Financial education for school children

An initiative of SEBI & NISM

Agenda
Money matters Planning: the mantra for success Budgeting prioritizing the needs Investments Banking Investment mantras

Choosing the right investment options Asset allocation strategy Savings and investment related products Depository System Points to remember Investment philosophies About stock Markets About SEBI

Money matters: They really matter!

Ravi and Mohan who is wealthy?

Ravi

Mohan

Bicycle Watch Books A cricket bat 5 Wonderland comics

Books Basket ball Mobile phone 2 games CDs A video game A tennis racket

Ravi and Mohans possessions

Ravi

Mohan

Bicycle worth Rs. 2250 Watch worth Rs. 475 Books worth Rs. 1250 A cricket bat (borrowed from a friend) worth Rs. 345 5 Wonderland comics (worth Rs. 35 each. 2 out of 5 comics are borrowed)

Books worth R.s 750 Basket ball worth Rs. 650 Mobile phone worth Rs. 1000 2 games CDs (borrowed from a friend) worth Rs. 100 each A video game worth Rs. 1250

A tennis racket worth Rs. 1000

Monetary value

Wealth = net worth Net worth = assets liabilities

Assets: something you own Liability: something you owe

Calculating net worth

Activity II in the booklet Which items are assets and which are liabilities? Calculate the net worth
Net worth = assets liabilities

So.

The magic word to be rich is : High net worth

And negative net worth would lead to Bankruptcy

Net worth tells us where we are

Planning the mantra of success

But, all of want to be somewhere

We want some things we do not have yet We want to be what we are not yet We want to reach where we have not yet

These are the goals in life

Success in life means having goals and then planning to achieve those

Goals
Clear? Vague?

Smart goals

Goals are dreams with deadlines Converting dreams into SMART goals

Goal definition is the first step in a plan

Resource constraint

Win with prioritisation

Remember:
Needs are basic necessities one cannot wish away Wants make life more comfortable, but can wait

BUDGETING

Budgeting is the process of tracking, planning and controlling the inflow and outflow of money
Inflow of money = income Outflow of money = expenses

Budgeting: important terms

Cash-flow statement Budget Surplus or deficit Instant gratification / delayed gratification

Knowledge of budgeting is an advantage Art of budgeting helps a person develop economic way of thinking and problem solving

Important repetition:
Income: money earned from various sources Expenditure: money spent on needs and wants Cash-flow statement: record of income and expenditure

BANKING AND INVESTMENTS

What is this extra Rs. 10 that the banker offering to Ankush?

3 pillars of investment
Safety

Investment s

Growth

Liquidity

Understanding a bank:
What is a bank? Types of bank accounts

INVESTMENT MANTRAS

Time value of money

Who will have more Money ?

Sunny
Starts investing Rs. 1 lakh p.a. from the age of 15 At the age of 30, he stops investing He does NOT withdraw a single penny from this money

Bobby
Starts investing Rs. 4 lakhs p.a. at the age of 30 years and continues till the age of 60 He does NOT withdraw a single penny from this money.

Both earn 12% p.a. return on their investment Who will have more money at the age of 60 years?

Check Mate!

Once upon a time there lived a wealthy king. One day a man brought to him a new board game that he had invented. He called the game chess. The king played the game with the man and he was so impressed that he asked him to choose a reward for himself.

Check Mate!

The man asked for one ashrafi for the first square of the chess board, 2 ashrafis for the second, 4 for the third & so on The king found it a very easy reward. And ordered to give the award to the man ..

Chek - mate

But till the 64th square .the man had managed to gather 18,446,744,073,709,551,615 ashrafis!!!! The king had given the man his word so he had to stick to it. So even after having emptied his entire treasury, he could not pay the mans full reward.

Einstein called Compounding ?

Rule of 72

Compounding and the discipline of regular savings

Amount saved per month Rs. 200

Rs. 300 Rs. 400

Period of investment

Total saving

Expected rate of return 10%

9% 8%

Final value

8 years
6 years 5 years

Rs. 19,200
Rs. 21,600 Rs. 24,000

Rs. 29,236
Rs. 28,502 Rs. 29,390

INFLATION BEWARE!

How much did you spend to buy your new school bag this year? How much did you spend last year?

To counter inflation, you need to invest your money Investments can help your money grow

INVESTMENTS EXAMPLES

National Savings Certificate Public Provident Fund Post Office Saving Schemes Equity linked savings scheme Infrastructure bonds

Kisan Vikas Patra Bonds Debentures Company deposits Mutual funds Equity shares
Depository system

What if?

If something happens unfortunately to a person in the short termthen what about his family and long term goals? Well, the solution is Planning

Why Insurance Planning ?

Insurance is like a parachute. If it isn't there the first time, chances are you won't need it the second time!

Insurance is protection for the person and his family

POINTS TO REMEMBER

Investment philosophies

Evaluate risk of every investment Decide the investment based on needs Do not invest in any scheme that you do not understand Do not invest on trust. Have everything backed up by documents Take into account tax implication of every income Do not blindly follow market tips and rumours Anything that appears unnaturally high or low will have some catch disguised Do not follow schemes where you may protect the interest but lose the principal Invest with knowledge after understanding the product well

About stock market

What is a stock exchange? Function of stock markets Stock exchanges in India What are securities?

SEBI
Role of SEBI Importance of a regulator

THANK YOU!