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Project Arthik Gyan


a FIAI imitative to support

Financial Literacy drive of NCFE
for Class 8th, 9th & 10th Students

Chapter 1: Money Matters: Smart Goals And Financial


Money : A current medium of exchange in the form of coins and banknotes;


Which 5 things you would like to buy right away, if you had
the money?

Net Worth

Asset: Items owned by a person.

Liability: Money owed by a person.
Net-Worth = Assets Liabilities
Identify the assets and the liabilities of Mr. ABC and calculate his net-worth.



Gold / Jewellery









Home Loan



Loan Taken From A




Total Assests / Liabilities

Net Worth




Smart Goals And Financial Analysis


Not Smart



I want to go
somewhere on my
winter vacations.

I want to visit Goa

on my winter


I need to save
some money for
going on a trip.

I need to save
Rs.3000 for going
on a trip.


I will arrange all the I will request my

money myself.
parents to give me
Rs.2000 & for rest I
will use my savings.


I will start saving

the amount
required 2 months
before leaving for
the vacation.

I will start saving

Rs.200 monthly
from my pocket


I will save money

sometime soon.

I will save Rs.200

per month for next
5 months.

Chapter 2: Budgeting: Balancing the Means and the Ends


Income: It is the money earned/gained.

Eg; Your parents giving you Rs.500 monthly as pocket money.
Income are of two type:

1. Active Income: You are receiving Rs.500 regularly as your monthly pocket

2. Passive Income: You received Rs.500 from your parents on your B'day.
Expenditure: It is the money that you spend on your needs and
Eg: Rs.100 you spent for having a pizza.
Expense are of two types:

1. Regular Expense: That you regularly or daily spend like eating daily in

2. Lump Sum Expense: That you spend once on your Birthday Party.


Expenses can be Discretionary Or Non-Discretionary.


Discretionary Expense: Its your choice that you want to spend money for eating at
canteen. You can also bring your lunch.

Non-Discretionary Expense: Its a expense that you have to spend out of necessity. You
spend Rs.10 daily for taking a bus for attending school.

Deficit: Deficit is a lack OR an excess of expenditure over earning.

Eg; Instead of Rs.500 you spend Rs.600 on a pizza (Rs.100 borrowed from anyone), so
your deficit is -Rs.100
Rs.100 (your pocket money Rs.500 your pizza cost Rs.600 = - Rs.100,
your deficit amount)

Surplus: Surplus is the amount that remains when use or need is satisfied.
Eg; If you along with your 4 friends ordered 4 Burgers, Cold Drinks etc. at Mc'Donalds. The
total cost of your order will be Rs.500. Now, instead of ordering everything
separately, you ordered 4 combos which includes Burger, Cold Drinks, Toys etc. For
Rs.400 only. In this case Rs.500 Rs.400 = Rs.100 money you still have with you. This
amount is your SURPLUS, where you utilized your smartness to fulfill your need.


Small Amount creates Valuable Interesting & Nice Gifts

Saving is a healthy habbit,, which will reap benefits in the long run
Because you have short term goals like buying a book, toy etc.
& you have long term goals like saving for buying a bicycle, video game etc.

Cash Flow Statement


Cash-Flow statement : It is a record of your income and expenditure, i.e.

Income Expense = Cash Flow

Importance Of Cash Flow Statement:

It tells us the amount of money remaining with us after deducting our all
expenses from our income.
Eg; Pocket Money (Rs.500) Pizza Cost (Rs.100) = Rs.400 (Cash Flow)
Now, you can utilize Rs.400 for any of your need.


Budget : Budget is a planning of your expenses keeping in mind your

E.g. You ordered a pizza of Rs.200 keeping in mind that your monthly
pocket money is Rs.500.
Opportunity Cost : Opportunity cost is what you give up every time you
make a choice. Re sources are limited and wants are endless. There is
no way we can have it all. So each choice to buy something is also a
choice of what to give up.
E.g. If you ordered a pizza of Rs.500 but due to some reason its
delivery got delayed. Due to delay, you got a discount of Rs.200 on
your pizza. So, in this case you paid only Rs.300 instead of Rs.500
then your Opportunity Cost is Rs.200 here.

