Securities and Exchange Board of India

Financial Education for

SCHOOL CHILDREN
The content of the book is developed National Stock Exchange (NSE) under the guidance
of the Advisory Committee for the Investor Protection and Education Fund (IPEF) of
Securities Exchange Board of India (SEBI)

Disclaimer

Financial Education initiatives of the SEBI are for providing general information to the
public. For specific information on securities law, rules, regulations, guidelines and
directives framed there under, please refer to the same at www.sebi.gov.in

Published by

Securities and Exchange Board of India

(SEBI)

SEBI BHAVAN
Plot No.C4-A,'G' Block
Bandra Kurla Complex
Bandra (East), Mumbai 400051
Tel: +91-22-26449000 / 40459000 / 9114
Fax: +91-22-26449027 / 40459027
E-mail: [email protected]

Every effort has been made to avoid errors or omission in this publication. Nevertheless any mistake, errors or discrepancy
noted may be brought to the notice at the above mentioned address which shall be rectified in the next edition. It is notified
that the publisher will not be responsible for any damage or loss of action to any one, of any kind, in any manner from use
of this material.

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action.
 Session 1
LEARNING
Money Matters: They really matter!

Activity I
Ravi and Mohan are students of class 10th of ABC Public School. One day both of them went into an argument
about who is wealthier? The argument peaked up and they started to mention the things which they
possessed.
Ravi started first and mentioned following are the things available with him:
Cycle worth Rs.2250.
Watch worth Rs. 475.
Books worth Rs.1250.
A Cricket bat of worth Rs.345. He borrowed the racquet from Rajesh for some time.
5 Wonderland comics each worth Rs.35 each. Out of the five comics, he had borrowed two from Arjun.

Things available with Mohan are as follows:

Books worth Rs.750.
Basket ball worth Rs.650.
A Mobile worth Rs.1000
He borrowed two games CD from Chandan worth Rs.100 each.
A video game worth Rs.1250.
A tennis racquet worth Rs.1000. He has lent the racquet to Pankaj for few days.

Both of them know the things available with them Wealth is determined by Net
and their respective prices. But they don’t know how worth
to prove who’s wealthier. Can you help both of them
Net worth = Assets –
to know who is wealthier?
Liabilities

Asset: Something you own

Liability: Something you owe

2
LEARNING
ACTIVITY II:
Let’s enhance our understanding of assets and liabilities further:

The information furnished below is of Mr. Pawar You need to calculate the net‐worth of Mr. Pawar by identifying
the items as assets or liabilities:
Speaking Money wise: You
are worth your Net worth

Amount (Rs.) Asset

ITEM AMOUNT (Rs.) ASSET LIABILITY

Savings bank account balance 55,000

Shares of listed companies 60,000

Car 3,25,000

House 25,00,000

Furniture 12,500

Air Conditioner 14,000

Microwave 10,500

Laptop 22,000

Gold Jewelry 75,000

Life Insurance – Surrender Value 85,000

Car Loan Outstanding 2,00,100

Home Loan Outstanding 12,00,000

Money lend to a friend 15,000

Payment to maid not paid 1,500

Total Assets

Total Liabilities

Net worth = Total Assets – Total Liabilities

Net worth of Mr.Pawar is Rs.

3
LEARNING
Planning: The Mantra of Success!
We all have Goals in life:
I want to buy a cricket Bat
I want to go to picnic
I want to buy a cycle
I want to get admission in ABC College
Have you ever wondered why many of our goals are delayed or worse not fulfilled? Well, simply because we are
wishful about our goals and we have no definite PLAN to achieve these cherished goals.
The starting point to achieve any Goal is to have a plan for it. Once you have a plan, it is no more a vague goal, it
becomes a SMART Goal.

