Financial Literacy for Class 7 - PDF

Unit 1: Team Work Learning Objectives The objective of this unit is to discuss teamwork and its benefits. The unit focuses on: Describing team and teamwork Identifying the requirement of teamwork Describin...

Unit 1: Team Work Learning Objectives The objective of this unit is to discuss teamwork and its benefits. The unit focuses on: Describing team and teamwork Identifying the requirement of teamwork Describing the benefits of teamwork Learning Outcomes: Location Learning Outcome Knowledge Performance Teaching and Evaluation Evaluation Training Method Classroom Understand the Describe the Examine the Interactive Lec- meaning of team and meaning of team- importance of ture: Meaning of teamwork work teamwork in day team and team- to day life work Activity: Discuss with a friend or elder sibling for further learnings on teamwork Identify the skill Enlist the skill Identify the Interactive requirements of requirements of skills required Lecture: Require- teamwork teamwork for teamwork in ments of team- projects. work Understand the ben- Describe the Appreciate the Interactive Lec- efits of teamwork advantages of advantages of ture: Benefits of teamwork teamwork in Team-work classrooms Activity: Based on personal observations in a school-based team, enumerate the benefits of teamwork with your classmates in a classroom session Page 4 Central Board of Secondary Education 1. Teamwork In the previous class, we learned that a group of people who come together to perform a common goal or objective is known as a team. Common examples of teams found in schools and colleges are football team, cricket team, or tug-of-war team. Similarly, in business organisations, teams are referred to as work teams. When members of a team perform some work together, it is known as teamwork. Ex- cellent and effective teams make challenging tasks achievable and straightforward. When a team works together, each member can contribute based on their unique set of abilities and skills. For example, while making a cricket team, the coach and players choose a captain, a wicket-keeper, batsmen, all-rounders and bowlers. Therefore, team output results from various individuals contributing uniquely and dis- tinctly yet for a common purpose. The purpose could be to win a game, a tournament, or to finish a study project. 1.1 Effective Team Skills Teams are an excellent way for individuals to come together and achieve common goals. However, team members need to possess and demonstrate specific skills to achieve common goals. Let us briefly recall the kind of skills that are required for teams to work effectively: Communication Skills Team members should have the ability to listen attentively and also put across their thoughts and viewpoints. Interpersonal Skills Teams work well when there is harmony with- in the members, which becomes possible to demonstrate interpersonal skills. Feedback Skills Giving and receiving feedback are essential skills for teams to work. It involves being able to communicate improvement points to other members while also receiving feedback calmly and gracefully. Conflict Resolution It is usual for differences to arise among team members. Therefore, members need to demon- strate conflict resolution skills to sort out the differences peacefully, without impacting the team-work. Central Board of Secondary Education Page 5 1.2 Difference between Teams and Groups How is a team different from a group? Even a group consists of individuals who have common characteristics. However, they may or may not have common goals or objec- tives—for example, study groups. Let us take the example of a football team. A football team is different from a study group because, in a football team, the common goal of winning against the other team drives all team members. Common goals or objectives are essential aspects that differentiate a ‘Team’ from a ‘Group’. 1.3 Benefits of Teamwork When individuals join together as a team, this leads to various benefits such as: Higher Productivity: Humans are essentially social beings, and when we work to- gether, we tend to work faster and more effectively. Better Cooperation: Working as a team enables improved cooperation among the members. They can learn from each other’s mistakes and provide support where required. Creativity and Problem Solving: Team-work provides opportunities for all members to take advantage of their unique skill-set and propose new creative approaches to solve challenges. Sharing of Work: When a set of people work as a team, the work burden gets divid- ed amongst the members. There is a reduced risk of stress on any one individual. Learning and Motivation: Everyone in the team can learn new things from one an- other. This keeps everyone motivated and focused on goals or objectives. Summary A group of people who come together to perform a common goal or objective is known as a team Team members need to possess and demonstrate communication, interpersonal, feedback and conflict-resolution skills to achieve common goals A team is different from a group because a group consists of individuals who may or may not have common goals or objectives Page 6 Central Board of Secondary Education  Various benefits of teamwork include higher productivity, better cooperation, cre- ativity and problem solving, sharing of work, and learning and motivation Unit 1: Self-Test Questions Choose the correct option(s) 1. Which of the following is an example of a team? a. Siblings and cousins b. Tuition colleagues c. Army regiment d. Parents and grandparents 2. Which