Financial Literacy Basic Concepts Class 8
Here, notes have been given here in this single article. Students have already studied it for two years, in class 6 and in class 7. Here, only the extra points and topics that were not in the syllabus of those classes, are given. Students may use the links given to access those topics in case of need.
Previous topics are given in blue.
Financial Literacy Basic Concepts Class 8
Teamwork
Definition of Team
A team is a group of people who come together to perform individual tasks to achieve a common goal or objective.
Benefits of Teamwork
- Higher Productivity
- Better Cooperation
- Creativity and Problem Solving
- Sharing of Work
- Learning and Motivation
Team Roles
Each member in a team performs a unique role on the basis of his/her competencies:
Shaper: An individual who has a clear sense of direction and drives things forward.
Implementer: One who is able to turn words into action and is able to get things done.
Coordinator: Demonstrates leadership abilities and is able to manage group dynamics.
Resource Generator: Gathers and provides the necessary information for smooth working of team.
Plant: Generates random set of ideas and creative solutions.
Specialist: Demonstrates specialist knowledge and expertise.
Financial Literacy Basic Concepts Class 8
Introduction to Financial Literacy
Needs and Wants
Basic Financial Concepts
Bank
Account
Income: Income is money that an individual or business earns by providing a good, service or the use of assets.
Loan: A loan is a sum of money that is offered as debt or advance usually by a bank, to an individual, a corporation, financial institution, or government on specific set of terms and charges in the form of interest.
Barter System
It is a system of exchange in which any two individuals mutually exchange a product that they individually require.
Pre-conditions for Barter System:
- Person A should have a product that person B requires and vice versa.
- They should be ready for the exchange at the same time.
- The products being exchanged should be of similar value.
Money and Trade
Bill/Cash Memos
Before the formal system of banking in India, Hundi was used in the process of trade for remittance of payment from one place to another, contained an unconditional order or promise to pay and was negotiable.
Financial Literacy Basic Concepts Class 8
Banking
Evolution of Money
- Barter System involving the use of commodities such as beans, butter and tobacco leaves
- Use of Gold as a medium of exchange
- Ancient Metal Coins used by various ancient civilisations including India
- Use of Paper money as a convenient form of exchange
- Plastic Cards, a modern-day invention that makes transactions quick and efficient
- Electronic Money in the form of digital banking facilities
Importance of Money or Functions of Money
Medium of Exchange: It helps us buy various goods and services that we require in our daily lives like toothpaste, books, lock and key etc.
Standard of Value: Money helps us define the ‘value’ of a product and categorise them as high-priced or low-priced. For example, refrigerator and knife have different value.
Store of Value: Money can be stored in convenient form in your wallet or as a safe deposit in banks. More money means higher ability to buy things of choice.
Financial Literacy Basic Concepts Class 8
Role of Banks
Banking in India started in a major way in the form of the Imperial Bank of India in 1921. This was later renamed as the State Bank of India (SBI) in 1955.
Types of Banks
On the basis of their ownership and services they offer:
Central Bank: In our country, the Reserve Bank of India (RBI) plays the role of the central bank. RBI is an extremely important institution and has strong influence over the state of economy. It acts as the banker to the Government and performs many important functions such as:
- Acts as the key issuer of currency notes
- Managing the foreign currency reserves of the country
- Controlling money supply in the economy
- Acts as a custodian for the reserve money
- Checks and monitors all the activities of the commercial banks of a country.
Commercial Banks: These banks are of two types.
Public sector commercial banks are owned by the Government, and are also known as nationalised banks e.g. State Bank of India, Canara Bank, Central Bank of India etc.
Private commercial banks are owned by private organisations e.g. include ICICI Bank, HDFC Bank, etc
Services of Commercial Banks to customers:
- Management of accounts
- Acceptance of deposits
- Lending of funds
- Cheque facilities for payments across accounts
- Facilities such as online banking and phone banking
Cooperative Bank: The cooperative banking system aims to promote saving and investment habits among people. Cooperative Banks play a significant role in funding of areas under agriculture, livestock, milk, personal finance and self-employment.