SMART

Let’s see the difference between what is Smart and what is not:

4
LEARNING
Activity III:
Below are the goals of some smart kids like you. Now your task is to plan a SMART goal for each one of them so
that they can achieve their goals:
1)
Name: Mitesh Jain
Age: 15 years
School: Modern Public School
Passion: Play football
Dream: Wants to buy a football.
SMART goal:

2) Name: Ankita Singh

Age: 14 years
School: Laxmibai Public School
Passion: Learn Cricket
Dream: Buy a Cricket bat

SMART goal:

Success Wise: To climb the ladder of success you need to

have
SMART Goals! Success Wise : To climb the
ladder of success you need
to have SMART Goals !
ING

Session 2
5
 Win Win
Budgeting: Prioritizing the needs! All the Way
Win Win

Activity IV:
Mr. and Mrs. Singh have following family demands to meet:

1. Purchase a shawl (as it is winter) for Mr. Singh’s mother as a present on her birthday
2. Elder son Sahil is demanding a Cycle to commute
3. Younger son Rohan demanding a latest Video game
4. Gift for the marriage of a common friend Mr.singh has to attend. Gift can be a gold set.
5. The couple also wants their house to be decorated by an interior decorator.

Discuss the demands and prioritize them on the basis of importance and urgency. Then take required
action:

Win with
Urgent Not Urgent
prioritization
I. Urgent and important as well II. Important but not urgent
Important
Action: Need to do now Action: Plan to do it later
:
III. Urgent but not important IV. Nethier urgent nor important
Not Important
Action: Do it if cash flows allow Action: Ignore

Demand Urgent Important Action

Shawl for Mr. Singh’s mother Y Y BUY
Sahil’s Cycle N Y PLAN FOR LATER
Rohan’s new videogame N N DON’T BUY
BUY A LESS EXPENSIVE
Marriage gift for common
Y N GIFT TO THE EXTENT
friend
CASH FLOWS PERMIT
House decoration N N IGNORE

Remember 5
Needs are basic necessities one cannot wish away. For example in summer fan becomes a need.
On the other hand wants make your life comfortable .An air conditioner makes life more comfortable in
summer.

6
 Activity V: Write down various needs and wants of your family and suggest action as per prioritization
LEARNING
Demand Urgent Important Action

Budgeting: Let’s first learn few terms about Budgeting

Cash‐flow Statement: A record of your income and expenses.

Budget: A plan for balancing of income and expenditures or a projection of one’s

income
and expenditure.

Necessity of Budget: Optimize savings

Traffic signal for vehicle called ‘Spending’.
Save accurately for a particular short/long term goal.
Effectively allot funds to various areas of expenditure in advance.

Budget Surplus or Deficit: Projected income > Projected Expenditure = Budget surplus
Projected income < Projected Expenditure = Budget deficit

Postponing Satisfaction: Let go something now for something better/bigger in the future. Eg: giving
up the idea to buy video game now to purchase a bicycle in the future.

Instant Satisfaction: Instantly buy something when you want it. Eg: Purchase a video game
instantly when you want it.

Opportunity Cost: At a point of time, when you give up something to achieve something else,
the forgone opportunity is known as ‘Opportunity Cost’. Eg. You have an
option to either buy a video game or a bicycle and you opt for the bicycle,
then the video game is the opportunity cost for purchasing bicycle.

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

7
 Activity VI: Plan your Budget
LEARNING
Himanshu is a 15 year old boy and he stays in Hyderabad with his family. His family consists of his father, his
mother and sister Priya.

Himanshu gets Rs.1500 as a monthly allowance from his parents. Out of Rs.1500 he has to pay Rs.600 as
school bus fees. He has to pay Rs.200 for Yoga classes and Rs.300 for canteen. Out of the remaining amount
he uses Rs.200 for the recharge voucher for his mobile. He is an avid fan of comics and hence he spends
Rs.150 (4 to 5 comics) on comics. Rest of the money he spends on stationary and/or ice cream.

His sister Priya always gives him a birthday present but he never gave anything to her on her birthday. But
this year he has decided to give her a surprise gift.Priya’s birthday is after 2 months. But as of now he has no
savings with him and he didn’t want to borrow extra money from his parents for the purpose. He didn’t want
to borrow money from a friend as his parents would get angry if they come to know about it.