of the following statements distinguishes a team from a group? a. Teams have team leaders and groups have group leaders b. A team does not work towards a common purpose, but a group does c. A team works towards a common purpose, but a group does not d. Teams have similar jerseys for each team member, but groups do not Fill in the blanks 1. Excellent and ________ teams make challenging tasks achievable and straight- forward. a. Effective b. Enormous c. Elated d. Ecstatic 2. For a team to work efficiently, team members should ________ with each other properly a. Contradict b. Communicate c. Convolute d. Covert 3. Members need to show conflict resolution skills to sort out the __________ peacefully, without impacting the teamwork a. Similarities b. Dissimilarities c. Reciprocities d. Parities True or False 1. Teams work well when there are differences among the members. ( ) 2. Feedback should be taken or given while working in a team to avoid conflicts.( ) 3. Humans tend to work slower in a team.( ) Central Board of Secondary Education Page 7  Unit 2: Introduction to Financial Literacy Learning Objectives The objective of this unit is to discuss the basic concepts of Finance. This unit focuses on understanding: Basic financial concepts The concept of cash memo Learning Outcomes: Location Learning Outcome Knowledge Performance Teaching and Evaluation Evaluation Training Method Classroom/ Understand the Describe basic fi- Appreciate the Interactive Museum basics of financial nancial concepts importance of Lecture: Basic Fi- concepts and the differ- basic financial nancial concepts ence between concepts in daily Activity: Discuss needs and wants life with parents and seek further information on basic financial concepts Introduction to cash Describe the pur- State the purpose Interactive Lec- memo pose and working and importance ture: Meaning of cash memo of cash memos of cash memo. Activity: Enlist the various types of banks in India 2. Introduction to Financial Literacy How often do we see our parents plan the monthly budget for groceries, house-rent, school-fee, etc. Now and then, we find adults giving each other financial advice like where to invest, why to invest and how to invest. The possession of such financial knowledge and skills that help us make intelligent financial decisions or choices is called financial literacy. Page 8 Central Board of Secondary Education 2.1 Understanding Basic Financial Concepts In order to possess good financial knowledge, we need to understand some basic financial concepts. 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 ac- counts and deposits. Currency Currency is the physical form of money in the form of coins and ru- pees. Each country typically has its currency as a medium of ex- change, 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. It acts as a custodian of money deposited by account holders. It uses the collect- ed funds to extend loans to individuals and businesses while charging interest. Banks also provide other financial services such as wealth management, currency exchange, and safe deposit boxes. Account An account is a repository of funds held by a bank on behalf of the account holder. An account can be of various kinds such as savings, current or fixed. The bank identifies each account by a unique account number issued to the account holder. When accompanying parents to the market, observe how they purchase the various items. Every purchase requires the use of money. We can observe that money is the accepted medium of exchange. It allows us to buy the things we require, from basic things such as bread and butter to high-value products as a car. In India, we use a form of currency known as the ‘Rupee’. We all would indeed have used ‘rupees’ when buying food from the school canteen. Central Board of Secondary Education Page 9 2.2 Barter System Historically speaking, humans have been transacting in goods much before the inven- tion of money. How were these transactions taking place without money? The answer is ‘Barter System’. In the previous class, we learned about the Barter Sys- tem through the story of Satya and Ahmad. Let us recap the story. Satya has two bags of wheat at his home; however, he needs only one of them for his monthly consumption. On the other hand, Ahmad has two bags of rice out of which he can spare one. So they meet and decide to exchange the bag of wheat with that of rice. After the bar- ter exchange, Satya and Ahmad both have one bag of rice and wheat to match their food requirement. We see simple barter exchange in everyday life too. For example, suppose you want to refer to your sister’s encyclopaedia. On the other hand, your sister wants to play a video game that you have. So, you give your video game to your sister and borrow her encyclopaedia in return, completing the barter exchange. 