Delayed Gratification: With long-term

term goals, you must be willing to give
up something you want now to get something better/bigger in the future.
Eg; You have received a pocket money of Rs.500 & want to order a pizza
of Rs.700. Either you can ask your parents for more money or you can
order something else like burger for Rs.100 & in coming next month you
can have a pizza of Rs.700 as you already have saved Rs.400 this
Instant Gratification: When you satisfy a want immediately, it gives you
instant gratification.
Eg; You have received a pocket money of Rs.500 & want to order a pizza
of Rs.700. Now, you will ask your parents for Rs.200 more immediate so
that you can have that pizza of Rs.700.
Then in next month, your pocket money will be Rs.300 only (as Rs.200 you
already have taken for Pizza).

Chapter 3: Understanding Insurance


Insurance: Life Insurance is a Noblest concept invented by the Government which is a

way of managing risks of Human Life.
Types Of Insurance:
A. Life Insurance : Term Insurance, Whole Life, ULIP, Traditional, Retirement Policy etc.
B. General Insurance: Motor, Property, Health (Mediclaim) etc..
Insurance policies can be divided on the basis of two risks, i.e.
A. Pure Risk : Where the coverage involves the risks related to the insured life
B. Investment Risk Where the coverage not only involves the risks related to the
insured life but also his investments.


Risk for Human beings


Dying too

Living too Long

Financial Loss
Above picture explains the risks involved with Humans and if they die early & live
too long then it will get impact on their Finances. Thus explaining the importance
of Life Insurance.

Need of Insurance

A Peace of Mind

Life Insurance products

Life Insurance Products


Traditional Plan

Term plan

Unit Linked
Insurance Plan


Note :
Term Plan

: Benefit paid only in case of mishappening during the term

Pure Endowment : Benefit paid only in case of survival during the term

Life Insurance products





Term Assurance

Pure Endowment

(Provides only
death cover)

(Provides only
survival benefit)

Endowment Plan
(Combo of Term and Pure


Unbundled Pricing Factors


. Mortality



Investment Element

They are more transparent in nature

Unit Linked Insurance Plan (ULIP)


They offer choice of funds to the investors

Investments are made in equities, debts and the money market




Investors can choose an Asset class as per their risk preferences

It offers more flexibility to the investor than a traditional
1 policy

Insurance Terminologies

Proposal form

Initial step(application) to initiate the contract


The person who applies for the insurance contract

Life Insured

The person who is covered in the insurance


Sum Assured

The risk cover amount promised by the insurer


The money paid as consideration for a specified

Sum Assured

Insurance Terminologies

Policy term

The duration of the insurance contract

Maturity value

The amount received at the end of policy term

Premium paying

The number of years premium is to be paid.

Can be less than or equal to Benefit Period

Surrender value

The amount received if policy is closed before the

end of policy term

Types Of General Insurance:


with fire

(dealing with
related risk &

(dealing with all
other like
motor, liability,
Medical etc)

Examples Of General Insurance (Motor)


You have a car of Rs.3 lac & have taken a car insurance. The premium for this is
Rs.6000/year. After 1 month your car met with an accident and too fix the
damage (make the car new again), it will cost Rs.20000. Now the insurance
company will pay this amount as you have taken a car insurance.

Examples Of General Insurance (Motor)


Example Of General Insurance (Mediclaim); You have taken a health

insurance cover of Rs.5 lac (Sum Assured). The premium for this is
Rs.8000/year. After 6 month you need to be hospitalize due to some illness
& your hospital bill was Rs.200000. Now the insurance company will pay this
amount as you have taken a health insurance policy.

Portability Of Health Insurance: Here one can change his insurance company.
Note: In INDIA the regulatory body for insurance companies is IRDA i.e.
Insurance Regulatory And Development Authority.

