URVASHI PANDE Consumer Empowermentconsumereducation.in/monograms/Consumer_Empowerment... ·...

INDIAN INSTITUTE OF PUBLIC ADMINISTRATIONNEW DELHI

EmpowermentConsumerConsumer

A Resource Manual for Finance Management

for Rural Women

URVASHI PANDE

CONSUMER EMPOWERMENT A RESOURCE MANUAL FOR FINANCE MANAGEMENT

FOR RURAL WOMEN

Urvashi Pande Department of Family and Community Resource Management

Faculty of Family and Community Sciences The Maharaja Sayajirao University of Baroda

Vadodara

Published underConsultancy Project on

“Promoting Involvement of Research Institutions, Universities and Colleges in Consumer Protection and Consumer Welfare”

Sponsored byDepartment of Consumer Affairs

Ministry of Consumer Affairs, Food and Public Distribution Government of India

INdIAN INSTITUTE OF PUbLIC AdMINISTRATION NEW dELhI

ii

© Indian Institute of Public Administration, New Delhi 2012

ISBN : 81-86641-65-3

Price : `150/-

All right reserved. No part of this work may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without the prior written permission of the copyright owner and the publisher.

Published by Indian Institute of Public Administration, New Delhi - 110002

Printed at New United Process, A-26, Naraina Industrial Area II, New Delhi-110028.

iii

FOREWORd

As a part of a global trend, the consumer movement has been spreading in India over the last two and a half decades. The movement has received valuable support from the Government of India and the state governments. The support has come in the form of legislation, new institutions, awareness campaigns and funding. The Indian Institute of Public Administration (IIPA) has been contributing to this effort through training, research and dissemination of knowledge and information. The Centre for Consumer Studies and the Project on ‘Promoting Involvement of Research Institutes, Universities and Colleges in Consumer Protection and Consumer Welfare’, are the two main activities of the IIPA that have been sponsored by the Department of Consumer Affairs, Government of India. The objective of the Project is to promote better protection of Consumers’ rights, interest and welfare by involving educational and research institutions in research and other related activities like development of training material and their dissemination.

The book on Consumer Empowerment: A Resource Manual for Finance Management for Rural Women is intended to be a Resource Manual for women, especially from the less affluent sections. We are thankful to the author for undertaking this task. It is hoped that it will not only help spread awareness but also aid the development of training/ teaching modules and be a handy tool kit for many.

New Delhi Pranab banerji April 12, 2012 Suresh Misra Project Coordinators

v

PREFACE

Women need finances for different purposes throughout their life. These needs are personal needs as well as business needs, short-term and long-term needs. They can even be classified as consumption and production needs. A study of the life of rural women workers shows that the odds are stacked against them. These rural women workers are mainly self-employed with low and irregular income. In spite of the illiteracy, they are engaged in several activities to improve their economic conditions.

Women live on a day-to-day basis and are consequently extremely insecure. There is also the permanent danger of dislocation because even a small event like minor sickness or an accident can lead the family to the brink of starvation. The situation is further aggravated by major incidents like riots, heavy rains or cyclones. Even a social occasion like marriage leads to a situation in which they have to borrow at high interest rates, thus getting ensnared in the vicious circle of poverty. When they grow old, they do not have any old age monetary security option like pension or provident fund scheme. As a result they have to work as long as they can and lead a highly miserable life in their old age.

Women by and large continuously live their life, carrying a sense of insecurity and very little hope for the future. One of the reasons for this kind of situation is because a majority of them live and think on a day-to-day basis, and do not plan for their short-term or long-term future. Most of them do not have a concept of planning as they have not been to school and adding to this they have not seen their parents live a planned life. Even they also do not have any information about various financial services, products and investment options available for reducing risks (e.g. insurance) or securing the future (e.g. old age savings plan).

Therefore, there is a dire need for spreading the concept and importance of financial planning among poor women. There is also a need to provide them with information about different financial services, products and investment opportunities available in the market in a language they understand. There is also a need for introducing financial literacy programmes for poor women workers based on lifeline need approach. This would help the women who are trapped in the vicious cycle of poverty, to get out of this spiraling poverty syndrome, build their own future and live a secured life.

