Financial Literacy: An Overview
This course helps you gain a clear understanding of money matters. You learn how to manage your
money smartly, how to spend and save, and also how to grow your money.
Some important financial concepts are:
Needs: A necessity, something that is required, and something that is essential for life. Food, shelter,
clothes, education, etc. are needs
Wants: A desire, something that is wished for, something that is non-essential. Expensive shoes,
expensive mobiles, expensive clothes are some examples of wants.
The money you earn by working at a company is called Income. The money you spend on purchasing
things, paying bills, etc. is Expenditure. The money you are left after that is our Savings.
Why do you think savings are important?
• In case of an emergency in future
• To plan and buy something special for yourself or your loved ones
In Order to save money, you need to do Budgeting. By budgeting, you can ensure that you have enough
money to handle a major expense and not merely the surplus. Budgeting means planning your expenditure
in a way that will leave you with some extra money to save.
To open an account, you will require 2 passport-size photographs and a few copies of KYC documents.
KYC or Know Your Customer is a mandatory procedure done by banks at the time of opening a new
account. KYC documents are: Voter's Identity Card, Driving License, Aadhar Letter/Card, NREGA card,
PAN Card.
When you go to the bank to deposit or withdraw money you need to meet the specific person who is
responsible for taking and giving the money to customers in a bank. They are called Teller.
When you keep our money in the bank account, you are paid Interest by the bank. Interest is calculated
by this formula, SI = PxRxT
There are other ways to save money in the bank account:
Fixed Deposit (FD): An amount is put in a fixed deposit account once. The entire amount is blocked for
the period of deposit. The amount of interest is more than the interest received in a savings account.
Recurring Deposit (RD): Money is deposited periodically. The interest rate, once determined, does not
change during the tenure; and on maturity, the individual will be paid a lump sum amount which includes
the regular investments as well as the interest earned.
Apart from bank you can get similar services in a Post Office. The process is exactly the same. Even a
10-year-old minor can open a savings account in the Post Office.
There are two types of loans:
Secured Loan is connected to a guarantee or collateral. E.g., car loan, home loan.
Unsecured Loan doesn't require any type of collateral. Lenders approve unsecured loans based on a
borrower's creditworthiness. E.g., personal loans, student loans.
Collateral: Collateral is something of value like a car or a house or land. If the borrower does not pay
back the amount borrowed on time, then the lender has the right to take possession of the collateral.
Credit Cards are also a type of unsecured loan. Credit cards allow you to borrow money from the card
issuer up to a certain limit. You have to pay back the amount within a specified time otherwise a penalty