Chapter - 4: Understanding Investment


Investment: Investment is a instrument which helps in grow money & it

also helps you to fulfil your certain desires in your life.
Benefits Of Investments:

Investing makes your savings grow

Invested money grows with time

Interest is the extra money you get when you invest

Your money for some time

When interest is compounded money grows faster


Diversification: Diversification is a very familiar financial terminology to most

In the most general sense, it can be summed up with this phrase:
"Don't put all of your eggs in one basket.
Taking a closer look at the concept of diversification,
diversification the idea is to create a
portfolio that includes multiple investments in order to reduce risk.

Lets understand Growth Of Money with an example:


Once a boy (Named - Ankush) received Rs.500 from his grandfather for his
Ankush went to his father with this Rs.500.
Father:: Son, put the money in your a piggy bank.
Ankush:: Father, it is almost full and what should I do now?
Father:: Why don't you put the money in my bank?
Ankush:: I have total Rs.1500 (Rs. 1000 in my piggy bank and this Rs.500), but
why should I give it to your Bank? Will they return my money?
Father:: What if I say, they will not only return your money but will also give you
additional Rs. 90 at the end of the year.
Ankush:: I would like to know that why they are giving me this extra Rs.90?
Father : Rs.1500 was your investment and Rs.90 is the return on investment or in
simple term interest amount.

** Interest Rate Taken As 6% Per Annum


Inflation: The rate at which the general level of prices for goods and services is
rising, and, subsequently, purchasing power is falling.

For Eg; When Mc'Donald launches its Mc Aloo Burger at Rs.20, now because of
inflation (Due to rise in price of potato, transportation cost etc.) the same
burger now costs Rs.30 (including taxes). So, inflation rate is 30-20/20
= 50%.


CPI (Consumer Price Index): A measure that examines the weighted average of
prices of a basket of consumer goods and services, such as transportation, food
and medical care. The CPI is calculated by taking price changes for each item in
the predetermined basket of goods and averaging them; the goods are
weighted according to their importance.
The annual percentage change in a CPI is used as a measure of inflation.

WPI: An index that measures and tracks the changes in price of goods in the stages
before the retail level. Some countries use WPI changes as a central measure of

Time Value Of Money: The time value of money is the principle that a certain
currency amount of money today has a different buying power (value) than the
same currency amount of money in the future. The value of money at a future
point of time would take account of interest earned or inflation accrued over a
given period of time.

Types of Interest

A. Simple Interest:
S.I. = P*N*R/100 = Principal (Rs.1500 Amount Deposited) Number Of Year (1Year) Rate (6%) /
S.I. (Simple Interest) = Rs.90
B. Compound Interest: Interest On Interest.
Suppose Ankush has deposited his Rs.1500 with bank for 2 years then his interest would be Rs.1685.40

C.I. = P (Principal) * (1+r)^n = P (Rs.1500 Amount Deposited) {1+0.06}^n(2)
= Rs.1685.40
C.I. = Compound Interest, P= Principal, R = rate of interest, n = number of periods, r = R/100 (6 / 100
= 0.06)
So, Compound Interest for 2 years = Rs.185.40 (Compound Interest)

Rule Of 72:

Chapter 5: Basics Of Banking


Bank : Bank is an institution where people park their surplus money

(Deposit) and earn some return called interest.
Types of bank Accounts:
Savings Account: You deposit money &
get interest on that deposit but there is a limit
on monthly withdrawls.
Current Account: You deposit money but
you don't get any interest on that deposit and
also there is no limit on withdrawls.

Eligibility Criteria For Opening A Bank Account:


One can open bank a/c who is of 18 years or above

Now, parents can also open bank a/c in name of their kids

Eg; Kotak Junior Account

Kotak Junior Account is designed

to inculcate the habit of savings in
children from an early age and
help parents build a corpus for
their childs future.

Services Offered By Bank:


Types of Bank Deposits:


Recurring Deposit : Recurring Deposits are a special kind of Term Deposits

offered by banks which help people with regular incomes to deposit a fixed
amount every month into their Recurring Deposit account and earn interest at
the rate applicable to Fixed Deposits.

