn at ea a ese ely an ‘ea resin ser ys Sena tl tl fc ci te ah ced come ne eae ‘ei i tock concept whites income fo concep, The at adil 9 ertionexresion of el Thai very i eng apo IRS Un an gy, | pe process of hs 39 ee rng nan ergy averting, As eee “es the eu incase So, advil tS 83 ie terse, thee Is no age Het co heeorve ancy Hee 1. What do you mean by nate tracy? 2 Why is Snel eracysmporca? |5 plain the Following torn. 4 Comparison shopping 2 Predatory Lending Pay yoursol st Bankeuptey 6 Opportunity Cost Fatt and Se Rae of 72 SES 1, You jos strted this course on fnancta Hersey, so you must be curious fo knw shat i being financially terse =o importa then dre people saing something about. Thus, you are required to conduct a inane) eraey survey ad see how ic difers among diferent senagraphics, 2 Raj Is your ften, He informed you that he wots to bay a nptop. When ow asked we lptop he wants to buy athe he aived atthe dee. so he informe you that be selected it randomly without ay research. Since: you one started with the course of fnaneal literacy tm your eat Fielum, bis approach didn't Mt yom wl. You are tequizedl to expo to him the importance oteomparison shopping and wy thorough research, is important Also sas him in performing the analysis and Rervig at the Sal choice Document the whale process. (Cassi al she wale ates bose ter ates ent rack em aecording to MvSaving and Spending Management The learning from this chapter will enable students > how to differentiate between needs and wants and why > get accustomed to the concept of spending management and its impor- tance > how to practice spending management through budgeting > acknowledge the need for financial discipline INTRODUCTION ‘The previous chapter shed light on the concept of financial literacy and its importance. Continuing with this knowledge journey the first and foremost skill which one desire is cash management. At times people find that despite the availability of sufficient quantum of funds, one is still not able to meet the ends. This is so because one is failing to prioritize expenses. Cash management ig not something in which you can expertise overnight. It is a long and ongoing process. Under this, one must be able to differentiate between the concept of need and want, learn the art of budgeting and follow a systematic approach to managing spending. The current chapter sheds light on such concepts and skills. NEED VS. WANT Needs are basic requirements that are necessary for survival, such as food, shelter, and clothing. Some examples of needs include food and water, shelter (a place to live), clothing to protect the body from the elements, medical care when ill or injured, ete. Wants are desires or things that we would like to have but are not essential for survival. 24inode uy He Sh 3 eAPENE ching Some examples of wants Sore cai eee sarphones oF OPS reTetonal ag ESTES gu a es wc re re oe fe their nods. Dudes can help rats “PSone oe them noe gore cot ws Difference between Need and Want SSRI =| Wa ae te in iy SETA [ie hn oer an | his er denies sty) SET SY od | Wane oi {nr vr oat 9 pee Sines 7 Params en PS SS Fay TREE ES antec ei ail depending on he vy eae tbe fale St hands the decision ts made irene Rave aire eee Mend are en portant | importance: dus. the choice i I egred be ade Wants can be postpone Norling the nts on rma Insoeial and mental des Sie anna end mate opened lee ff oes eu 3 the endo Ue ‘understand using some ce. and Mayank area yOU Ry aso asa ta couple in their mid-20s who have recently er and Moyenk works in sles They ve a a re eying to save money 30 they can eventually buy rcs dsies tng and reuenty shops a Nvend sre. err ang to eat at expensive restaurants and trying new ea sig ent loan Get and ave struggling 0 S2ve money. (suns ann arma wUeENET 23 spice Roaand Napanee ifeeatebstrenthlpeedsand ‘ie tmnt a ining OU are wants at neds Whe iis impetont 0 <7 atge ecisinal net ned to soni th Franc ane back en unnecessary spending stead of shopping dele SOT 2a Sea sho at thi sores or bu ating fom tower pried Seer 2 shuld ty homereing beer cookin at home sed of BONE aan eating back on ats nd ecsing on he needs Ry and MAIN Jeevan and Bull 9 slid foundation for thelr ure nna, Kak 2 SO-yearokt man who has been working the sme job PE jee house inthe eas 0 year ie hs a comfoable alary aed om 2 {RSP owes ar has fot of eons debt rom eet PANS, ster ian He has a abi of ting things Be doesn eH he et 201 an designer eth Rat aslo een nels Ms eee ng and as Hat pot much mons towards then sip ese needs 0 fru on is neds and priori sing Ne th fcnsme et bling tees ad ae ees tS xing eden avr bing