This will help poor women to change their way of thinking, to live a comparatively secure life with some peace of mind, have hope for the future which will make them economically self-reliant. This handbook on financial counselling is prepared with the

vi

intention to provide a broad outline to the trainers with the necessary inputs of attaining the objective of a “Better Tomorrow” and “Secure Tomorrow” for our rural women in the eight sessions of training. The aim is to ensure that the trainers undertake counselling, realising the basic principles of adult education and help the self-employed women workers find practical solutions in managing their lifeline needs and bring a change in their mindset that will help them come out from the vicious circle of poverty and attain their dream of financial independence.

I am thankful to the Indian Institute of Public Administration, New Delhi and particularly to Prof. Pranab Banerji, Project Coordinator and Prof. Suresh Misra, Co-Project Coordinator of the Consultancy Project on “Involvement of Research Institutions/Universities and Colleges in Consumer Protection and Welfare” for associating me with the project.

I am sure this handbook will be useful to trainers in educating rural women and enhance their financial literacy. I would be happy to receive feedback about the handbook.

Vadodara November 2012 Urvashi Pande

vii

CONTENTS

Page

Foreword iii

Preface v

Trainers’ Guide 1

MODUlE 01 Evolution of Money and Money Management 7

MODUlE 02 Importance of Financial Planning 21

MODUlE 03 Savings 33

MODUlE 04 Consumption 45

MODUlE 05 borrowings 57

MODUlE 06 Investments 73

MODUlE 07 Insurance 89

MODUlE 08 Make a Financial Plan 101

References 113

Consumer Empowerment: A Resource Manual for Finance Management for Rural Women 1

TRAINERS’ GUIdE

This handbook provides the background material and variety of activities which are helpful to the trainers in conducting training sessions with women on various aspects of financial planning. The handbook is divided into seven modules, each module consisting of different activity and the steps to work on each activity. Each module contains exhaustive notes on various steps of the activities in the annexures. The notes in the annexure are a kind of tool kit which has various stories on the subject, role plays, posters, and other necessary tips to build the sessions of training.

Objectives of Financial Literacy1. To make poor women understand the concept and importance of financial planning.

2. To help these poor women inculcate sound financial planning in their normal decision- making process.

3. To motivate poor women to plan for the future. They should understand the fact that the future is very uncertain and anything might happen. She can be assured of a secured tomorrow only if she makes adequate financial provision today.

4. To bring out a change in the mindset of women, by encouraging them to plan for the future.

5. To lead her to a "Feeling of security" by giving her information and access to the various financial services and products available in the market, and explaining the various life-cycle financial needs that each of the services or products is designed to meet. This is also an important tool of empowerment as knowledge is power.

6. To inculcate a feeling of economic independence and belief that the money she is earning today can be useful not only for her present but also to make her own and the family's future more secure, provided she plans and invests properly.

Modus OperandiSteps required to introduce this financial literacy programme would be:

1. To understand lifeline financial needs of the family (daily, short and long term).2. To understand women's income level, income pattern, expenditure level and pattern,

her cash flow as well as her survival strategy.3. To help women understand the concept of financial planning and its importance.4. To motivate women to plan for the future.5. To help women build a financial vision for the future (short term, long term).6. To help women prepare suitable financial plans.7. To help women implement these plans.

2 Consumer Empowerment: A Resource Manual for Finance Management for Rural Women

8. To provide them information about various financial products and services available in the market, and their comparative advantages and disadvantages.

9. To help women understand the disadvantages of incurring wasteful expenditure due to social pressures or other reasons.

10. To build a cadre of grassroot financial counsellors and financial literacy specialists in various aspects of financial planning who will help women implement sound financial plans.

The motive of the guide is to develop the analytical skills of the participants with a step-by-step approach to each topic and build-up the training sessions to inculcate a habit to utilise the acquired knowledge in their everyday life.

The following figure shows the lifeline financial needs of women:

Lifeline Financial Needs

EACh MOdULE FOLLOWS A SIMILAR FORMAT

Firstly: ● Objective of session

● The concept

● Points of discussion

● The column on the side, provides the gist of the number of activities in the particular session, the methods and material required, lastly the time frame within which the session is to be completed.

Thereafter: The steps to be taken to explain each activity.