He wants to give a dress to his sister which costs Rs.600 which he unable to find any way to get money to buy
it. Can you help Himanshu to attain his goal???

What should be Himanshu’s SMART goal?

Analyze the needs /wants of Himanshu:

Description Amount Need Want

Planning and reworking on Himanshu’s budget:

Note: 7
Income: Money earned from various sources
Expenditure: Money that is spend for need and wants
Cash‐flow statement: Record of income and expenditure

8
LEARNING
Activity VII
Jai is a 14 year old boy who resides in Pune with his family. His family consists of four members, his
father, mother, younger sister and himself. One day he along with his younger sister Disha decided to
go for a family trip to Manali. When he discussed their desire to his parents, they liked the idea but
kept it in the backseat as there were some urgent needs that were supposed to be fulfilled in the year.
Understanding the problem of his parents, he decided to save money from household expenses and
plan the trip with the savings. He discussed this strategy with his parents and they were very happy and
appreciated this apt decision of their wise son. They also promised to spare Rs.15000 for the trip. Rest
was dependent on the savings. The plan for the trip was 6 months from now. Jai enquired about the
expenses of the trip and came to know that total trip will cost approximately Rs.30000. He collected
the details of monthly expenditure of family in a chart along with the additional details which are as
follows:
Every S u n d a y , f a m i l y g o e s f o r a n o u t i n g . They w a t c h m o v i e i n t h e t h e a t r e w h i c h
c o s t s them Rs.150/person.
After movie they go for a long drive which costs them Rs.300/Sunday. Dinner in a restaurant
which costs them Rs.550/Sunday.
His father uses his car to commute to his office which costs them Rs.150/day. His father also
possesses a
Bike which when used to commute to office will cost them Rs.50/day. He works 22 days a
month.

Following are the list of other monthly expenditure of the family: Help Jai to meet his requirement by
suitably modifying the family budget for him.

Current Proposed Savings in 6

Area of Expenditure Scope for curbing
Expenditure/month saving months
Medical & emergency
2500
Reserve
Electricity bill 1000
Phone bill 1800
Movie & Popcorn at
Multiplex
Dinner at a restaurant
Long drive expenses
Grocery 5500
Father’s diesel charges
Misc 800
Total
Expected Saving
Total Saving

9
 LEARNING
LEARNING
Activity: VIII

Prepare your family’s monthly budget & find out monthly surplus/deficit

Area of Expenditure Current Expenditure/month

9
Total Expenses

Area of Income Current Income/month

Total Income

Income – Expenses= Surplus/Deficit = ______________________

10
 Session 3
LEARNING
Investments
Keep your money safe and make it work !!!

Once upon a time at a bank:

Ankush went to a bank along with his father

Banker: (to Ankush), Son do you have a piggy – bank?
Ankush: Yes Sir, and it is almost full and I plan to buy another one.
Banker: why don't you put the money in the bank?
Ankush: I have Rs. 150 with me, but why should I give it to your Bank? Will you return my money?
Banker: What if I say, I not only will return money but give you additional Rs 10 at the end of the year
Ankush: I would let you know after asking my father.
Ankush is wondering Why would the banker return Rs.160 if he is giving only Rs.150?

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

Three pillars of Investment!

Ankush later at home asks his father, why the banker offered him extra 10 Rupees. Father replied its called
return
On investment and in this case it is named as interest. There are three aspects to investment you must know:

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 o n your investment? It could be in the form of income or
appreciation or both.

10
11
 Activity: IX
LEARNING
Real Bank Vs. Piggy Bank: Let’s compare them on 3 crucial features:

Piggy Bank Real Bank

Safety
Liquidity
Growth

Write down at least three different avenues of investment you can think of:
1.
2.
3.

Banking:
But what is a Bank?