2.3 Needs and Wants To better understand the Barter System, we should know the meaning of ‘Needs’ and ‘Wants’. In the Satya-Ahmad example, while Satya needs rice to meet his family’s food re- quirements, Ahmad needs a wheat bag for the same purpose. However, rice and wheat are not their ‘wants’. Let us try to understand the same through another example. When we feel hungry, we need food to satisfy our hunger. Therefore, food is our ‘need’. However, when we go out for a school picnic, we feel tempted to have fruit juice or pop-corns. In this situa- tion, neither fruit juice nor pop-corns are our ‘needs’; however, those are our ‘wants’. ‘Needs’ are the essential requirements in our life such as food, clothes and house. On the other hand, ‘wants’ are for the things we require to enhance our life quality such as games, music and TVs. Page 10 Central Board of Secondary Education 2.4 Evolution of Trade and Commerce Before we understand trade and commerce evolution, it is vital to understand the dif- ferences between the two. As per the definition of trade, it is the fundamental econom- ic activity involving buying and selling goods and services. For example, you ask for a loaf of bread from the general store, and in order to purchase it, you give a certain amount of money to the shopkeeper. This simple transaction is known as trade. On the other hand, we define commerce as those activities that promote the buying and selling of goods, right from when the goods are manufactured until the customer buys the goods. For example, while purchasing the loaf of bread, the related com- merce activities could be: 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 you to the shopkeeper Historians and financial experts link the evolution of trade across the world with the money system’s development. Trade across continents and between different civilisa- tions has been prevalent in our world from ancient times. While ancient traders traded their goods using the barter system, humans also used commodities like livestock, salt, metal, rare stones, etc. Did You Know? The Han Dynasty, which ruled China from 206 BC to 220 AD, opened up the ‘Silk Road’ trading route between China and Central Asia. Various kinds of merchandise travelled along the Silk Road, making it one of the world’s oldest international trade routes. Central Board of Secondary Education Page 11 2.5 Concept of Cash Memo Often, when we purchase groceries from a local store, the store-keeper hands us over a receipt of items. This receipt is an example of a cash memo. We use cash memos in ‘cash’ transactions. Both the seller and the buyer should doc- ument their transaction to avoid any confusion in the future. Therefore, a cash memo acts as “proof of cash sales” in any business or transaction. Summary Possession of financial knowledge and skills that help us make intelligent finan- cial decisions or choices is called financial literacy Money is a recognised medium of exchange in the economy An account is a repository of the funds held by a bank on behalf of the account holder A barter exchange is a transaction of good or service for another good or service without the use of money ‘Needs’ are the essential requirements of our life. On the other hand, ‘wants’ are for the things we require to enhance our life quality Ancient traders traded their goods using the barter system using commodities like livestock, salt, metal, rare stones, etc. Cash memo acts as “proof of cash sales” in any business or transaction Abbreviations GoI Government of India RBI Reserve Bank of India Before Christ (or the labelling of dates before the birth of Jesus Christ in Ju- BC lian or Gregorian calendars) Anno Domini (literally meaning ‘the year of our lord’; the labelling of dates AD after the birth of Jesus Christ in Julian or Gregorian calendars; also known as CE or ‘common era) Page 12 Central Board of Secondary Education Unit 2: Self-Test Questions Choose the correct option(s) 1. What is the benefit of being financially literate? a. Financial literacy helps us make intelligent financial decisions b. Financial literacy is only helpful for adults c. Financial literacy does not help us at all 2. Which of the following is NOT a need? a. Home b. Food c. Clothes d. Car Fill in the blanks 1. Cash memo acts as ___________ in any business or transaction a. Proof of cash sales b. Proof of cold sales c. Proof of card sales d. Proof of cell sales 2. The _________________ opened up the ‘Silk Road’ trading route between China and Central Asia a. Man Dynasty b. Chan Dynasty c Han Dynasty d. Pan Dynasty WWw Central Board of Secondary Education Page 13  Unit 3: Banking Learning Objective The objective of this unit is to introduce the basic concepts of Banking. This unit fo- cuses on: Understanding the evolution of banking Discussing various types of banks and their services and products Understanding key banking operations Learning Outcomes: Location Learning Outcome Knowledge Performance Teaching and Evaluation Evaluation Training Method Classroom Understand the evo- Describe the Chart the evolu- Interactive Lec- lution of banking importance and tion of banking ture: Evolution of evolution of across history Banks banking Describe various Understand the Enlist different Interactive types of banks types of services types of banks Lecture: Various and products and the services types of banks offered by banks they offer Activity: Enlist the various types of banks in India 3.Banking Let us understand the concept of banking with the help of an example. Consider a situation where a person (lender) lends some money to another person (receiver) without a cash memo or similar evidence. After a while, the lender demands his money back, but the receiver fails to do so. The lender cannot approach the police or file a lawsuit against the receiver because of the lack of evidence. Consider a different situation where there is a specialised institution that performs the role of a lender. It keeps all due documentation and lends money on specified rate of interest. The bank further instructs the receiver to pay back the money within the stip- ulated time. Failure to do so would invite fines and other actions. This important institutional role is performed by banks. A bank is a financial system licensed by the governing authority to lend