unmecesayHary ems Karkmn WOE OT he Pet mt gs ee soul ae FO TAS 2208 rests, wheter thragh i eng fda ahr imeE remy Spioiings neds and ving fr the fture, Kart am ee eeeten a fancial say ‘ceed sonal fa singe mother of wo soung cies, She wos 2 ase Seng oak nds esas recent) ok do 0 woe Se ha all amount of sings Eu 6 ST ede ere shirred about ving enough ne ther STEN vem buying a eae car is ae onl and he mio nh ay Saal tet wok and prover hes SN sao emting os er sng fr ay Gy Ne newt 9 FS be mal can conser pursing a used tof negoiane 2 ein ooo. she cin a ook int fnancing eons ox EVENT ri ams tap whe oy prong etd eS ance OB, Sonal cn esa a fay Bas the resources MY eed to thrive ee fctoan sa een colege grasa wo as nde He ren the ee ea sy and xed 0 0 ee ea, te of dent Tom debe ar soging sre mone ens Tard money ot expense hobbies a 1S we ce Tran nest ois ob psig os ede and saving tn hs arr Whe is mgr on Me 0d Pu passions. sone conser fing ower st we 00. eo ‘of going ‘aun eth col ty ene a a saying cere croton. aun soul ao rors PNG off2 psa UNE PARNER ‘SPENDING MANAGEMENT _ a mvt at ofcorng a INPOvI Te ye po inv Speatine man sit hte To dere Sri mr nn sis uss moor a Whaconmmns he Tone he IM en et ES 2 es 8 ENN a ag ne: co i a ae pase income a psd hg ws are By put _aeinone omens Pate geste Wh ra mB a rhneopnnd es ha Is a ee sue NE 8 hs ioe eae sen Tagher and Expense: Exe assets whe ecuringin nate reli. non 7 these: Bet cen spending management se me ei Tse spending can Be regular whiny ‘steps in Spending Management | | 1. start ith | | ‘ean se. [hea also | se Bore money 2, St Goals: Stn fncalgoals is an Important part of financial dis. ne oss can be shorter lke saving fora vacation, or fong-erm, Fh etree Sting goals eps you focus on what I im portant to you ‘nd bps youstayan track. Be sure to st realistic and achievable goal 44 Track Spending. Tracking your spending is another important step tp homing final deine. Tockingyourspendinghelpsyou densify areas where you are ovrspending and where you can make cuts, Iago ‘alps you say ontop of bls and other payments 4, automate Your Savings: Automating your saving is an easy and ele tive way a tart saing Automating your savings helps you save without von thinking abou i the raney i ransferred to your saving account| os Ares of income, al the needs which are requ ‘os a sean wanceEXT 28 sutomtialy each mon. team help you stay om track an reach YOuF Finacial goals aster 5 save for Emergencies: Emergencies ean happen potato bo prepared laity an encergoney fund can bel tmexpected expenses and keep you from going into debt. The al bo sve at est se months worth af expenses in cae of an eeeTB%Y 0 row nyt and is you cover ins should Make Siaet Investments: Investing your money #8 great four wealth overtime. Heer si nortan to make smart fest Jhents. Research potential inertments carefully and speak oa fant sor needed, also, be sure to diversify your svestmen t spread fut te ise Live Within Your Means: Living within your means is an aportant pt of finan scipline, Tis mans spending less than you earn a railing debt. Try to avid Mee iaion where you Increase YOu peng 95 Yur income nereass. 1 avoid Impulse Buying: Impulse buying can be a major drain om Your finanece To aid inplse Dying create Hs of things you nec before sou go shopping and sik ot can also halp to wat 24 hours bere Jprchasing so yOu ca consider f you ed the item or nt. ‘tay Organized Organization can help you stay ontop of your finances find ensures that you don't mis ay payments oF Bis on the due date Create a system for managing your nanees and keeping trac of Bil at payments Get Professional Help: Finally f you need Help with managing yOHr fines, dont be fad to seek professional help. financial planner oF Acoumtan can help you deve pan for reaching your financial gools fu! provide advice on vestments and other areas 6 1. HOW TO MANAGE SPENDING: BUDGETING lg pin ofl oo come nd xp sot ale lt be pad for ad the wants (° te that yo Jump @ Os! ‘fat yu intend t lf The Hts help you t sks a sane ony when al the needs are provide for. The wants wil the finds av slfient enough on to cover needs Let as understand with 2 hypothetical scenario, la for hws rnich money you wil have to spend, manage, and save fe eoping track of expenses, and Keeping obs Tes an effective instrament sl achieving Meng ap scaled bdgeting, Setting goa fn apending ote al part ofthis monthly strates (ar eafoing peop in maintaining their Rnancia Me in order an thei nancial goals26 vars asnast ony bsg 10 ANE is HMaNcs oy A person's hypothe! Ho something Iie his Income: 300900 in sas . £1000 in insesment He 231,000 in