FINANCIAL LITERACY

BASICS OF MONEY AND HOW TO HANDLE IT

TARGET AUDIENCE: STUDENTS IN CLASS 8,9,10

CREATED BY: RAJESH KUMAR

 MONEY

 What is Money?
 Money is any object that is generally accepted as payment for goods and services. It can
be anything such as Gold, Silver, Bronze or any other metal or any other item.
 What is Currency?
 The government of every country decides what kind of money will be used in that country.
It is then called the Currency of that country. E.g. India’s currency is called Indian Rupee
(xx).It is nothing but a form of money which can be used to buy things.
 Currency can be in physical form (coins and notes) and in digital format (debit/credit
cards, bank accounts, mobile wallets, etc.)
 Where does money come from?
 In India, currency notes are printed by the Reserve Bank of India while coins are minted
by the government. But they cannot create unlimited amount of currency.
IS MONEY IMPORTANT?

 Simple answer is Yes.

 But, why is money important?
 Money is important because we need it to buy things (such as food, books, clothes, motorcycle, etc.) and also if we want
others to do some work for us (to get a haircut, to get bicycle repaired, etc.)
 Is it the most important thing in life?
 Definitely NO.
 Money is only ONE of the three most important things in life, namely Health, Wealth (i.e. money) and Happiness
 WHAT SHOULD WE DO WITH OUR MONEY?
 We can use our money for three main purposes as given below:

SPENDING SAVING GIVING

 For buying necessary items such as
food, clothes, stationery, etc.
 For buying non-essential items such
as TV, costly smartphones, etc.
 On things which provide good
experience such as movie, dining out
in a restaurant, travel to a tourist
place, etc.
 We use either cash or debit card or
credit card for spending money
 Keeping the money in a safe place  A lot of people use a part of their
for future use money for helping others
 The goal of saving can be fixed such
 Some people donate money to
as buying a laptop or bike
charities which in turn help the
 A lot of people do saving to meet
poor people
future unplanned expenses such as
medical emergency  Some people also help their
 Saving money can be kept at home in
families and friends in times of
need
piggy banks and lockers, or in a real
bank

| No one ever became poor by giving.|| A rupee saved is a rupee earned ||

Do not save what is left after spending, but spend what is left after saving |
 NEEDS VS. WANTS
Smart people always ask this question before every purchase – Do I really NEED this?
NEEDS
 Anything that is essential for survival and living is a
need for us. E.g. food, basic clothing, shelter, etc.
 These are our basic necessities and do not change
over time. Also, it is mostly same for everyone. For
example, we need to eat food daily
 If needs are not fulfilled, it can create problems for
us. So, everybody has to spend money to fulfill their
needs.
WANTS
 Anything that is not essential for our survival but we still
desire to have, can be called as Wants. E.g. fast-food,
branded clothes, jewellery, watching movie in a theater,
travelling for fun, etc.
 Everybody has different wants based on his or her
likings and interests
 We can live without these things. If wants are not
fulfilled, it does not create any REAL problems
 It is therefore important to keep our wants to a minimum
so that we have enough money to spend on our Needs
and then Save for future
 ASSETS AND LIABILITIES
Will it not be better if your money can also earn money?
ASSET
 An asset is something that is useful and valuable. In
financial terms, an asset is something that puts money in
your pocket
 Money deposited in a bank (savings account, fixed
deposits) earns interest. So, the money deposited is an
asset. If bank pays 5% interest per year, then we can
earn ₹5 on every ₹100 deposited and have ₹105 at the
end of one year
 If we buy something for ₹100 and sell it later for ₹150,
then we can say that our money earned 50. E.g. real
estate (house, flats), stocks, gold, silver, etc.
LIABILITY
 A liability is a responsibility or an obligation. In financial
terms, it is something that takes money out of your pocket
 Money borrowed from a bank (home loan, personal loans,
etc.) have an interest cost. If we promise to pay 10%
interest per year, then we have to pay ₹10 on every ₹100
borrowed. So, the money borrowed makes us spend more
money every year and hence, is a liability.
 If we use credit card to buy something, we create a
liability since, sooner or later, we have to pay the money
to the bank. Hence, by using credit card we create a
liability.
 INVEST IN YOURSELF

 When we put our money (or time) into something, hoping to get some benefit out of it in future,
it is called an Investment. And the thing where we put the money (or time) becomes our Asset.
 E.g. Opening a fixed deposit (FD) in a bank – since the money deposited will earn some interest and
increase in value, opening a FD can be called an Investment and the FD becomes our asset
 E.g. Learning to use MS-OFFICE – By learning to use MS-OFFICE (i.e. MS Word, MS Excel, MS
PowerPoint, etc.), we increase our value as we have a gained a new skill. So, the investment we make is
our ‘TIME’ and the new skill of ‘Knowing how to use MS-OFFICE’ becomes our asset.
 The best investment anyone can make is the ‘Investment in Oneself’
 Invest time (and money, if required) in improving Health, gaining new Skills and increasing Knowledge
 A healthy body is the most important thing in life
 Every skill that we learn will help us in one way or another
 HOW TO INVEST IN YOURSELF?
 Find out your interest areas i.e. what things you like to do, something that makes you happy.
Then make it your hobby and spend time on it
 Read books – borrow from school library or friends; buy new or second-hand books on topics
which interest you
 Read books in any language that you enjoy, not necessarily in English
 Exercise regularly or play some sports daily; don’t eat junk foods
 Learn to play a music instrument: Guitar, Flute, Sitar, Harmonium, Keyboard, etc.
 Learn new skills: Singing, Dancing, Painting, Self-protection skills (Martial Arts, etc.), etc.
 Sports and games: Cricket, Football, Hockey, Volleyball, Kabaddi, Table Tennis, Chess, etc.
 Educational: Learn a computer programming language (Python, Java, etc.); learn a foreign
language (French, Spanish, Chinese, etc.)
 Computer skills: MS-OFFICE (Word, Excel, PowerPoint); Creating e-mail Account and
sending/reading emails; etc.
|| There is no friend as loyal as a book ||
CONCLUSION
 Everybody should understand what is money and how to handle money
 Money is important, but not the most important thing in life
 Decide what you want to do with your money: Spend or Save or Help
others with it
 Before spending money on anything, ask yourself: Do you really NEED
it?
 Buy it only if the answer to the above question is Yes. Don’t mistake a ‘want
or desire’ for a ‘need’
 Create assets, not liabilities
 INVEST IN YOURSELF
SOME EXAMPLES OF HOW ‘INVESTING IN YOURSELF’
REWARDS