money to people in the form of loans and receive money from people in savings and deposits. Page 14 Central Board of Secondary Education 3.1 Evolution of Money We can see that a Barter-like exchange system has its limitations and only works when one has something to offer that the other person needs and vice versa. It may not always be the situation. The limitations of the Barter System led to the evolution of money. In ancient India, people used gold coins as a mode of currency. Similarly, different world regions have been using other precious/semi-precious products as a trade unit. For example, the ancient Aztecs used beans as a trade currency, and Norwegians used butter. Similarly, US colonists used tobacco leaves and animal hides as a form of currency. Gradually, however, as human civilisation progressed, coins and currency notes came into circulation. The development of currency has been representative of the evolu- tionary level of an economy across ages. Historians date the earliest known records of metal coins to the 5th or 6th century BC. These coins were in the shape of tools like hoes and billhook (tools used in farming). Ancient civilisations used electrum* to make coins. In ancient India, too, metal coins came into circulation around the 6th century BC. Pa- per currency is said to have been introduced in India by the Mughals in the year 1236 AD. However, the transition to paper currency is said to have occurred in China during the 10th century. *naturally occurring alloy of Gold and Silver Central Board of Secondary Education Page 15 Plastic cards in the form of credit and debit cards are replacing paper money for mak- ing transactions. In addition to that, banking transactions through the internet have been gaining popu- larity in recent years. It is known as net-banking. Net-banking involves the transfer of money electronically; hence the term electronic money came into existence. The latest form of money used for transactions utilising block-chain technology is called crypto-currency. Some examples of crypto-currency are bitcoin, ethereum and ripple. 3.2 Banks and Their Importance A bank works according to strict rules and serves many more essential functions to individuals and businesses. To explain in simple words, a bank is an institution where people deposit and withdraw funds. In this sense, a bank acts as a ‘vault’ for the safe- keeping of funds. On the other hand, people may need funds more than their savings to purchase high-value products such as cars, bikes etc. In such situations, banks also provide ‘loans’ to the ‘deposit holders’. Banks play an essential role in the development of our nation, such as: Banks help in economic development by providing loans to farmers, service mem- bers, business people, and organisations Banks provide people and businesses with the opportunity to convert their savings into investments Banks raise the standard of living by providing loans for consumer goods, homes, automobiles, etc. Page 16 Central Board of Secondary Education  Banks identify our country’s backward regions and help in their economic and so- cial development by providing them adequate funds at reasonable interest rates 3.3 Origins of Banking In ancient human history, banking started in the temples and palaces even before 2000 BC. People used to store precious stones, relics, jewels and valuable artefacts in places of worship and mausoleums in honour and respect of kings and religious deities. Ancient Greeks, too, developed a system of transferring money in the form of book entries. Modern banking in India started in the form of the Bank of Hindostan in 1770. Bank of Calcutta (formed in 1806 and later known as the Bank of Bengal), Bank of Bombay (formed in 1840) and Bank of Madras (formed in 1843) merged in 1921 to form Impe- rial Bank of India. After independence, the GoI and the RBI nationalised the Imperial Bank of India in 1955 and renamed it the State Bank of India (SBI). SBI is also the oldest surviving bank of India. Central Board of Secondary Education Page 17 State Bank of India branch in London, England Nationalised banks in the country include: 1. State Bank of India 2. Bank of India 3. Bank of Maharashtra 4. Canara Bank 5. Indian Overseas Bank 6. Punjab & Sind Bank 7. Punjab National Bank 8. UCO Bank 9. Bank of Baroda 10.Union Bank of India 11. Indian Bank 12.Central Bank of India (not to be confused with RBI) 3.4 Types of Banks Let us recall the different types of banks we learned in the previous standard. We cat- egorised them based on their ownership and the services they offer: Central Bank: A central bank is the most important institution in the financial system of any country. The Reserve Bank of India (RBI) plays the role of a central bank in our country. Commercial Banks: These banks include public sector banks owned by the govern- ment and also private banks. Commercial banks provide a direct interface to the peo- ple allowing them to open and manage accounts, to obtain loans and other financial services. For example, the State Bank of India. We classify commercial banks into four different types, namely: Public sector banks or the nationalised banks of India like SBI, Union Bank of India, etc. Foreign banks like National Australia Bank, American Express Banking Corpora- tion, etc. Private sector banks like HDFC, ICICI, Axis Bank, etc. Regional Rural Banks (RRBs) 3.5 Opening a Bank Account To open a bank account, applicants submit the following documents to the bank: Passport size photographs Identity proof Page 18 Central Board of Secondary Education  Address proof Opening amount Once the bank opens the account, it provides the account number and chequebook to the account holder. 