Lastly: An annexure to each module containing the tool kit is given. The trainer can put her additional inputs to any of the modules in the sheets. The sequence of activities and steps therein are developed to create a dialogue between the trainer and the group. Where in a practical solution to the financial planning is concluded at the end of each activity with maximum effect.

TIPS FOR ThE TRAINER Firstly the trainer needs to be clear of the objective she/he wants to accomplish at the end of session and be well prepared with the content she/he wants to discuss at the session.

SUGGESTIONS● Review the steps of each activity and the tool kit, namely the annexure in

advance.

● Ensure that the trainer becomes familiar with the method and process of the session.

● Gather all the necessary material for the session, i.e. posters, hand-outs, papers, pens, equipments, etc.

● The trainer should be at the training centre well in advance of the training session.

● Ensure that the basic amenities to conduct the training are in place.

● Start the meeting on time and also end the session at the set time.

dESIGNING A TRAINING EVENTTrainers should remember that all the steps to the activities can be adopted or changed to suit the participants of the group. There would be circumstances where certain activity or any of the steps may be unnecessary or another activity needs more time. Hence the trainer needs to be flexible as per the need of the group and the given situation.

The trainer should try to keep in mind the group facilitation technique which is very important in training women participants. A cohesive atmosphere should be created by the trainer wherein the participants can talk freely. They should not feel embarrassed, even on any of their queries or answer to a question. The trainer should be a good listener and try to understand the problem of the trainee to give an appropriate solution to it. Also the most important aspect of all the sessions is that there should be a dialogue wherein the trainees participate and develop analytical skills. The session should not be a monologue wherein the trainer goes on giving a lecture and the trainee’s mental presence is somewhere else.

Above all, the session should be lively! Ensure the trainees have fun.

MOdULE 01EVOLUTION OF MONEY

ANd MONEY MANAGEMENT


ObJECTIVES OF ThE SESSION To Make Women Understand:

a. Various mediums of exchange

b. Basic principles of money management

c. Importance of building wealth

CONCEPTSi. Money is a medium of exchange which can be

measured, stored, carried from one place to another and is acceptable to all.

ii. To create wealth is to get your money working for you, rather than you work for money.

ACTIVITIES NO 03

METhOdlecture

ExamplesStories

Role PlaysDiscussions

TIME SChEdULE1.30 hours

MATERIALStoriesPosters

Dummy Debit and Credit Cards

POINTS OF dISCUSSION• History of Money

• Managing Money

• Creating Wealth


Steps1. Explain the way ancient men and women used to live.2. Explain with short examples the barter system. Also

explain the limitations of barter system.3. Explain gold and silver as medium of exchange and its

usefulness and disadvantages.4. Explain paper money and its advantages.5. Explain Credit Card(s) and Debit Card(s). Show them

dummy cards and its utilities for their knowledge and use. (Refer Annexure I, page 13).

Steps1. Explain the various means of getting money, i.e. inflow

of cash (refer Annexure II, page 15)

2. Explain the various uses of money, both productive and unproductive (refer Annexure II, page 15)

3. Explain the concepts of income/expense and investment/ borrowing through 5 equations in the chart (refer Annexure III A, page 16)

4. Draw a table containing all the situations (refer Annexure III B, page 16)

5. Ask all the participants to form 3 groups. Make them play a money game. Ask each group to do a role play of the given situation (refer annexure IV, page 17)

6. Conclude the activity by asking the participants which of the equation is the best situation and why?

7. Give them the keys to manage money--→

ACTIVITY 2 Money Management

METhOdS Poster(s), Role plays

TIME30 minutes

ACTIVITY IMoney’s History

METhOd lecture / Poster(s)

TIME20 minutes


Examine your money regularly. Pay attention to money coming in and going out.

Plan how to use your money.

Make conscious decisions about how to use money.

Use money productively.

Save.

Think before you spend. Do not throw away money. Every paisa counts.

Steps1. Explain how initial investment can earn interest every

year, if money is not withdrawn (refer Annexure V, page 18).

2. Explain how compound interest (interest on interest) makes money work for you rather than you work for money (refer Annexure V, page 18).

3. Ask questions to the participants, like

I. How much can you save every month?

II. Do you think you can earn money from the savings made?

III. What would happen if the investment is withdrawn before maturity date?

IV. How can you utilise the money received on maturity?

4. Explain the various schemes of bank where money can be invested.

ACTIVITY 3 Building Wealth

METhOdS lecture, Poster

TIME 30 minutes.