Fixed Deposit: It is a financial instrument which provides investors with a

higher rate of interest than a regular savings account, until the given
maturity date . It may or may not require the creation of a separate
account. It is known as a term deposit.

Special Bank Term Deposits: Banks also have their own specialized FD's
offering attractive interest rate which is higher than normal FD's.


Cheque: A cheque is an instrument in writing containing an unconditional order, signed by

the maker, directing a a specified banker to pay a certain sum of money only to, or to
the order of a certain person or to the bearer of the instrument.

Demand Draft: It is a special instrument which does not get dishonoured (bounced). IT is
always issued by a Bank.

ATM: Its a machine through which we can withdraw money from our deposit a/c at any time.

E-Banking Or Internet Banking: Its a process through which one can manage his/her account
online like viewing e-statement,
statement, fund transfer, online shopping, ticket booking etc.

Tele-Banking: Its a process through which one can manage his/her account over the




Entry in the above cheque

Pay ( Name of the person who needs to be paid)

Ramesh K.N

Date ( Date on which the money is to be paid)


Rupees(The amount to be paid in words)

One Thousand only

Rs. (The amount to be paid in Figures)


Signature of the person issuing cheque

Signature(It should be as per specimen

signature card given to the bank)

Account Number of the person issuing cheque


Branch Name(The branch where the person who

is signing the cheque is having the account)

State Bank of Mysore

Public Utility Branch, Bangalore -560 001

Cheque Number


Mode of Payment

A/C Payee

Demand Draft

Enclosed within the figure

Enclosed within the figure


Black rectangle at the top left

SBM - Somwarpet

The branch of bank issuing the DD

Red Rectangle against ON



The party which gets the amount specified in

the DD

Red circle at the top right corner


Date of issue of DD
(Validity period is six months)

Green Circle below the date


The amount payable to the party

Green rectangle in the middle

Six ten thousand

Five Thousands
Zero Hundreds
Zero tens

Amount in words

Black circle at the bottom

SBM Service Bangalore

The branch of bank which pays the amount

Blue rectangle next to Drawee



Number of DD

Brown rectangle on the right


Two signatures of the officers of branch issuing


Difference between Cheques and DDs:




Demand Draft(DD)


Issued by account holder

Issued by bank

Availability of

The account need to

have enough balance, at
the time of passing of

Amount need to be paid to the bank before

DD is made


Can be forged easily

Highly secure

Credit of
amount to the

take few

One or two days

of instrument

Cheque may get


Guaranteed by Bank

Issue Date

Can be pre/post dated

Can not be pre/post dated


Signed by

Signed by 2 designated officers of the Bank

Charges for

Nil or negligible

Based on the value of DD, the Bank charges


Basics Of Banking

Safety: If you lend 100 rupees to someone, will he give it back to you i.e. is your
capital (Rs.100) safe?
Liquidity: Will you get your money back if you need it immediately?
Growth: What is the return you will get on your investment? It could be in the
form of income or appreciation or both.

Bank Gives

Bank offers Safety on amount deposited.

You can withdraw money at any time through cheque, atm etc.

On amount deposited, you will also get interest on same.

Note: In INDIA the regulatory body for Banks is RBI i.e. Reserve
Bank Of India.

Chapter 6: Introduction Of Stocks & Bonds


Can you identify these buildings?


The two buildings shown in last slide were:

National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) Located In Mumbai,
BSE is the oldest stock market in Asia and NSE is the largest stock exchange in India and the
third largest in the world in terms of volume of transactions. Though a number of other
exchanges exist, NSE and BSE are the two most significant stock exchanges in India.
What is a Stock Exchange?
A stock exchange is an organization constituted for the purpose of assisting and carrying out
buying, selling or otherwise dealing in securities. It is also known as Secondary Market.
What are securities?
Securities are financial instruments and include instruments such as shares, bonds, debentures
of a company or body corporate or a government. Thus, a stock exchange provides
a trading platform, where buyers and sellers can meet to transact in securities.

Note: In INDIA the regulatory body for stock exchange is SEBI i.e. Securities and
Exchange Board Of India.


