Financial Literacy Read the information below in Assamese, Bengali, Gujarati, Hindi, Kannada, Malayalam, Marathi, Meiteilon (Manipuri), Nepali, Odia (Oriya), Punjabi (Gurmukhi), Sanskrit, Tamil, Telugu, or Urdu by selecting your preferred language using the translation tool in the top left corner of the screen. Financial literacy Introduction to Financial Literacy Key Points: What is financial literacy? Importance of managing money effectively. How it impacts your life (budgeting, saving, and investing). Saving WHAT IS SAVING? Savings = income minus expenses No or very little income generated on savings Helps you during emergencies Budgeting helps cut down unwanted expenses and increase savings Expenses = income minus savings Investment WHAT IS investment? Savings generating income Interest – amount charged for the period of borrowing Simple interest & compound interest Short-term / long-term LUMPSUM / REGULAR Simple interest vs compound interest Lumpsum investment of Rs.10,000 for 10 years at 10% p.a. interest Year Simple Interest Value at year end Compound Interest Value at year end 1 1,000 11,000 1,000 11,000 2 1,000 12,000 1,100 12,100 3 1,000 13,000 1,210 13,310 4 1,000 14,000 1,331 14,641 5 1,000 15,000 1,464 16,105 6 1,000 16,000 1,611 17,716 7 1,000 17,000 1,772 19,487 8 1,000 18,000 1,949 21,436 9 1,000 19,000 2,144 23,579 10 1,000 20,000 2,358 25,937 Principles of investing Invest early – lumpsum investment Compounding works better if you start investing early and invest for a longer term Principles of investing Invest early & regularly – regular investment Compounding works better if you start investing early and invest for a longer term Principles of investing Invest early Compounding works better if you start investing early and invest for a longer term Particulars A B Start Age 25 35 End Age 55 55 Investment per month ₹ 3,500 ₹ 7,000 Rate of Return 12% p.a. 12% p.a. Corpus accumulated ₹ 1,07,83,406 ₹ 64,39,001 Investment avenues Instrument Risk Return Term Duration Avg expected return Recurring Deposit / Fixed Deposit Low Low Short term Upto 3 years 5.5-6% p.a. Liquid / Ultra short term debt mutual funds Low Low Short term Upto 3 years 5-7% p.a. Equity Mutual Funds / ETFs High High Long term > 8 years 12-15% p.a. Equity Shares High High Long term > 8 years 12-15% p.a.