LEARNING EXPERIENCE 1. Spend less than what you earn2. Don’t waste money3. Save some money4. Invest your savings5. Don’t invest all your money at one place6. Borrow only if you can invest at high rate of return7. Way to create wealth is to get your money work for you

rather than you work for money

TIPS Aspects of Money

● Value it: Value each rupee that flows into your life. This rupee is a seed. A seed that has a power to grow into a money tree supplying fruit to fulfill your dreams.

● Make it: Make money by earning as well as investing which can help you make more money.

● Manage it: Spend less, save and invest.● Save it: Small amounts can grow to substantial sum. The

sooner you start, the more you will have.● Invest it: Invest it where it is safe and gives good returns

and can be withdrawn, if required.● Shield it: Take adequate insurance and protect your life,

income and assets.● Share it: Share what you have with those who don’t

have.


ANNEXURES

Module No 01

Total Annexures 05


ANNEXURE I hISTORY OF MONEY

Ancient MenThousands of years ago, human beings were living in forests like animals, eating grains and fruits directly from plants and trees, wearing leaves and living under trees in groups like hunters. There was no economic activity prevailing and no money existed.

barter SystemSlowly human beings started growing vegetables, fruits, food grains, building huts, weaving clothes, making chappals (sandals), furniture and so on. They started specializing in one activity and sharing what they had produced with others in exchange of other goods, which others had produced. This system of exchanging goods for goods is termed as barter system, for example a person who had milk would exchange it with vegetables.

however, this system had many limitations such as

Exchange was not possible every time, because at times, a person who wanted to sell vegetables would not want to buy milk but he would want to buy cloth. So it was difficult to find a suitable person for the desired exchange.

It was difficult to measure the goods and split all goods in proportion of the goods to be exchanged. For example a person who wanted a pot of salt could not exchange it for a piece of cloth, or they could not exchange 2 kg of potatoes with 2 kg of wheat.

Many of the perishable goods could not be stored: for example milk could not be stored for selling in future.

This exchange was possible only within a limited geographical area. It was difficult to carry goods from one place to another especially in places very far from each other.

Hence there was a need to find some common medium of exchange.Gold & Silver as Medium of ExchangeIn view of limitations of the barter system, people started accepting gold and silver as a common medium of exchange. But since these metals themselves had price, so the price of goods were dependent on the prices (supply) of metal, so e.g. if gold mines were discovered at that time the prices of goods would go down, and if there was scarcity of gold the prices of goods would go up. So there was a need for a “Common medium of exchange” which is,

*Acceptable To All * Easy To Carry * Can Be Stored* Can Be Measured

Paper MoneyGovernments of countries had introduced paper money which was cheaper than gold and silver, (Printed by government and guaranteed by government) as medium of exchange and had all the characteristics, i.e. acceptable to all, can be measured, easy to carry and can be stored. The supply of money was controlled by government and was backed by gold and silver reserves in the country.

Plastic MoneyRecently, plastic money in form of credit cards and debit cards is introduced by banks which can be used without carrying all the money along with oneself and also one can avail a credit at a cost.

Today money is the acceptable medium of exchange or means of payment for a common man.


ANNEXURE II MEANS OF GETTING MONEY / USE OF MONEY


ANNEXURE III CRITERIA OF INCOME/EXPENSES ANd INVESTMENT/bORROWING

III AIncome > Expenses = Savings

Expense > Income = Borrowing

Income = Expense = Break-Even

Saving = Invested = Interest Earned

When saving is invested, it brings more Income.

Whereas

Borrowing When Used in Unproductive Use, Then One Has to Pay Interest & She/he in A Debt Trap

III b

Income>

Expense

Expense>

Income

Income=

Expense

Saving→→Invested→

Earnings

Borrowing→→Unproductive

use→Interest

payment &Debt Trap

Income is ` 7,000

Expense is ` 6,000

Income is ` 7,000

Expense is` 9,000

Income is ` 7,000

Expense is` 7,000

Income is ` 7,000` 1,000

is invested in FDR

Income is ` 7,000` 1,000

is spent on entertainment

and vices life is full of happiness

life is full of tension

life is miserable

Earning from investments brings joy

Short-term happiness

brings long-term miseries and

tension for the whole life.


