Financial Basics

Think about it – why do we even need money? Imagine trying to trade your video game for a movie ticket, but the cinema owner wants snacks, not your game! It gets complicated fast. That's where money comes in!

Money is like a superpower for trading. Its main job is to make it easy to exchange things we have (like our time or skills) for things we want or need (like food, clothes, or fun experiences). Instead of complicated swaps, we use money as a common tool everyone agrees on.

Forms of Money:

• Cash: Those familiar ₹ notes and coins in your wallet.
• Digital Money: Money stored electronically in bank accounts. You access it using things like debit cards, credit cards, or payment apps (like UPI apps - Google Pay, PhonePe, etc.). It represents real money!
• Not Real Money: Things like Monopoly money or points in a game are just for fun within that game – you can't use them to buy groceries!

Why is our Rupee valuable? It's not because the paper or metal is super expensive. It's valuable because we all trust the government that issues it, and everyone agrees to accept it as payment for goods and services. This is called "fiat money".

So, how do you get money in the first place? Usually, through income.

Income is simply the money you receive. This could be from:

• Doing chores around the house for pocket money.
• A part-time job after school.
• Selling something you made.
• Gifts for your birthday or festivals.
• Payment for services you provide (like tutoring or designing something).

It's the money flowing in. It's different from money you borrow (which you have to pay back) or money you spend (which is money flowing out).

Okay, you have some income. Now, how do you decide what to spend it on? It helps to understand the difference between needs and wants.

• Needs: These are the absolute essentials you require to survive and live safely. Think: basic food, clean drinking water, a safe place to live, essential clothing, necessary healthcare, and things needed for school (like textbooks).
• Wants: These are things that are nice to have, make life more fun or comfortable, but you could live without them. Think: the latest smartphone, branded sneakers, video games, fancy gadgets (like a stylish smartwatch), eating out often.

It's easy to mix them up! Before buying something, ask yourself: "Do I truly need this, or do I just want it?" Understanding this helps you prioritize your spending and save for important things.

Have you ever noticed that the price of your favourite candy bar or movie ticket seems to go up over time? Maybe last year a chocolate bar cost ₹10, but this year it's ₹12. What's going on?

This is usually because of inflation.

Inflation is the gradual increase in the prices of goods and services over time. It means that the same amount of money buys you less stuff than it did before. Your ₹100 doesn't stretch as far as it used to.

It's a normal part of most economies, but understanding it helps you see why saving and investing are important to make sure your money keeps its value (or even grows!) over the long run.

What do you want to achieve with your money? Buying a bike? Saving for college? Going on a trip? These are all financial goals.

Goals give your saving and spending a purpose. They can be:

• Short-Term Goals: Things you want to achieve relatively soon, usually within a year or so. Example: Saving ₹5,000 to buy a new video game console in six months, or saving up for a specific laptop next year.
• Long-Term Goals: Things that take longer to achieve, often several years. Example: Saving for higher education, buying a car someday, or even planning for retirement (yes, it's far away, but good habits start early!).

Setting clear goals (like "Save ₹X by Y date for Z reason") makes it much easier to stay motivated and track your progress!

In finance, things you own that have value are called assets.

Assets can be physical things (like cash, a bike, a laptop, land) or financial things (like money in a savings account, investments).

Some assets grow in value over time – these are called appreciating assets.

• Examples: Often includes things like land or property (especially in growing areas), sometimes gold, rare collectibles, or certain investments like stocks (though these can also go down).

Other assets lose value over time – these are called depreciating assets.

• Examples: Most cars lose value the moment you drive them off the lot. Electronics like mobile phones and laptops usually become less valuable as newer models come out. Even that new bicycle will likely be worth less next year.

Knowing the difference helps you understand the long-term value of things you buy or invest in.

The opposite of an asset is a liability.

A liability is simply money that you owe to someone else. It's a debt.

• Examples: If you borrow ₹500 from your parents, that's a liability until you pay it back. If you take out a loan to buy something (like a student loan for college later), that loan is a liability. Credit card debt is also a common liability.

Managing liabilities wisely (like avoiding unnecessary debt and paying back what you owe on time) is a super important part of being financially healthy.