Here is a sample monthly budget for the family:
Income: Rs. 20,000
Expenses:
Rent: Rs. 4,000
EMIs/Loans: Rs. 5,000
Food: Rs. 6,000
Utilities (electricity, water, etc.): Rs. 2,000
Mobile/internet: Rs. 1,000
Transport: Rs. 1,000
Education/tuition: Rs. 1,000
Total Expenses: Rs. 20,000
Savings: Rs. 0
This budget allocates the entire monthly income to essential expenses like rent, loans, food, utilities etc. leaving no room for discretionary spending or savings. The
1. B Y S A A K E T H A N A L A M O T U
Financial Literacy
Class
2. C U R R I C U L U M
⚬Day 5: Investing
￭ Fixed deposits
￭ Stocks
￭ Real estate
￭ Tax saving schemes
⚬Day 6: How Taxes Work
⚬Day 7: Consumer Awareness and
Financial Scams
⚬Day 1: Introduction to Money
⚬Day 2: Introduction to Banking
and Interest Rates
￭ Types of Interest Rates
(simple vs. compound)
￭ Day 3: Types of Bank
Accounts
⚬Day 4: Importance of Saving and
Budgeting
4. W H A T I S M O N E Y ?
⚬Money is a medium of exchange
⚬Barter system preceded current system
￭ The problem with barter: I may not want
what you have
￭ People created money to solve this
problem- it became universal medium of
transactions
⚬Throughout history, people have used
stones, gold, paper, and now digital
numbers as money
5. O R I G I N O F P A P E R M O N E Y
⚬In olden days, when gold was used as
money, people stored it with goldsmiths
since they had armed guards. People
received deposit receipts stating that they
owned certain amount of gold
⚬Instead of going to the goldsmith to
withdraw gold every time they wanted to
spend, people began exchanging these
receipts with others in exchange of goods,
services and assets
6. O R I G I N O F P A P E R M O N E Y ( C o n t i n u e d )
⚬ This is how paper money came into
existence. It was a natural human
evolution to facilitate exchange of
goods and services with less hassle
7. C H A R A C T E R I S T I C S O F M O N E Y
⚬Scarce: if it is too common it has no
value. Silver is scarce and gold is more
scarce
⚬Easy to carry or transport: if it is bulky,
like steel or iron, using it will be difficult
⚬Durable: Should not rust or decay.
That's why gold and silver became
popular before paper money came into
existence. Paper money is not durable,
but Reserve Banks continually take
soiled notes out of circulation
8. I N T E R E S T I N G T Y P E S O F M O N E Y
⚬The Yap islands group is part
of Micronesia had a very
peculiar currency: stone
⚬Stone money known as “Rai”
are large stone disks,
sometimes measuring up to
4 meters, with a hole in the
middle that was used for
carrying them
9. I N T E R E S T I N G T Y P E S O F M O N E Y
⚬Historically, the pound sterling was defined
as a specific weight of silver. In the early
days, it was a Troy pound of sterling silver,
which is equivalent to 373.24 grams or 12
troy ounces. However, over time, the pound
sterling became a fiat currency, detached
from its original weight in silver.
11. ⚬US- Dollar
⚬UK- Pound Sterling
⚬India- Rupee
⚬European Union- Euro
⚬UAE- Dirham
⚬Japan- Yen
⚬Pakistan- Pakistani Rupee
⚬China- Renminbi
SOME MAJOR CURRENCIES
13. WHY CURRENCIES?
⚬Every country has its own currency
⚬ Because no country wants to use
currency controlled by some other
country
⚬ Also easier for a country when locals
control the currency
⚬Exchange rates- value of one currency in
terms of another ex- $1 = Rs.82.61
⚬Trading currency: Global trade is mostly
conducted in US dollars or Euros
16. P R O M I S E T O P A Y W H A T ?
⚬Governor of RBI says "I promise to pay the
bearer the sum of five hundred rupees"
⚬What does it mean?
17. LESSON 2, DAY 2
INTRODUCTION TO BANKING AND
INTEREST RATES
18. B A N K I N G
⚬You worked hard and earned money. But
somebody comes into your home and steals
it. What would be the effect?
⚬That's why banks came- to protect your
money for a fee
⚬Originally, banks (typically goldsmiths)
were just a place to protect your money.
Over time, they have taken on more roles
19. B A N K I N G ( C o n t i n u e d )
⚬Banks today have two main functions:
￭ Provide deposit and savings accounts to
customers
￭ To provide loans at an interest rate
⚬Other functions- investment management,
safety deposit lockers, etc.