ANNEXURE IV

MONEY GAME ROLE PLAY

A Family of three groups, i.e. 12 participants

Each group will make a family of husband, wife and 2 children

Husband Rickshaw driver

Wife Vegetable vendor

Two children School going

Income of Husband ` 3,500

Income of Wife ` 3,500

First groupSimple living where none of them would have vices. The kids would not be spending on chocolates and movies, rather would buy good books to study. Count their earnings each day and plan their day accordingly. They would decide at the beginning of the month, for saving at least ` 1,000 at end of the month. Invested the money on which they earn 15 percent secured interest. Their investment is safe and they get a good return on their capital.

Second groupThe second family will have the same earning. The husband would always come home drunk at night; the wife would be always chewing tobacco and their children borrowing/stealing money for chocolates and movies. The wife would have to go to the money lender to borrow money at 36 percent interest, and would have to mortgage her ornaments. Everyday there are fights and money lenders coming to get interest on their loans.

Third groupShall make family of same size, having the same income level, who also have made a plan to save at least ` 1,000 at the end of the month. However, their son met with an accident and the family had to spend ` 1,000 on medicines, so they could not save money. Of course, they didn’t either have to borrow money because of their avoiding unproductive expenses. Their life would have been miserable otherwise.


ANNEXURE V

MONEY GAME

Year Initial Investment Interest ` Balance `1 10000 1,000 11,0002 1,100 12,1003 1,210 13,3104 1,331 14,6415 1,464 16,1056 1,610 17,7157 1,771 19,4868 1,948 21,4349 2,143 23,577

10 2,357 25,93411 2,593 28,52712 2,852 31,37913 3,137 34,51614 3,451 37,96715 3,796 41,76316 4,176 45,93917 4,593 50,53218 5,053 55,58519 5,558 61,14320 6,114 67,257

Final Result:

In the example ` 10,000 at 10 per cent compound rate of interest earns, ` 67,257 for oneself, in 20 years which makes you earn ` 2,800 every year.


MOdULE 02IMPORTANCE OF FINANCIAL

PLANNING


ACTIVITIES 1

METhOdSlecture, Examples

Stories, Role Plays

Discussions, Games

MATERIALStories, Posters

Blackboard

Chalksticks

Stick Board

TIME SChEdULE1.00 Hour

ObJECTIVESMake Women Understand

a. Importance of financial planning.

b. Difference between a planned life and unplanned life.

c. Planning gives better tomorrow.

CONCEPT Planning is to look down the road, sacrifice a bit now, which gives big returns later.

POINTS OF dISCUSSION Meaning of planning and process of

planning.

Identifying financial goals.

Advantages of planning.


Steps 1. Narrate the story of laxmi, who saves money, by not

spending money on tea and sending her daughter for higher education. This concludes that how a little hardship today would bear beautiful fruits in future (refer Annexure I, page 27). Thereafter, ask the participants moral of the story.

2. Show on the poster various lifeline needs. Ask each participant to rank their priorities (refer Annexure II, page 27).

3. Ask the participants, what they would do to achieve their lifeline needs, in their present condition. Ask them to tell other needs which are not in the poster. Make a note on the blackboard and ask them “What would they sacrifice today, for a better future tomorrow”.

4. Narrate any one of the two stories namely, story of a grasshopper and four ants or Sita–Geeta. Draw down the conclusions from the story by asking the moral to the participants (refer Annexure III, page 28).

5. Ask the participants, the qualities of a planner and a non- planner on the basis of the story and ask them to pick up small pieces of paper from the pot mentioning various qualities and stick it on the Stick Board either under planner or non-planner (refer Annexure IV, page 29).

6. Work out the steps of Financial Planning. Ask the participants to make five groups and make each group discuss their income/expenditure level, savings, borrowings and investments.

7. Ask each participant to note their financial goals, short-term, medium-term and long-term in their workbook.

8. Identify their personal and business goals.

9. Ask each participant to identify the steps to achieve the goals, and make a note in their workbook.

10. Conclude the Activity by identifying the impact of planning v/s non-planning by asking the participants to do a role play of the story narrated in the session.