wai Expenses: 23,000 in wis € 7 Buying food # 800? eaytepone 30 goon ent nent ec Loma Eo C6000 Gas 82000 : 2s freee 29g ttl ee savings thy seins con 290000 931 087 £200 ts tp in makina BAG I sem, cts we eof # 30000 sy 38d £1.00 nies Fetoe wang 31.008 xi ied eats vere a of ence senate Se vento See let Enh race det for people the CRT badging 62 cui 10 get and Heeplng tack of thelr expenses ‘SAVING “Svings arth orton oincarelet aside y people for uate concingencesr Seg re ae Svngs are red into an investment they old impor rece tar ecoremie roth, Cash has no fear, but puting money into tanks BeTacatog cl enable one o ear 2 return on . Moreover, banks caring the depose beable lend more Leading to more money circulation, mor Investments and mare growth (money muller process). - (2: sre a0 reson macenerT a ponent cm egy one ge 8 cessily sitharaven when needed. ° fa aye ee ate oa race eran transactional rebates and net banking facilities. ie a ae Sone teen ete FINANCIAL DISCIPLINE Fiancl diline means how wl one sable o adhere obser sped Foran gulfines, ancl diipline docs appear maga One ast ‘ert hr te contol the fie mind and stk other bgt and spenlng Sls tool ee afterwards- yr «nancial PANNING AND FRANCIAL PRODUCTS “he nd} can atin antl dvoine BY eaNg ese show, Sed tks ef badging and sending manage Se°Np6 2 hai san eng cour fr the actions A het Re ta atprovecting oneself rom debi tape", fered Sop dn be Sect el Me yc! wh ee sc gn Th a econing a 1 Dee Yow et nl ee ap scp 1 SO cane bth shor crm 3a eng te tc i we ake sre ey ar col ade bound Na gosta MESO MoM goa, 2. Tekin spenig oes Ke sh or spa get sa gee fimprovemen US 8 BuESN 900 oF sera Ding of your eens nudge an essen tol for create A Reali Budget A Buc fae: 2 a ied pout lp YOUN ard epen Sean Gif oro your Nese and ick o apr ngnces Autoaon 3 72 SY Tay dpi ‘Ser upaueomatic payments Frill and regular tye sr take he guess ou of mange 4 Autom ‘eth your finances fees inne savings account, Tl your mones Eliminate Finan rerptations sil bedi ways co reduce tempi ca Tnpttons: 07 UN yan rues dacpned th som mings | i sc Jour ancl goa Pl] «mane Sovinga Priority: Saving isan Important art of iancia gg, | Mk pare you set ie 2 prio fy [COME cch Won | Fare onder stg up separate s2ings ACOUNE OF veining eemene secur, 7. nd Ways to Ct Costs: Look for ways to save money on daly expenses widget and consider sting 10 lower coq Me adjustments to your provider for necessary series seek Professional Advice: If you're facing trouble in managing you, See for professional help. A financial advisor can help yOu crete St praprite planta meet your financial goals timely 4, Practice Patience: Becoming financially disciplined takes time. Dox {et discouraged if you dot see immediate results. Remain patient and {asin to work far your goals 10, Roward Yourself Celebrate your successes and reward yourself for snaking progress tvards yur Banca goals. This wil lp to keep yey rotated and on track (2S an spvoc uncaMsT 2 REVIEW QUESTIONS) Dilerente sven need nd wan Win do you mean by spending managment? Ge ses in send ‘management. e Geter eaciiee pare ‘mean by financial discipline? How can one practice financiat 44 What budgeting? Pes eess 1. Prepare 2 monthly budge for you for your expenses. Keep track of thom for @ le say 6 mont. Durie hs time period pracietanal dpe Gampare W300 were abe to ame yur spending or not. si your sponses into needs and wants and see how much you are able t $272 if you are abe to contol your wants,Financial Goals and Planning LEARNINGIOUTCOMES| SRE The learning from this chapter will ‘enable students : * get familiarized with the financial goals popular among the public > understand how to prioritize and set financial goals » learn the concept of financial planning and its need/importance > become aware of the steps to follow in financial planning INTRODUCTION We can all agree that the ultimate goal of financial literacy is to attain the re- quired skills to prepare a sound financial plan. We all have various goals which we want to achieve in life like funds for higher education, owning house property, owning a vehicle, children’s marriage, retirement, etc. Without proper financial skills and knowledge, it is next to impossible to achieve all these goals. So, in this, we will look at the different types of financial goals and the steps needs to attain these goals. FINANCIAL GOALS Financial goals are the targets one intends to achieve through money manage- ment. Setting financial goals can help in attaining financial discipline. They assist in encouraging savings and making conscious investment decisions. Some of the popular