Bank is an institution where people park their surplus money (Deposit) and earn some return called
interest. At the same time people who need money can borrow from bank for a cost (again
interest).Therefore bank is an institution involved in the business of borrowing and lending money. It
charges higher rates of interest while lending and pays lesser interest to depositors. The difference
between lending and borrowing rate is called its Net interest margin (NIM)

For any country banks play a vital role for the financial needs of Individuals and companies, enabling smooth
Economic activity

Types of bank Accounts:

Savings Account: It is useful for depositing your surplus money and withdrawing money needed for
expenses. One needs to keep a minimum balance usually. Banks pay lowest interest rate on the money kept
in this account.

Current Account: This account is for basically business transactions. Banks do not pay any interest on the
money kept in this account.

Term deposit account or fixed deposit amount: As the name suggests in this account money is deposited
for a fixed and predetermined term. One deposits money which is not required immediately in this account.
Interest rate is higher than savings account.

Activity: X

1. What is ATM?

2. What is a cheque?

3. What is a Demand draft?

4. e‐banking ?
12
LEARNING
Session 4
INVESTMENT MANTRAS

1. Time value of money

Sunny:

Starts investing Rs. 100 every year from the age of 15

At the age of 25, she stops investing
He does NOT withdraw a single penny from this money

Bobby:

Starts investing Rs. 400 every year from the age of 25.
He continues to invest the same amount till the age of 35. He does NOT withdraw a single
penny from this money.

Given: Both earn 15% per annum return on their investment.

Who do you think will have accumulated more wealth at the age of 35?

What did you understand from the above?

2. What is the eighth wonder of the world?

Once upon a time there lived a wealthy king. He was revered for his intelligence and as a true
patron of
Innovation. One day a man brought to him a new board game that the man 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. The man asked for one ashrafi (gold coin) for the first square of the
chess board, 2 ashrafis for the second, 4 for the third, 8 for the fourth and so on for all the 64 squares
on the chess board.

The k i n g found it a very easy reward. 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 man’s full reward.

13
LEARNING

The story underlines the concept of

What did you understand from this?

3. How many years are good enough! What rate is good enough?

The table below shows you how a single investment of Rs.500 will grow at various rates of interest.

Years 5% 10% 15% 20%

1 525 550 575 600
5 638 805 1006 1244
10 814 1297 2023 3096
15 1039 2089 4069 7704
25 1693 5417 16459 47698

Can you interpret the above table?

4. Never ever give up!

Harsha and Varsha, twins, decide to invest Rs. 3000 every year when they are 25 years old. Harsha just
gave up at the age of 30 whereas Varsha continued to invest regularly. A few years later, Harsha decided
to make up for all those years so she invested a lump sum of Rs. 20,000 when she turned 35 and again
invested Rs. 25,000 at the age of 42. Thus by the age of 45, both Harsha and Varsha had invested Rs. 63000
each. Assuming a growth rate of 15%, Harsha had Rs. 4 lakh whereas Varsha had Rs. 3.8 lakh.

Why did Varsha lose?

14
 5. The magic of number 72!
LEARNING
State Bank offered an interest rate of 8 % on deposits. Mr.Patil wants to
know when his money would double. Can you help Mr.Patil?

Simply divide 72 by th e given rate i.e. 72/8 = 9 years. It also works for finding out rate earned when
money is doubled in given years.

The Rule of 72:

6. Skating Away!!!!!

Leena is 15 and has just passed her class X exam. She has been attending skating class regularly for last 2 years
and she is recognized as one of the best in the group. Recently she heard from her master that INLINE
Skates are becoming popular, winning the competition in INLINE Skates can get her admitted to one of the
best colleges 3 years later under sport quota. Since then she has been obsessed with the idea of getting
an inline skates and practice with it. Leena goes to the store selling the best Skates in the city and finds out
that the equipment would cost her Rs. 40,000!

Heart‐broken, she goes to her skating teacher and tells him about the inline skates. Her teacher is a young
and talented skater himself. He listens carefully to Leena.