20. I N T E R E S T R A T E S
⚬Depositors:
￭ People who save money for
future gain
￭ This gain is interest rate
⚬Borrowers:
￭ People who take money from
others for investment or
spending purposes
￭ The cost that they incur to
borrow money is interest rate
21. T Y P E S O F I N T E R E S T R A T E S
⚬Simple Interest- calculated on the original principal amount every time
⚬Compound Interest- calculated on a new principal every time; new principal
= previous principal + interest rate
⚬(find and show video/activity)
22. Principal- 1000
Simple Interest
(10%)
Compound Interest
(10%, compounding
monthly)
5 Years 1500 1611
10 Years 2000 2594
15 Years 2500 4177
20 Years 3000 6727
25 Years 3500 10835
30 Years 4000 17449
TODAY, ALL BANKS
USE COMPOUND
INTEREST, NOT
SIMPLE INTEREST
23. P E R S O N A L L O A N S
⚬Why do we need loans?
⚬What do we do when we need a loan? Who
can we approach?
⚬An informal personal loan, is a borrowing
arrangement where individuals obtain
funds from their family and friends.
24. P E R S O N A L L O A N S ( C o n t i n u e d )
⚬Pros
⚬ Borrowers can quickly obtain funds
without the lengthy approval process of
financial institutions.
⚬ Borrowers may receive funds with little
to no interest, reducing overall cost.
⚬Cons
⚬ Money can sometimes lead to
misunderstandings or strain
relationships if the borrower faces
difficulty in repaying.
⚬ Informal agreements don’t have legal
protection, leading to disputes if terms
are not upheld.
25. M O N E Y L E N D E R L O A N S
⚬Informal personal loans from moneylenders
refer to borrowing money from individuals
or groups who provide loans, often at a
higher interest rate.
26. M O N E Y L E N D E R L O A N S ( C o n t i n u e d )
⚬Pros
⚬ Borrowers can receive funds faster
compared to traditional banks
⚬ Borrowers and moneylenders can
negotiate terms more flexibly, including
repayment schedule and terms.
⚬Cons
⚬ Moneylender loans often come with
significantly higher interest rates
⚬ Moneylenders can use illegal tactics to
recover funds
27. P A Y D A Y L O A N S
⚬A payday loan is a short-term, high-interest
loan taken to spend between salaries.
Borrowers repay from the next month’s
salary
⚬Pros
⚬ Payday loans provide fast access to
cash for urgent needs.
⚬ Borrowers with poor credit can still get
loans.
⚬Cons
⚬ Interest rates are very high
⚬ Relying on payday loans can hinder
financial stability and proper budgeting.
28. B A N K L O A N S
⚬Why do we need loans?
⚬What do we do when we need a loan? Who
can we approach?
⚬Borrowing money from a bank with the
guarantee that amount will be returned
with interest at the end of the period
⚬Getting a loan and the interest rate is
dependent on credit score (CIBIL score in
India)
⚬Credit score is a measure of
creditworthiness- it checks your
background, past loan repayment history,
bill payment history etc. and assigns you a
number
⚬Higher the number, better the score, more
the chance of getting the loan
29. T Y P E S O F L O A N S
⚬Can be divided 2 ways- by requirement of
collateral, and by purpose
⚬Collateral- if you take a loan and are unable to pay
it back, bank will take some possession of yours;
this is for risk mitigation
⚬Secured loans: require some collateral to be given
to get approved
⚬Unsecured loans: no collateral required, but
generally interest rates are much higher since
there is more risk
30. T Y P E S O F L O A N S B Y P U R P O S E
• Personal loan: loan taken for personal use
• Home loan: loan taken to buy home
• Vehicle loan: loan taken to buy car/bike
• Commercial loan: loan taken to run a business
• Credit card loan:
⚬ Payment made for purchases such as clothes
and groceries
⚬ No interest if paid in time
⚬ High interest if the due amount is not paid in
full
⚬ High penalties if payment deadline is missed
31. L O A N E M I
⚬Principal Amount- loan amount
⚬Tenure: time taken to clear loan
⚬Interest Rate
⚬Interest Amount: Total amount of interest due
⚬If you only pay monthly interest, you still have to
pay back principal at the end of the tenure
⚬What is EMI? Equated Monthly Installments
⚬How does it work? Loan is split into equal
monthly installments
⚬Can clear both principal and interest amount by
the end of the period.
⚬Monthly Home Loan EMI
33. T Y P E S O F B A N K A C C O U N T S
⚬Regular Savings Account- standard account
for saving
￭ Required to maintain a minimum account
balance; provides a fixed rate of interest on
your money (compound interest)
￭ May or may not have transaction limits
⚬Jan Dhan Accounts: A govt initiative to create
basic savings bank deposit account for the
unbanked persons
⚬Basic Savings Account- same as regular but no
need to maintain a minimum balance
⚬Checking accounts- used for spending and
daily transactions
￭ Low or no interest rates
￭ Offer use of debit cards
• Fixed deposits
34. C A N K I D S O P E N A B A N K A C C O U N T ?
⚬Kids can open a bank account as
long as child is a minor (up to 18
years of age) and parent has a
savings account.