financial goals are given below: ¢ Make a budget and live by it: A certified financial planner and renowned author Ric Edelman once said “Budgets are focused on debts and expenses and nobody got rich by focusing on their debts,” and “You get wealthy by focusing on your assets and your income.” However, many experts agree that when it comes to financial planning budgeting has a lot to offer. They clearly define 3.1fs PANNING AND FRANCAL PeOBUET stiname aa event FFE HC ps i mad a get in paying off cred eng financial innovation butt iy now, one deful leads an 2," ender a debt trap Ip, ano doce raum exabes people 10 make poor Et fos dot even knw ars eg sr of pense» mun gow when moda ae mga 6 month fe Save an emergens fan sated retoment ers ring by Sr ing ng 8 dengue comty nag ve rocket scence unde ‘ou ear, you will incur debe S28 dy ' mn sve for ¥9Ur Seas tnee fe Soe fr your a “bInpoore your ert score: The re Ta terradtnorhinse A person with a igh edt say ses wich abs hopfl. So. the is sda George Washington University profes sf the wer ‘person debt management "Te Se can de mcr and evejune shoold Go more to plan fee iw that pan aed “ae plan then fl 33 (0 ACHIEVE YOUR FINANCIAL GOALS. ; ow 708 ai se nt ey en ih oe segs are ssid ii 3 eae: ay Shoreterm Goals fs are nancial goals it sing hovsohld el ited time bar a narow scope an ‘i sf oslo ecronice, funiture, Rowse fe the mere imparteneshort-orm 62) re pking shorter det a staring bul 70% rego porte pels porch 29 on spending et MOET sacan ot spending starngto practice det a ig ins in fear Sas ey funda 00 25 posse ro pals require ou to question your spending and 3k urs Soa Jou ae le fo anger ter honesty YOU 27 OP NS A ds Anal peace and reed. THs al ENS Se sim bot can says goto financial adsors for asssi2nce right wa 07 08 7 {ey idterm Goals re tendency t web ar plans around h TH [at lee the tarbe appreah. However, Ba es oer goals which ake been 3 2 S0 sem gas area dv pyaet on a ou PY soot wacatin, targa busines Thszon increases so does te meney needed. Thus, a MPOR=NE ae Srey gnrte ape tens often ea =e SA sue ingens xy by dy one cannot sare Js wih 2S lec eed Seep pase come stream 36 NUE OE i or income generaing vestments, Your fnandal feclaneing W0rk oF it counsellor sec you tard our miter strate 1 near and long-term goals “Bue considerations need 10 to 10 ears 10 fal. Some off rudy to asthe sme {c) Long-term Goals our longterm goals are di Ting 9 coforabl and steste See cen education ern’ mariage 2nd ols alae realised between 200 40 yar. These gk re Teese becae they cannot be compromised re gostseing proces inclaesdeon egeing what sal or 2995 sing the quant af fnds you need: and estimating the ie ea reve those goals rected towards being done with your responsibil life Thus, some popoar long-term ‘omnforable retirement re dscpined period rogue(aso Fc Fo ayer mgs an 80 RANCH PROBUS IND FINANGIAL GOALS: SMART 34 ATTRIBUTES OF SOU! 5 stands for Specific a ‘hat dogo ant wo cient one sould Sat BF STSFig his gy et ee a yee ad the 8B ache gt Tee hale ego eto ayn Tad by abot one's ssc 24 and chao ang sn sehenng them For example Ifyou si 0 5 severe lloving gee ow much do nd for hs ee? ew Tg do ae colette fads otis 6s? tocol fands for his gol? forties eucaton olen 300 my Hor am | ping stands for Measurable The ccenof tis ut can be psd 6308 CN 68 yay oy ere rant on cad a 16h ae af lr Tos lit in Keeping ack ofthe cape drei ore Sag ae rege inthe els in the fture Og Sa ear restos ih he veal Ig glo rol mec = nal encima calestr aval olin to grue re a eer mh re redo ata the goa A stands fr Achlvable spin ot aterm lt, Ml pls ar need challnging butte should not be Impossible to attain, Got Eu be rate abot one's goals and should perlorm thorough resets ‘regarding their attainability. “y ae eed fa ne i a ae 0000 sim to rere athe age of 60 with 2 retirement carpus of € 30,000,000, 4°" Inc unl igh of one er wl jou bese et ‘ors it just wishful thinking? ae R stands for Relevant be ert and aunting andi you seta pal which et rc eld any sgifcance vo yu, he journey wl fel ikea Burden cance to ye, the journey il fel vs ne ney ' die mn era 1 onc ons vo PLB = ning your retirement as yoursel sor example, when tui fly expenses inthe fare affect my goal? se there ay avis or bbs ef mine which can deter re fom atin fos 2? to bay oY need to achieve tn the equal time per ponds or aya? -r stands for Timely/Time-Bound 1 inthe word” oF -qeve are af" popular phases tke “You have alse tn Toes oolong et about things” They sound prety nice and carte. Right? ar being carefree can cost you your future, The timeliness ofthe financial otigensres that You