IPO: An initial public offering (IPO) or stock market launch is a type of

public offering where shares of stock in a company are sold to the
general public, on a securities exchange (like NSE, BSE), for the first time.
Demat Account: In India, shares and securities are held electronically in a
Dematerialized account, instead of the investor taking physical possession
of certificates. A Dematerialized account is opened by the investor while
registering with an investment broker (or sub-broker).
Every shareholder
will have a Dematerialized account for the purpose of transacting shares.
Dematerializing a security means converting it from physical form to
electronic form.
In India there are two depositories which take care of securities
dematerialization. They are NSDL (National Securities Depository
Limited) & CDSL (Central Depository Services Limited).


Equity Stocks: An equity investment generally refers to the buying and holding of shares
of stock on a stock market by individuals and firms in anticipation of income from
dividends and capital gains, as the value of the stock rises.
Face Value: It is also known as par value of the stock. Face Value of share is generally
Dividend: A dividend is a payment made by a corporation to its shareholders, usually as a
distribution of profits. When a corporation earns a profit or surplus, it can either re-invest
it in the business (called retained earnings), or it can distribute it to shareholders.
EPS (Earning Per Share): It is the rupee value of earnings per outstanding share of a
company's equity stock.
Earnings per share (net income formula) :
EPS = Profits Dividends / No. Of Outstanding Shares
P/E Ratio: The price-to-earnings
earnings ratio or P/E ratio, is an equity valuation multiple. It is
defined as market price per share divided by annual earnings per share.


Shareholders: Individuals who buy (in other words invest in) shares of a
company are the owners of the company and are referred to as share
holders. Share holders usually have voting rights and can, thus,
participate in management of the company.
Bond: It is a debt security, under which the issuer owes the holders a debt and,
depending on the terms of the bond, is obliged to pay them interest.
Bonds are issued by public authorities, credit institutions, companies and
supranational institutions in the primary markets.
Debenture:: A debenture is a document that either creates a debt or acknowledges
it, and it is a desbt without collateral.

Nifty is the 50 stock index comprised of some of the largest and most liquid
stocks traded on the NSE.
BSE 100 is the stock index comprised of 100 of the largest and most liquid
stocks traded on the BSE.

Phases Of Stock Market:


Bull Phase: A bull market is associated with increasing investor confidence,

and increased investing in anticipation of future price increases (capital
gains). A bullish trend in the stock market often begins before the general
economy shows clear signs of recovery.

Bear Phase: A bear market is a general decline in the stock market over a
period of time. It is a transition from high investor optimism to
widespread investor fear and pessimism.

Chapter 7: Investments : The Wider Spectrum


There are other asset classes for investing apart from bank saving a/c such as: Mutual Funds,
Commodities (Gold), Real Estate, Foreign Exchange (Dollar).
Mutual Fund: It is a pool of funds for doing investments which is professionally managed by
Fund Managers & has a common goal.

Types Of Mutual Funds:

A. Open Ended Funds: Where you can invest/sell anytime.
B. Close Ended Funds: Where you can invest for a specified time and can sell only after the
specified time.
Entry/Exit Load: A Load is a charge, which the mutual fund collects on entry and/or exit from
a fund. A load is charged to cover the cost incurred by the mutual fund when it buys or
sells shares in the stock market.

Types Of Mutual Funds:


Benefits Of Mutual Fund


Professional Management Fund Manager

Diversification - In All Sectors of Economy

Return Potential - High Returns / Post Tax Returns

Low Costs - Entry / Exist Load

Liquidity - Anytime Redemption / Partial Withdrawal

Transparency Fact Sheet

Flexibility Switching Option (One Scheme to other)

Choice of schemes Various Funds

Tax benefits u/s 80



NAV : Net asset value(NAV) is the value of a fund's asset less the value of its
liabilities per unit.