3.6 Types of Bank Accounts Almost every commercial bank has more than one type of accounts. Some common types of accounts that we learned in the previous class are listed below: 3.6.1 Savings Account These are the accounts opened in banks with the critical purpose of teaching the habit of saving amongst people. Savings accounts allow maximum flexibility to deposit any amount of their liking, making it easy and convenient for people. This kind of account is popular with students, salaried individuals, and senior citizens. Savings accounts earn a nominal interest based on the period for which the account holder parks the funds. 3.6.2 Current Account Business owners open these accounts to meet their requirement for a higher number of cash deposits and withdrawals. The vital thing to note in the case of current ac- counts is that they do not earn interest. On the other hand, banks charge interest from account holders for an overdraft facility. When banks allow account holders to withdraw more than their account balance to meet their business requirements, it is known as an overdraft. Central Board of Secondary Education Page 19 3.6.3 Fixed Deposit This account type is ideal for depositors who wish to park their bank funds for an ex- tended period. The key benefit of fixed deposit is that it provides a substantially higher interest rate than savings accounts. 3.6.4 Recurring Deposit Very popular with students, recurring deposits are designed to encourage regular sav- ings amongst people. These deposits, too, earn interest higher than savings accounts. An example of a Recurring Deposit is when a depositor plans to deposit a fixed amount of Rs.1000 per month for 24 months. Upon the completion of 24 months, the depositor gets back the base amount of Rs. 24,000, along with the interest amount. Page 20 Central Board of Secondary Education 3.7 Cheque - An Instrument of Exchange Cheques have been the most popular instrument for money transfer for many de- cades. Today, more and more people are using online banking. However, cheques continue to remain at the core of the banking industry. Let us understand through a simple example of how cheques work. Let us suppose that Disha has Rs.25,000 in her bank account with Bank ABC. She wishes to pay Rs.5,000 to Arif using a cheque. 1. She issues a cheque of Rs.5,000 to Arif using Bank ABC’s cheque book 2. Arif deposits the cheque in his bank, say Bank XYZ 3. Bank XYZ sends the cheque to Bank ABC 4. Bank ABC then sends the amount of Rs.5000 to Bank XYZ after confirming the cheque details 5. Bank XYZ then deposits Rs.5000 in Arif’s account 6. Bank ABC reduces Rs.5000 from Disha’s account Each cheque contains some key elements, which include: Amount to pay in words as well as in numbers Name and signature of the person making the payment or the account holder Name of the person who will receive the payment The date on or after which the cheque is valid Central Board of Secondary Education Page 21 Summary A bank is an institution where people deposit and withdraw funds. It acts as a ‘vault’ for the safekeeping of funds. Banks also provide ‘loans’ to the ‘deposit holders’ In ancient India, people used gold coins as a mode of currency and metal coins came into circulation around the 6th century BC The development of currency has been representative of the evolutionary level of an economy across ages Banking transactions through the internet is known as net-banking Banks play an essential role in the development of our nation Modern banking in India started in the form of the Bank of Hindostan in 1770 After independence, the GoI and the RBI nationalised the Imperial Bank of India in 1955 and renamed it the State Bank of India (SBI). SBI is the oldest surviving bank of India The Reserve Bank of India (RBI) plays the role of a central bank in our country Commercial banks are classified into four different types, namely: o Public sector banks o Foreign banks o Private sector banks o Regional Rural Banks (RRBs) Banks offer Aadhaar card-based savings account opening Bank accounts are of the following types: o Savings account o Current account o Fixed deposit o Recurring deposit Today, more and more people are using online banking. However, cheques con- tinue to remain at the core of the banking industry Page 22 Central Board of Secondary Education Abbreviations US United States of America SBI State Bank of India RBI Reserve Bank of India RRBs Regional Rural Banks PAN Permanent Account Number (Issued by the Income Tax Department, PAN is necessary for filing income tax returns) OTP One Time Password Unit 3: Self-Test Questions Choose the correct option(s) 1. Which of the following is ideal for depositors who wish to park their funds for the long term? a. Recurring deposit b. Fixed deposit c. Current account 2. Which amongst the following is NOT a commercial bank? a. EXIM Bank b. Punjab National Bank c. State bank of India 3. This account allows maximum flexibility to deposit any amount, making it easy and convenient for people. a. Current Account b. Savings account c. Fixed deposit Match the following 1 Public sector banks A An instrument for money transfer 2 Cheque B Coins to paper currency 3 Recurring deposit C Owned by the government 4 Evolution D Regular savings amongst people Guess the words 1. Allowance to withdraw more than account balance (O/_/E/_/_/R/_/_/T) 2. For safekeeping of funds bank act as a (V/_/_/L/_) Central Board of Secondary Education Page 23