ae serious about your goals and ean set priorities TRS Seng tne amp on your gol is important. ao ses you 2 reas padine hich con help pug the quantum of your elfos to achieve them. seca be done by gig onesetroglartely Jeadlines. jo? Can tbe com> FINANCIAL PLANNING a recalling mers deipingw psonal eodnap fr your Arona fc nc oem ote whole peng paces ra path ch meds seed atthe Mow os et of era dens set on tec ony cel pln our Seats rer apt tna pats wih the dre! tne Financial planning process “ue facil plansng proces inva evr septa an Siva can ‘owt sclve ther ancl ga Step Define your Nanci goals “refs stp isthe nc planing proces so define your finan go “inves Understanding our erent franc sustion and determining gota tein rm em gem Sane ‘Shon Graesl goss incade sing forretienent,puteaeng seme ‘off debt, and saving for a child's education. be a ree Sep 2: ses our current Hane ition “herr ss cre oon TH ines eee Iron icome expences slg ada By udertng yee nal staton so an ently area were yon may ned take changes jin order to reach your financial goals, a36 co Step 3 Create a budget ‘nee you have a dear ues 2 bad bet 9 ad expenses in ones mt ace YOUF Hata Spending ana stick to yor bet ‘Step 4: Develop 2 financial pt» cng of your financial situa Aeron ine dened | Staton yo xn de 2 Finca pl. financial plan include a tne for a wil sekiove tem Step 5: Implement you ‘nce you hare develope tyes lng cos 30 Faking ether racial eis ae or PES pei regularly review and monitar your financt nancial plan eis important 1 th thts rerng your be 88 ngs yo Bra seg a ar uh ancl ol 1s nporant eine egg ys ans 35 wl ep You Spe sd very ine ng em. Practical benefits to financial planning ancl panig helps yout: can create a solid nancial plan thay ca ann AND FASCIA RDDICTS HOH, You ea fon at outins #08 0x wil llocate yogth ey rele 8 impor ee pals. "uy | ancl 7 8088 OOF erent Isa ro ey edt hee Your Hance Py tes th ss you red a el 63 saegy hou I to help you reach your goals. ns Foy Pon egg, se wan yu al ols Ter gourd lon Reeder haa a Be proc cme 6 tree your sain: not inpossible fo save money wth enc pw efits sone 0 hot age Wen you make a inane phn you become are of y expenses which wll lp you in keeping track of them on tg est nosceusess, which wl automaticaly help you inn your sings nang rn, 4 oy a beter standard of living: I is assumed that ‘is nc EMI repayments hinder your living standards te \wel-deveoped nae la wl lp you to honour your time, mee al your expenses nd sil ejoy a comfortable Me seme nrg | Heh mony | iene td | ‘obligations on nd siesta | O13 FINANCLAL GOALS AND PLANNING i + Beprepared or emergencies: he cretion ofanemergeney/ontegency fun sus Is the fst ste towards a stress and anxiety ie Uneagected ancl dstres ean afer yur ment health, which nn affects your performance, which ukinatly rests in ss of Income steam, Ths is advsed o matin a fund eqitalent to 6 months of our expenses 4 tain peace of mind: person practising fact panning able to manage his/her nances propery and have a pene mind, Sometimes you might Kit @reck bottom, but you should not be discouraged because ettmatly you wl reach your gel i you sty deiptined Inthe path of your gels it might ake you some ine, but you wil reach the stage of financial poaes Need for financial planning ‘The financial len serves 362 guide as you go through i's journey. It helps you two manage your income, expenses, and investment in sucha way that you Ca image your finances and achive your goals You need to have enough money te achieve your goals and desires Persona finances ean help us fave worked hard fr ‘Awelletefined plan ensures that you rental stress and anaity related to gain insight into the role of banks in financial literacy » knowledge about the types of banking activity > discover different types of products and services offered by banks > understand the need and methods of marketing banking products and services INTRODUCTION We are all well aware of the role bank plays in promoting financial literacy. Its efforts in promoting saving and investment cannot be emphasized enough. Banks, in the conventional sense, signified a brick-and-mortar business meant to accept deposits from and lend loans to their customers/clients. However, with the evolution of technology, increased awareness among the public, and rising concern for efficient regulations and sustainability; banks have also evolved a big time. At present, they are neither confined to the four walls of a room (in fact, not even confined to a country), nor are they restricted to only lending and depositing money. They have diversified and expanded their scope, functions, products