Where Assets = Market value of the funds investments + Receivables +

Accrued Income






Pa ra m e t e r
Re t u r n s
In t e re s t
Re c e ip t

On Ma t u rit y

8% - 9%
Ma t u rit y

Eq u i t y M F
Sche m e s
De p e n d s o n
Pe rfo rm a n c e

Te n u re

1 5 Ye a rs

7 da y s t o
1 0 y rs

No S p e c ifie d
Te rm

Pa rt ia l
Wit h d ra w a l
Lo n g t e rm
Ta x Lia b ilit y


Ba n k F D



Ye s


Ye s


Min im u m
Rs 5 0 0 p . a .
Rs 1 0 0 0 0
Rs 5 0 0 0
In v e s t m e n t
Ma x im u m
Rs 1 , 0 0 , 0 0 0 No Up p e r
No Up p e r
Lim it
Lim it
In v e s t m e n t
N. A
N. A.
Rs 5 0 0
Mo n t h ly
In v e s t m e n t s
De p e n d s
Lo c k In
By De fa u lt
No Lo c k- in
Pe r io d
1 5 y rs
o n Te r m o f Pe rio d
De p o s it


National Saving Certificate (NSC):: National Savings Certificates popularly

known as NSO is a saving bond , primarily used for small saving and income
tax saving investment in India, part of the Postal savings system of Indian
Postal Service (India Post). These can be purchased from a post office by an
adult in his own name or in the name of a minor, a minor, a trust, two adults
jointly. These are issued for six year maturity and can be pledged to banks
for availing loans.


Post Office Monthly Income Scheme (POMIS):

(POMIS) Post Office Monthly Income
Scheme plan is one of the many investment options offered by Post Office in
India. Schemes offered by Post Offices are risk free as there is no touch of
equity in them. POMIS is also one such scheme.

Chapter 8: Beyond Savings : Borrowing


Loan: A thing that is borrowed, especially a sum of money that is expected to be

paid back with interest.
For eg; As explained in previous slides your pocket money is Rs.500, you ordered a
pizza of Rs.700. Your shortage is Rs.200, so you borrowed or took a LOAN
from your elder sibling for Rs.200. Now your loan is Rs.200 which you will pay
back when you will get your pocket money next month. This loan also can be
treated as Personal Loan.

EMI (Equated Monthly Installment) is the amount that a borrower should pay every
For eg; You pay back Rs.200 loan taken from your elder1sibling in 4 monthly
installments of Rs.50. In simple term, you will pay back your loan in EMI's of Rs.50.

Credit Card

Amortization:: Amortization is the process by which loan principal decreases over

the life of a loan, typically an amortizing loan. With each loan payment that
is made, a portion of it is applied towards reducing the principal, and another
one is applied towards reducing the interest on the loan.
Credit Cards:: A credit card is a payment card issued to users as a system of
payment. It allows the cardholder to pay for goods and services based on the
holder's promise to pay for them.

Credit Card

Advantages of Credit Card:

Availibility of interest free credit for 45 days

No need to carry cash

Useful for online shoppings/payments

Available all over the world

Disadvantages of Credit Card:

High interest rates on late payment

If lost, it can be misused

One tends to spend a lot over and above his earning



Different Types Of Loans:

House Loan

Consumer Loan

Personal Loan

Auto Loan

Education Loan etc.

Eg: Suppose you purchased a car of Rs.5 Lac. You paid Rs.2 Lac for now i.e.
your down payment. For the remaining portion you took an Auto Loan of
Rs.3 Lac (Loan Amt-3Lac) at 12% per annum (Interest Rate-12%).
And you
pay Rs.7000 monthly to pay off your loan i.e. EMI.
If the interest rate remains the same i.e. 12%, its called as Fixed Rate.
If the interest rate fluctuates i.e. Sometime 12%, sometime 13%, its called as
Floating Rate.

Chapter 9: Retirement Planning


Retirement planning: Planning for the purpose of achieving financial independence

after retirement.
Pension: Regular income to the individual after retirement.
Retirement planning requires three basic steps:
1. Determine how much annual income will be needed in each year of retirement.
2. Determine how much corpus must be accumulated in retirement savings by the start
of retirement in order to fund the expenditure during retired years.
3. Determine how much must be contributed to retirement savings in each working
year remaining in order to accumulate the required amount.