⚬If parent does not have a savings
account, then he/she will need to
open one, before a kids account
can be opened.
⚬Each bank will have their own
monthly balance requirement
35. W H A T I S A B A N K P A S S B O O K ?
⚬A bank passbook is a traditional method of
keeping track of the number of
transactions made and started by a user. It
depicts all transactions, whether they are
credited or debited. It also shows where a
person spent money and who credited it to
the bank account holder’s account. In a
bank passbook, everything is precisely
printed.
⚬A user must have the transaction printed on
the bank passbook every time he or she
visits the bank to keep it up to date.
⚬The bank account holder must update the
bank passbook by visiting the bank
⚬A traditional bank passbook is printed on
paper
37. A T M
⚬ATMS, or automated teller machines, are
banking outlets where you can withdraw
cash without going into a branch of their
bank.
⚬Some ATMs only dispense cash, while
others allow transactions such as check
deposits or balance transfers.
⚬The first ATMs appeared in 1960s and now
number more than 2 million worldwide.
⚬Today’s ATMs are capable of accepting
deposits as well as administering several
other banking services.
⚬To avoid ATM fees, try to use an ATM by
your own bank.
Source: Investpodeia
38. D E P O S I T M O N E Y I N A B A N K
⚬Firstly, fill in the branch name where you are supposed to
deposit money.
⚬Then, write the date when you are going to deposit into your
account.
⚬Select your account type among SB/CA/OD/RD/CC and then
write your account number accordingly.
⚬Loan account/credit card number– If you bear any of these
then, write your loan account number or credit card number
accordingly.
⚬Write the name with which you hold your ICICI bank account.
⚬Particulars– Under this section, just write
⚬Rs– Write the amount in figures under this section.
⚬Ps– Under this section, mention ’00’ in case the amount is in a
round figure.
⚬Rs. in words– Here, write in the amount that you are depositing
in words.
⚬Officer’s Sign– You must leave this section blank.
39. D E P O S I T M O N E Y I N A B A N K ( C O N T . )
Bank Copy
⚬Deposited in-branch– You need to mention the name of the
branch you are depositing the money in.
⚬Date– First of all, mention the date of filing the slip.
⚬PAN of A/c Holder– In case of depositing an amount above
50,000/- you will be required to mention your PAN Card
number. Hence, make sure to mention your PAN Card number
under this section.
⚬Savings/Current Account No– Choose your account type and
write down your account number accordingly.
⚬Loan account/credit card number– If you bear any of these
then, write your loan account number or credit card number
accordingly.
⚬Name of the account holder– Under this section, you need to
mention the name with which you hold your bank account.
⚬Contact Number– Here, mention your mobile number.
⚬Signature of Depositor– This section requires the signature of
the depositor.
40. A C T I V I T Y : F I L L I N G A D E P O S I T S L I P
42. I M P O R T A N C E O F S A V I N G M O N E Y
⚬Emergencies- if there is any sudden
medical or any other problem in your
family, savings will save you
⚬Preparing for Future- savings will help in
case you have to shift cities, pay for your
(or kids') education etc.
⚬Retirement- after you retire, you can only
live on savings; having good savings will
guarantee peaceful life
43. B U D G E T I N G
⚬Process of planning how to use money
based on income and expenditure
⚬Helps in managing finances, avoiding
overspending, and saving money
⚬Some expenditures generally take priority
over others; generally, this is the order:
￭ Basic needs
￭ Debt repayments (home loan, credit
card)
￭ Insurance
￭ Retirement savings/education
(depending on age and family status)
44. B U D G E T I N G A C T I V I T Y
Scenario:
Family of 4 (spouse and 2 kids)
Monthly income: Rs. 20,000
Rent (monthly): Rs. 4,000
EMIs and other loans (monthly): Rs. 5,000
Children school fees (monthly): 3,000
Electricity: Rs. 500
Food: Rs. 3,000
Savings at present: Rs 100,000
New phone: Rs. 8,000 (buy it or save the money?)
New clothes for children: Rs. 3,000 (buy it or save
the money?)
