Basic Terms in Financial Literacy

In this unit the students will know about the basic terms in Financial Literacy like: money, currency, bank etc.

Financial literacy:

The possession of such financial knowledge and skills that help us make intelligent financial decisions or choices is called financial literacy. These decisions can be where to invest, why to invest and how to invest.

Money:

Money is a recognised medium of exchange in the economy. It is an asset that can be stored and used as currency or as the value in accounts and deposits.

Currency:

Currency is the physical form of money in the form of coins and rupees. Each country typically has its currency as a medium of exchange, issued by the central bank. The Government of India (GoI) and the Reserve Bank of India (RBI) are the issuers of the currency, i.e. Indian Rupees.

Bank:

A bank is a government authorised financial institution which keeps the money of account holders and provides loan to the needy for interest. Banks also render other financial services like currency exchange, wealth management and safe deposit boxes.

Account(Bank Account):

An account is a repository of funds held by a bank on behalf of the account holder. An account can be savings, current or fixed. Bank gives each account a unique account number issued to the account holder.

The following terms, students have done in class 6:

Barter System

Needs and Wants

Evolution of Trade and Commerce

Trade:

Trade is the fundamental economic activity involving buying and selling goods and services.

Commerce: Commerce means those activities that help the process of buying and selling of goods.

For example:

  1. Transportation of bread from the bakery to the general store.
  2. Payment made by the shopkeeper to the bread maker.
  3. Bread’s advertisement display in the shop.
  4. Payment made by the customer to the shopkeeper.

The evolution of trade and commerce can be related to the evolution of money also.

Cash Memo

In case of purchase of goods for cash, the store-keeper hands over a receipt of items. This receipt is an example of a cash memo. A cash memo acts as ‘proof of cash sale’ in any business transaction.

 

Check your understanding:

MCQs

 

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