and services to cater to the modern needs of the knowledge-based economy to facilitate banks’ development. In this chapter, we will learn about the various products and services that banks have to offer. BANKING PRODUCTS AND SERVICES Based upon the expectations of their customers banking activity itself leads to the development of new products and services. These expectations are depen- dent on their experience with their banks, which interestingly sets the standards for new experiences as well (Popescu & Rizescu, 2008). Consequently, there is 5.3je AMING ANG ANNE aE 54 wx onthe 41PIMEH OF Nee roy, | enormovsseop for innetinin the developmen of But such innovation is ested my, rp iitthe use | a. The eultins in place e0 ok nae sodsanintersection between 4 ‘a Product development needs: ‘chm, tnd eormare ess ml ety sei settee NEF ng Ths oi eat el ya fered t varios cua the iy, Sethe padacts an eres tia ae ore eon = ‘pon dei needs ‘Types of Banking Activity eof isomer tye, DANG cn hy Depending onthe ‘ou ores agen stg «Re Big 5 coor Big 6: rt Bag a ee zee ener pug =] (SSeS ==) ea Retail Banking Products and Services Following are the products and series fered by banks to the pene 3 poe 1. Account Management Savings Account: The most basic product of any bank 1s the enunt The Sigs ney depose ina stings account earning 9 nom ofteeres Deen harks we diferent features, such a ease Secu ad ears tao ces to the bank Yor ICICI Bank offers no minimum balance requirement, a “complety a of eharges on deriand drat, poy orders and anyahere ty tes, complientary and prsonalned international de hanking mobile honking and a pomina se bon bit cards. ime, Hon aclty to attract custome, ee Tr ie ‘mont fina 3 ed er tes he Aaa cyte ka ens sap on forever Credit CdS, 9 post pu my hac bits 10 voney instrument that lets you pay bil for sr (OF wiles Bp fo 2 masimum specif mle are als sed y Some sane eh ath my he ak ag wh ee 3, Deposits ery bank offers diferent types of term depasts of ferent duration a er thechent’ objective. Foran instana it sombody wants to sve tases ten te) fan choose toesaer fed deposits. Smiley if sombody sshes to epost £5000 every month for three years then thy ean ehooee Recurring DEpDEt. “Tose tyPe of deposits are the most convenlonl and Felately sere OF investment herein you eta ke vate of Ineest income: The interest MeO [sreately higher thon What you get ina savings account Because the money {Sock in fr the period specie inthe term dente 4. toon snk provide a variety a loans fr diferent purposes such as home loans to tua hows, ca Toons to uy a cat education fone for paying eatin in sates Tes, persona Ions for personal needs, an busines Tons to Finance Saatup or business Banks aso provide ans aginst any ase deposited 3 4 secur For example gold Tans lass apsinst property oats against xed epost, ete In retur, banks change ttre fom the cient depensing onthe fret sore ote client, the type of lan taken and the tenore of the Ya, {5 Foreign exchange services Some banks prove foreign exchange serices such as Foreign Curren, Tra ser’ Cheques, and Travel Cards for foreign business a haley trips {Demat account serve A beat account an account which els ivestrs in holding scutes in een frrs. Deiat account service enables cents acess to their Dems ecounts Information abou the holdings, ansactios, bills and ISIN details ‘eo be attained by opting for she SMS sericea reasonable chore.etme rai sea cn oe i ee) es ac (a ae A) a ah ing Uva Pere tk As Se ks a at ae prometsont sre ite rane a ay iemes sh 2 Pradhan Many yl 9 ane ops taker . ee emens, en choose the sz of the Lockers. i to. nvestment Banktag ana erring Asopeate ranch banks sot vestent bakers = ene For ct See \ ‘efficiently frorm te market: st it dung 9 ening “© Opening an Account Online: Most ofthe leading banks of tag} arian Mopening a savings account online without actualy pig ‘bank. A bank representative, upon filling out the application fora aaa ees ars wf law eae ‘af a PAN card, Live Signature, Live Photography, and Geostag ‘Sample of HDAC dig application ts dept in tho Oguree Caetano rnin seers 1 Raking very bole olfers NEF, IMPS and farege tans oe t0 Rs cet bat, Seve ce. withthe sanouncenent of the dt San al have re ued pov he ely oer te Banking: Hos fer sar sere uk at SS hankng Ut Metin ond Biometric wot barking payment with the help of aie 21022 plies an mey soe can be te one venom yo be bry Speen Ben OS elec we hpoaband enable Fecha, Impact Aecount: Another ovation in dhe ld of banking ste impact secount especial type of current account that traces the account holler’ carbo footprint, provides aver