Teacher: “What is the trouble then?”

Leena: “Sir, are you making fun of me? How can I afford that?”

Teacher: “Leena you play really well for your age but I suggest you continue playing the normal skates for
4‐5
Years. We can then consider inline skates”.

Leena: “Sir I know I don’t need it right now but I would like to have it at least next 5 years so that I can
participate in the competition. But the price is so high; there is no way I will be able to afford the equipment
even after 7‐8 years. After all, I am going to be studying all along. I won’t be earning. Right now I save
about 400 rupees per month but this paltry sum can never get me that skates.” The teacher smiled with a
glint in his eyes. He said, “Leena please don’t think that I am making fun of your situation. Not at all. In fact
you took me 10 years back in time when I made a similar decision to buy my own skates when I was merely
14!”

15
LEARNING
Leena got a little excited. She said, “Really sir, did you succeed? You must have really pinched yourself to
save so Much money!”

Teacher: “You see that skates, that’s the one that I bought when I was exactly 21!”

Leena: “How did you manage such an amazing feat?”

Teacher: “Just regular saving and investment. I did not had to sacrifice much either. I just saved and
invested a small amount regularly and did not stop till I got what I wanted. I also started saving about 150
rupees every month for the last two years in high school and then saved more and more as I grew up and
earned a little bit of money.

Leena: Do you think I will be able to buy the skates too, on my own... that is… I don’t want to bother my dad.

Teacher: Of course you will be able to! Get a pen and paper and let’s make you a plan!!

Amount Period of Principal Possible rate Final

per month Investment Amount of Interest Amount
Rs.200 8 years 19,200 10%
Rs.300 6 years 21,600 9%
Rs.400 5 years 24,000 8%
Total

7. The Inflation Termite: Beware!

At what price did you buy your school bag last time? Will you get it for the same price today? The answer is
probably no. This means the price of things keep on increasing. This phenomenon of price rise is called
Inflation.
Now let us assume, the price of your school bag was Rs.200 last year and it costs Rs.210 this year, the
inflation rate therefore is 5% (=10/200 *100= 5%). Now if you had saved Rs.200 last year and expected to buy
the bag this year with your saving you would be short of Rs.10. Therefore, it very important that are savings
are invested at a rate which is higher than inflation.
For example, if you have invested Rs.100 at the rate of 10% and the inflation is 5%, then you have actually
earned only 5%. (10%‐ 5% = 5%). This 5% is your real rate of return and 10% is called as nominal rate of
return.
Activity: XI
Smart Guide for your family Activity:
9 Identify the sources of income

9 Find out if there is a surplus or deficit

9 Build Cash flow statement and plan for budget

9 Calculate savings that can be invested for returns

9 Show benefits of Investments

16
 Session 5
LEARNING
Stock Market

Can you identify these buildings?

National Stock Exchange and Bombay Stock Exchange. The oldest stock market in Asia, BSE stands for Bombay
Stock Exchange and the largest stock exchange in India and the third largest in the world in terms of volume of
transactions, NSE stands for National Stock Exchange, both are Mumbai‐based stock exchanges. Though a
number of other exchanges exist, NSE and BSE are the two most significant stock exchanges in India, and are
responsible for the vast majority of share transactions.

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.

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. A stock exchange could be a regional stock exchange whose area of
operation/jurisdiction is limited to a region or a national exchange permitted to have nationwide trading.
EARNING

17
About SEBI

The function of the securities market is to allow companies to raise capital from public (primary market) and
to enable trading in the shares of public companies (secondary market). Securities and Exchange Board of
India (SEBI) is a body set up by the Parliament in 1992 to protect investors, and to regulate and develop capital
market. It started operations in 1988 through an order of Government of India. It is head quartered in Mumbai
with regional offices in Delhi, Kolkata, Chennai and Ahmedabad.