11. Give them tips and end the session.

ACTIVITYIMPORTANCE OF

FINANCIAL PLANNING

METhOdPOSTERS,STORIES,


LEARNING POINTS● Financial planning will help you to be self-reliant.

● Financial planning will give you a better and safe future.

TIPS● “Sow what you wish to harvest, know you will succeed.”

● “Fear and doubts are enemies, not circumstances.”

● “Change your attitude and action at the same time, and you can have anything you want.”

● “The key to success in business or personal finance is planning.”

● “If you fail to plan, you plan to fail.”

● “Make a decision to fly, everything starts with decision.”

● “It is never too late. You are in the right place at the right time and your best opportunities are before you right now. There will always be people who tell you that you have missed the boat.”

● “You can turn any situation around when you make the decision to do so.” “Visualise your life the way you want it to be.”

● “Ask and you will receive, seek and you will find. Knock and the door will open for you.”

ANNEXURES

Module No 02

Total Annexures 04


ANNEXURE I STORY FOR INTROdUCING PLANNING

The Example of the LadyDrinking 10 cups of tea in a day laxmi spent almost ̀ 30. She stopped drinking tea and invested in daily recurring deposit. She saved ` 850 at end of the year. She could send her daughter for higher study without borrowing money from anyone. She was proud of herself as she could send her daughter for higher studies. She did not have tea when she had small headaches for few days and the money saved from this enabled her daughter to choose a career of her choice.

Moral of the StoryPlanning is being able to look down the road and sacrifice a bit now for a big return later which can give a better and secured tomorrow.

Planning is changing attitude from living on day-to-day basis to think for tomorrow. One needs to look at their life cycle needs and then start planning for each need.

ANNEXURE II LIFELINE NEEdS


ANNEXURE III STORIES OF SITA-GEETA & GRASShOPPER ANd ANT

III A STORY OF SITA ANd GEETA

Women should appreciate and understand the meaning and importance of savings. With the help of a story a comparative analysis would be done between two women— Sita who saves and deposits in the bank and Geeta who does not save and spends her entire earnings. There were two women Sita and Geeta. Both lived and worked in the same area as vegetable vendors. They earned ` 100 everyday. Sita being very practical had the ability to foresee the future difficulties and started saving ` 20 daily from what she earned. So at the end of the year she had saved ` 7,200. She then wisely invested her money in such a way that all her needs and the expenditure of the festivals were taken care of. For Diwali she put aside ` 1,200, for childrens wedding or any occasion, she put aside ` 2,400. Then in case of illness or accidents, ` 1,200 was put aside, ` 1,200 for Insurance scheme, ` 1,000 was kept for fixed deposit A/c and ` 200 for the savings A/c.

This continued for some yearsAfter 5 years Sita was much better off than Geeta as Sita’s savings increased up to ` 30 daily. Therefore her total savings now were ` 10,800. She could spend ` 2,000 for Diwali, ` 1,200 for Bhavi Yojna, ` 2,400 for “Wedding”, ` 5,000 as F.D. and ` 200 in the savings a/c. At the time she started getting interest of ` 4,000 from money invested.Geeta did not think of the future. She had the motto of living for today, enjoy and have fun. Spend for today, who has seen tomorrow, make the best of today. So she did not save a penny and was in bad shape in emergency or at festival time. She had to borrow ` 1,000 for Diwali at the interest rate of ` 100. This kept on going for some years. The end of five years she had to pay a high interest on the money borrowed. Again for Diwali she borrowed ` 5,000.Her total debt was of ` 9,000 and she had to pay ` 10,800 as yearly interest.As Sita is saving she can enjoy life. But Geeta is under a lot of pressure as she has to pay per month interest. The fact is that saving little by little one can definitely overcome poverty.

III b STORY OF GRASShOPPER ANd ANT

In summer everything was bright and beautiful. Food was plentiful. A grasshopper ate to its heart’s content and sang merrily. He saw ants collecting and carrying food. He laughed at them because he thought that they were such greedy people, who were working hard when summer was the time to enjoy and be happy. The ants in return told him that they are collecting the food for winter, so that the food will be stored with them when it becomes scarce in winter. After summer, winters set in. The brightness of the summer was gone. Food was getting scarce, the grasshopper found it difficult to get food for himself. At last the time came when he had to starve. So in desperation he asked the ants to give him some food. The ants angrily told him “the whole summer you danced and sang merrily and did not store food, so now go hungry for being very lazy the whole summer”. This shows that if you save today it will be of great help tomorrow in case of difficulty. Save today’s surpluses for tomorrow’s needs.