on geting and saving, and sees the customer updated about eonnanty-buiding iniaives 4 Sart Vault Designo with stateoFhe-apt robot technology ad high cl security the automated foc, smart vault by KIC, help customers ees hel lockers ny tine of any i, Corporate Banking Products and Services, fats ate the procs Serves ered yb sto capone enti 4 Crrnt Acon: Fr eros uss he ak praieste e stale ype fume non aren soeees te oe hea tae tun, set eons br sae ee en- eee esc ns me buns vn: St 2 Stone a for importers and Pm aga redesortcalecionatd remitanec 4 radeseres iss. Bank a0 pevide gga estoot fanetoning of the busing” eh sek a et ma pa EEN el a Zi poor aiueatgtzewersae "ny vine See ba Banks engage thelr customers by reguig tial Marketing: nd safe banking tips. These mails na oa nes i of a fe od See ad age rena u incase “a a tena aerentst DHMEDTOINCS a ny Me i ering appation atroctcurgee ay acd i minds is ment one saeco ene pete pte cea . rate Arvencabtspovica personal eperieneetog ed Tne bos sit cones a | eter snd thus improve cisiomerststction et ert to reas ie pe Videos: ss ae soci en ee sepa ceningsral aay gl Fe ener sonal med hans and webster ge arena tanto simple tems and ee ‘STtos tts teneeds wih is prodot or service. This helpe es Seteton othe pipes ctr aad maybe comet mom aul Mh ¢ Mache tearig an Ail nlgenee (A: Varo46 my earn techs sd afi itligeer techniques ae 1 ae esos Aen tak s esa scat a os. mse sors jo segs Ail platforms sar inadance, ‘mization helps to place a. Aluss (SEOs): Search engine of congine. king product is searched on a search “Thus. review ofa the bakin the inporance of brn tt Ss and srieslpr ut eine nour ves. a port of eveyone and an en Re Bag hs become a ge gia Brac Porte sogment that can make India truly RIES 1. What products and services? 2, span he een types Fann acti 4 What are the banking produ and sore 4 What fe the banking roduse ands 5 List oot the poplar iethads ae sed by banks 2 Talk to peopl of dierent a {0 open up to nevwage banking products and serviges *E* PSOfim eS Digitization of Finan- cial Transactions The learning from this chapter will enable students > get famillarized with the impact of digitization of financial transactions jscover the numerous opportunities and challenges offered by the zation of financial transactions Jearn about different digital payment initiatives like card-based, blo- metric-based, internet-based, etc, } get accustomed to the concept of UPI and digital wallets INTRODUCTION In the previous chapter, we discussed various banking products and services available to business and retail customers in traditional and in modern times. In this chapter, we will shed light on the impact of digitization on the banking industry. In the age of the digital revolution, each sector of the economy is collaborating with fintech companies to transform their businesses to gain a competitive advantage. ‘To facilitate the digitization of businesses and due to the demand of tech-savvy consumers, the need for digitization of financial transactions has been necessitated as well, In recent years, this need is fulfilled by the introduc- tion of debit cards, credit cards, UPI, internet banking, and digital wallets. India, now, has a vast digital infrastructure catering to every need of consumers and businesses, thus, transforming the financial industry entirely. 61ei are so ent naire 3608 NOX 2022 Digital Payme sr a Teas ai] ser em] Frcs NCE ES re ag INANCIAL, Impact OF DIGITIZATION ON F eRViceg eon of i Beta ets ele of fan fo automated Services. Not on ean such 5 ric intelligene 9 faassen in jn ave nereased mut fl, fg NM ofthe latest ecnol0 Ge Mr nologies such as blockchain hag forthe advancement 7 thefinanceindsty. are discussed below cont scoring based on payment dal CU rating Gre edt creo ina ad Businesses based 9 y payment dala. «+ Goartconrat nrodced 0 ede Intermediaries 3rd ming, detion casts ad Fraud i Shon fan wansaction automatically wPon the occa Specie event stout aman intervention. tation hos led to the develo «6 Peerto-peer lending: Die ~, tear egal ending where the demanders of funds cn dy aah suppliers of funds, without requiring 2 bank a gq ate of intrest and tems Critical Analysis of Digitization of Financial Transactions Digzotion of anil transactions poses numerous opportunites ag Jenes for consumers, businesses, and providers. roca asin iptaton ta ti ‘a eal sy smart contracts ate computer cody eh ——~Strengths er atiies oun Mletknesses rope oar (6a oF Fag TACT s See Srey opportunities pmcireats ‘WOT Analysis of Digitization of Financial Transactions seonat ‘Aecessbilly: Consumers and businesses nt