46. I N V E S T M E N T S
⚬Putting your money in a place where it will
grow over time
⚬All investments carry risk, there is a chance
that they may also lose value
⚬High risk investments yield high rewards,
low risk investments yield low rewards
⚬ Stocks are higher risk and higher return
investments
⚬ Fixed deposits and bonds are lower risk
and lower return
47. T Y P E S O F I N V E S T M E N T : R E A L E S T A T E
⚬Real estate- buying land/properties; considered most
stable as land values don't decrease generally
⚬ Demands Patience
⚬ Research the Property
⚬ Check the Papers
⚬ Check Market Rates
⚬ Talk to Neighbors
⚬ Understand your Finances and Financing
⚬ Negotiate
⚬ Understand the Risks
https://www.bankbazaar.com/investment/beginners-guide-to-investing-in-real-estate.html
48. T Y P E S O F I N V E S T M E N T S : S T O C K S
⚬Stocks- buying shares (parts) of a company; more potential for
growth but they are more risky since companies can collapse too
⚬Documents needed for a trading account: Aadhaar, PAN,
Cancelled Check, Proof of Residence, Passport size photos
⚬Demat Account (dematerialisation)
⚬Trading Account
⚬Linked Bank Account
⚬Investing in the Primary Share Market (IPO)
⚬Investing in the Secondary Share Market
⚬ Demat and Trading Account
https://www.indiainfoline.com/knowledge-center/share-market/share-market-investment-guide-for-beginners
49. T Y P E S O F I N V E S T M E N T S : F I X E D D E P O S I T S
⚬Fixed Deposit- money deposited with bank for a fixed period of
time
￭ Money can't be withdrawn till the end of the period without
penalties. Generally a small portion of interest is foregone.
￭ Generally considered low risk
50. T Y P E S O F I N V E S T M E N T S : T A X S A V I N G S S C H E M E S
⚬Debt funds
⚬Money Market Funds
⚬Public Provident Fund
⚬Voluntary Provident Fund
⚬Listed PSU Bonds
⚬Post office Recurring Deposit
⚬Life Insurance
⚬https://cleartax.in/s/fixed-income-investments
51. T Y P E S O F I N V E S T M E N T S : G O L D
⚬Gold: Used by mankind for thousands of years as money.
⚬ Store of value
⚬ Hedge against inflation
⚬ High liquidity
⚬ Doesn't require specialised knowledge
⚬Gold Investments
⚬ Physical Gold
⚬ Digital Gold
⚬ Gold Sovereign Bonds
⚬ Gold Mutual Funds
⚬ Gold ETFs
52. T Y P E S O F I N V E S T M E N T S : C H I T F U N D S
⚬Chit Funds: A chit fund refers to a form of
collective savings scheme in which a group of
people agree to contribute a fixed amount of
money to a common pool of funds at regular
intervals. One member of the group is chosen by
lottery or other means to receive the entire pool
of funds for that period. The members of the
group then rotate receiving the fund, with each
member receiving the fund in turn as per the
agreement.
54. T A X E S
⚬Amount that all residents of a country have
to pay to government compulsorily
⚬Government collects this money for their
operations and provision of public services
⚬Of 2 types: Direct and Indirect
￭ Direct taxes- charged directly on income
eg- income tax, capital gains tax, etc.
￭ Indirect taxes- charged on spending like
the GST, or custom duties on imported
goods
55. I N C O M E T A X
⚬Levied on annual income of person or
business
⚬Changes depending on how much is the
income i.e. higher income, higher tax
⚬Major source of revenue for govt. in India
and world also
56. G O O D S A N D S E R V I C E S T A X ( G S T )
⚬Levied on spending on goods and services
⚬Introduced in India in 2017
⚬Replaced taxes like VAT, excise duty,
service tax etc. and combined them into
one
⚬Collected separately by both central and
state governments (CGST & SGST)
⚬In TS GST is 18%; 9% CGST, 9%SGST
58. LESSON 6, DAY 6
CONSUMER AWARENESS AND
FINANCIAL SCAMS
59. F I N A N C I A L S C A M S
⚬When people fool financial institutions or
consumers out of their money
⚬Examples- Vijay Mallya, Nirav Modi; duped
banks into providing them huge loans and
absconded with the money
⚬Scams we see on a day-to-day basis:
￭ Tax scams: scammer calls up pretending
to be government and says you have
taxes due
￭ Phone/Computer scams: scammer calls
and says your computer has a virus and
they need to repair it, and steal your
details
60. F I N A N C I A L S C A M S ( C o n t i n u e d )
⚬Elderly are particularly susceptible to these
scams
⚬Important to be careful and identify such
people when on the phone
61. N I R A V M O D I L O A N S C A M
⚬Nirav Modi was a businessman and
diamond trader
⚬Engaged in conspiracy with few Punjab
National Bank (PNB) officials to get
fraudulent LOUs and steal 14,000 crores
⚬LOU- Letters of Undertaking; it is a
guarantee from one bank to repay its
customer's loan taken from another bank
⚬Nirav Modi and few PNB officials worked
together to get fake LOUs and steal 14,000
crores from PNB
62. ⚬Money- history of money, types of money
⚬Banking and saving
⚬Interest rates and types of interest rates
⚬Types of bank accounts
⚬Saving and budgeting and importance
⚬Investments
⚬Taxes and Scams
C O N C L U S I O N