Specialised Bank: These are banks that are created with the objective to provide financial support to specific industry segments such as foreign trade, industrial development etc. E.g. Export Import Bank of India (EXIM Bank), Small Industries Development Bank of India (SIDBI) and National Bank for Agricultural and Rural Development (NABARD).
Financial Literacy Basic Concepts Class 8
Types of Bank Accounts
Savings Account Current Account, Fixed Deposits, Recurring Account.
- Key purpose is to encourage savings among people.
- Commonly used by students, salaried individuals and senior citizens.
- Savings account earns a nominal interest.
Current Account
- Key objective is to facilitate business.
- Targeted towards business users.
- Bank does not pay interest rather levies certain charges on the basis of services used.
Fixed Deposit
- Used for the purpose of savings and investment.
- Long term commitment to park funds.
- Interest earned is substantially higher compared to savings account.
Recurring Account
- An account type that encourages systematic habit of saving.
- A specific amount is deposited each month for a predetermined tenure.
- Earns interest more than savings account depending on the chosen tenure.
Financial Literacy Basic Concepts Class 8
Reserve Bank of India ﹘ Role and Importance
At the top of Reserve Bank’s organisational structure is the Central Board of Directors, which has the primary authority and responsibility for the oversight of the Reserve Bank. It delegates specific functions to the Local Boards and various committees.
The Governor plays the role of Reserve Bank’s chief executive. The Governor supervises and directs the affairs and business of the RBI. The management team also includes Deputy Governors and Executive Directors.
Reserve Bank of India ﹘ Core Functions
- Monetary policy
- Regulation of banking and non-banking financial institutions
- Regulation of money, forex, and government securities
- Management of foreign currency reserves
- Banker to Banks
- Banker to the central and state governments
- Currency management
National Payments Corporation of India (NPCI)
It is a not-for-profit organisation for an affordable payments infrastructure for India. NPCI is an umbrella organisation for operating retail payments and settlement systems in India. It is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA).
The various shareholders of NPCI include Public Sector Banks, Private Sector Banks, Foreign Banks, Regional Rural Banks, Multi State Cooperative Banks, Payments Banks, Payments System Operators and Small Finance Banks.
Digital India Initiative
Digital India is a programme with the vision to transform India into a digitally empowered society and knowledge economy. It is a part of the larger ‘Atmanirbhar Bharat’ initiative of the Government of India that aims to strengthen and empower the economy of India with the belief to promote the products that are made in India.
Financial Literacy Basic Concepts Class 8
Various Digital initiatives under Digital India Initiative:
Aadhaar Enabled Payment System (AePS): It is a bank led model which allows online financial transaction at PoS (MicroATM) through the business correspondent of any bank using Aadhaar authentication.
Bharat Interface for Money (BHIM): An app that makes payment transactions simple, easy and quick using Unified Payments Interface (UPI).
DigiLocker: It is a digital wallet that empowers citizens digitally via a secure cloud based platform for issuance, sharing and verification of critical lifelong documents or certificates
eBiz: The focus of eBiz is to improve the business environment in the country by enabling fast and efficient access to Government-to-Business (G2B) services through an online portal.
EPFO Web Portal: The web portal allows employees to check their EPF balance through an ePassbook which is an online version of their physical passbook.
Financial Literacy Basic Concepts Class 8
Digital Payments
Advantages of Digital Payments
- Convenient: Without worrying about specific banking hours, customers can avail the option of digital payments at a time of their choosing.
- Easy and Quick: With no cash or cheque handling requirement, digital payments can be made quickly and easily through smartphones or computers.
- One stop solution: Digital payments provide the facility to not just transfer funds but to purchase goods and services online and also to pay bills.
- Accurate Record: Each online/digital transaction is backed by a unique transaction ID. This makes digital payments fully secure transactions, and there is minimal risk involved. The transaction ID allows the user to track the payment in case of any delay or error.
- Transparent Transactions: Digital transactions are transparent and eliminate the security risks that come with handling cash money while discouraging the use of black money.
Financial Literacy Basic Concepts Class 8