every level can acess ital trensttins from anywnere and 3 anytime, Even small business Overs Sind ural people can acept a ay using dial means. Tiss especialy Itpportant fo areas where payment infuetre e poo Harr people tse #0 wat for banks to apo every morning ta wha exsh for ex ppnses 07 used 0 keep a Tage amount of cath in thar homes However, ‘hth gta transactions, cash iso longer the only means of payment Payments re subject neither tthe avasblty fash or tthe opening of bans ‘contraction of the Parallel Economy? The emergence of digal tan [Salons enabled all he transactions tobe routed through the bank and [Pemdl means of payment, Thus there hts been» significant contrecton ffi par economy and 2 fl in aeration ‘Simplified Payment Systom: Digitization tas simplified the payment {stem throughout the globe Inrnation! and loeal payments can be Tale tthe convenience of your home wth 9 single lice Multiple Payment Alternatives Suppose it isa bright riday and Talenly you gee a call 430 pm tht your dauphter Is selected for ‘Mamision to esteemed Delhi University and the fes of 30.00 were foe deposited by the net morning 9am. You are bound 0 experience fuppines, but unlortunaty the Hanks must have bae closed by now “Taconlyoptlon you ae ft wih 1s 0 leave tis opportunity, Tonks the digital poyment sytem, this scenario Is no longer experienced. Youeee cee tuoi to hn pe ay secptcy you eon go theater options such 5 ntrme ary UH Became 708 ps, digital {3NS3Cione give you th eaves at any tee and any pace sy via many Safe and Secure vere ad Fe ; : le re bon when cospated otaonal mem me arenp 2 Sp PLAT oy wi ue ramen ent om Forel SP pe ro ee ey waters en es ‘Technology, itself, has many limitatic ae enrand mocy by deep tks a8 preg t WER + re scope of digital payment and transaction system, vice, Novradays, even stall wendy, if oe 6 waren oF rea, ary’ C000 TH lps * Befuces the HME reaueed ey, «cashless ECONOMY: Ht te ea ‘enamy has the pert pt ey he a ry he nyo the enti and as the subs chlor gat Bee of the dita econ aur "1 rastrm en 9st p Feed nthe form of exci ‘eee up wth lntore bse Sed promoted distal pymente Senator ota Newer deat usacan ‘0.8 particular bank oF location. all the [an peer Tr Reo tr pens a ee MEN TE oth eet, thay sey snmih apres Os, sergeant bing noo one 7 Fines players have also Prospects to expand ther bane seats TS cash is Preferreds People are sti trent duc to ber threat. And prefer cath payment as opp sanyo ai ng ga mes fp {ne of ro gle snd pl poe, «awareness: Hany consumers ae wav eae dt toi it cd itera hari Tax gunn dae Serra of cesumers rsa ea an oa ta ae Service Secor ted Econom: nds, be : logan aero ono tas Sons bee nova fr tore ay here a Be Seitenio of tunes and sevens neon oer eco tui series fave emerge on as sede et Seca sory aver coy 4 tnresed Unemployment Dl ance he tthe bien trans srces and rece! te wad ens foe Savane professional nd pepe henner bee ended ‘eno pIGITAL PAYMENT INITIATIVES DIGITAL PAYMENT INITIATIVES “he pynent system in Ina was orignal cah-based, People use to pay for ‘hi ilies in cash and receive payment for the goods supplied and services caefered in eash on Hvvever afer the initnves are taken ty the government56 nor 2 oe 490 AL RE to promote ‘Digits nds, varios modes of digital payment e seen te Fer yr es Altocg a Decne gate ae er ther gone aa taal) an coed EH ears Se ey iv that ne responsible fr the miraculous grou yh hay ow pele are no longer a a (A) Credit Card sevetenent nt moat Foes tle ete a ae oe fice ta pes Insti Prep on eg tg at (a Percent mn “saa prove a Ind (63) and up| hy Indian addon 10 st the back jus benefit to the cardholder such 3 no need to cy Credit card offers various nei %0 th doen Groh cohtack and discount, wide acceptably, easy cash veithdraval, Inproament a eel scr cepa theinter rate aplicable onthe ered card fund s charged ter dapece ¥ monater he wanaction. This period where no interest chs {Peace ee he Gres Perid apd i abrays asd to poy the dived fonds in thes prid nl They to prove the eral scree ruholuee Some erea card companies ls) charge annual fees, depen ye iets cred ed Hg “7 Feb 5 08 BY ba ya ed de ry tr Ha: al ag cre cord Lt of 20,000 = 10% ro Period 1 month ests an S045 purchase sper? and HOHE BUTCHI! Yet H.99, rat en cada oy sot ter etn gh nr one gra ok rently, credit cards also come with 4 ee pb tote ust by apping the card onthe macy ne aE ansaction sul oat beroqared Aika 2 en seh sts ec have on 01.01.2028, One Ment, a, 31.01.2023, ea sian al Bip u ae {g) Debit Card seater Pe of Ds money eb cad (a ds bank ca sa plae Pay witharaw cash for dy utes, Bouvet er cl Ngee nee er con TS iE