Companies who want to raise capital (money) from public have to disclose their full details as per rules made
by SEBI. Subsequently, these companies are required to publish information periodically for the benefit of the
investors. In case of take‐over of a company, the rules made by SEBI have to be followed so that the interest
of shareholders of the company is protected.

Buying and selling of shares takes place in the stock exchanges through stock brokers. These entities can
function only if they have SEBI license. They are also required to follow rules laid down by SEBI, to protect the
investors. Similarly SEBI also regulates other participants in the capital markets like, sub brokers, depositories,
depository participants, portfolio managers, merchant bankers, share transfer agents etc.

Mutual funds collect money from public under various schemes and invest in the market on behalf of investors
and are also governed by rules formulated by SEBI. Mutual Funds have to disclose details of the scheme,
where they will invest money, the fees charged from the investor etc. They also have to make periodic
disclosures for the benefit of investors as mandated by SEBI

SEBI also educates investors, facilitates redressal of their grievances and protects them by introducing
consumer‐friendly disclosure norms from time to time.

For more information please visit www.sebi.gov.in

18
 For future financial education programs on any of the following modules;

1. School children
2. college students
3. Middle income group
4. Executives
5. Retirement planning
6. Home makers
7. Self help group
OR

Any of the following topics of securities markets namely;

1. How to read an offer document

2. How to invest in the primary market through stock exchanges.
3. How to trade in securities/guide to investors.
4. D-mat account and depositories.
5. Mutual funds-do’s and Dont’s
6. Collective investment schemes- Do’s and dont’s
7. Buy back of shares, delisting of securities,
8. Takeover regulations
9. Investor grievances-how to resolve it

Please write to SEBI at [email protected]

Or

DEPUTY GENERAL MANAGER

OIAE / IAD
SEBI BHAVAN
Plot No - C4-A, G - Block
Bandra Kurla Complex Bandra (East)
Mumbai 400051
Tel: +91 022 26449142

19
 Contact details of SEBI offices in India
HEAD OFFICE
SEBI BHAVAN
Plot No.C4-A,'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051
Tel: +91-22-26449000 / 40459000 / 9114 / Fax: +91-22-26449016-20 / 40459016-20
E-mail: [email protected]
(Maharashtra, Madhya Pradesh, Chhatisgarh, Goa, Diu, Daman and Dadra & Nagar Haveli)

Northern Regional Office Southern Regional Office

5th Floor, Bank of Baroda Building, D' Monte Building, 3rd Floor, 32 D'
16, Sansad Marg, New Delhi - 110 001. Monte Colony, TTK Road, Alwarpet, Chennai: 600018.
Tel: +91-11-23724001-05 / Fax: +91-11-23724006. Tel : +91-44-24674000/24674150
E-mail : [email protected] Fax: +91-044-24674001
(Haryana, Himachal Pradesh, Jammu and Kashmir, E-mail : [email protected]
Punjab, Uttar Pradesh, Chandigarh, Uttarakhand and (Andhra Pradesh, Karnataka, Kerala, Tamilnadu,
Delhi.) Pondicherry and Lakshwadeep & Minicoy Islands)

Eastern Regional Office Ahmedabad Regional Office

L&T Chambers, 3rd Floor, 16 Camac Street, Unit No: 002, Ground Floor SAKAR- I,
Kolkata - 700 017 Near Gandhigram Railway Station, Opp. Nehru Bridge,
Tel : +91-33-23023000 / Fax: +91-33-22874307. Ashram Road, Ahmedabad - 380 009
E-mail : [email protected] Tel : +9179-26583633-35 / Fax: +9179-26583632
(Assam, Bihar, Manipur, Meghalaya, Nagaland, Orissa, E-mail : [email protected]
West Bengal, Arunachal Pradesh, Mizoram, Tripura, (Gujarat and Rajasthan)
Sikkim, Jharkhand and Andaman & Nicobar Islands)

SECURITIES AND EXCHANGE BOARD OF INDIA

PUBLISHED IN JULY 2010