Moral of the storiesGoals are vitally only bunches of wishes, but if one determines to reach them; he/she can turn the wish into a goal and plan to achieve that goal.


ANNEXURE IV PLANNER V/S NON-PLANNER

STORY OF SITA & GEETA

Sita who is a good planner● She saves on a day-to-day basis and invests her savings regularly.

● She knows her life cycle needs and she plans for her needs.

● She invests in productive assets.

● She takes insurance for different types of risks in life.

Geeta who is not a good planner● She does not save. Instead borrows.

● She is not bothered of her life-cycle needs. She believes to approach the needs as and when they come.

● She borrows for her life-cycle needs because she has not saved and needs are never ending.

● She borrows for unproductive expenses, assets and is in a vicious trap.

● She never insures herself and faces difficulties after riots, floods, earthquake, etc.

MOdULE 03 SAVINGS


ACTIVITIES 4

METhOdS

lectures, Stories

Examples, Role Play

Discussions

MATERIAL

Stories, Posters

Blackboard, Discussions

Piggy Bank

Bank’s Brochures

Cards and pens

TIME SChEdULE

2.00 Hours

ObJECTIVESTo Help Women Understand

a. Importance of savings

b. Interest calculations

c. To know different ways and methods of savings

d. Importance of regularity of savings

CONCEPTi Small efforts giving big results.

ii Make your money work for you rather than you working for money.

iii Saving regularly at smaller intervals for a longer period, at high rate of return, gives you higher lump-sum amount.

POINTS OF dISCUSSION● First step towards financial planning -

SAVINGS

● Savings v/s Spending

● When to start the process of savings

● Means of savings

● Methods of calculation of interest

● Banking jargons


Steps

1. Explain to the participants the value of each and every rupee, treat it as a money seed, nurture it, (save) regularly, one day it will become a tree and will give us fruits to fulfil our dreams through a poster. The other example could be, every drop of water counts (refer Annexure I, page 39).

2. Repeat the story of Sita of Module 2 and explain the proverb “Penny saved is more than penny earned”. Explain bank’s recurring deposit scheme and thereafter the example of a person “Ashok” who saved loose coins from his pocket each day and at the end of 10 years, he had ` 2,600 in his piggy bank (For other e.g. refer Annexure II, page 40).

3. Explain value of each rupee and how savings lead to the goal of financial freedom by using every rupee pro-ductively and ensuring that one gets productive returns of his/her money. Refer to productive use of money of Module I, Annexure IV.

Have a dialogue with the participants on the subject

“Saver v/s Spender” and thereafter give them an exercise. (Refer Annexure III, page 40).

ACTIVITY IFirst Step towards Planning-Savings

METhOdStories, Piggy Bank, Posters, Examples,

Dialogue and ExerciseTIME

45 minutes.


Steps Explain to the women participants, meaning of simple interest

and compound interest (refer Annexure IV A, page 41) Explain to the participants the importance of rate of interest

in earning good income (refer Annexure IVB, page 41). Explain the importance of compounding with the help of the

graph (refer Annexure IV C, page 42).

Steps Start today Explain to the participants that delaying the commencement of

your financial plan will cost you a lot (refer Annexure V, page 42).

Steps Explain to the participants some of the banking jargons, namely,

Nomination, Either or Survivor, Jointly and Severally.

NominationIt’s a right of any depositor. It means depositor can nominate any person to collect dues if he expires before the completion of the term of the deposit or say in her absence. The person nominated by the depositor is known as nominee. But here one has to remember that the nominee only has the right to collect the money on behalf of the depositor and she is required to return the money to the legal heirs.

Either or SurvivorThe bank or any financial Institution is liable to return the amount of the fixed deposit to the principal depositor but if she is not alive, i.e. in her absence the bank shall refund the deposit to the survivor(s). The survivor is the joint holder of the deposit. This clause protects the right of joint holders to collect the dues by signing the instrument of deposit and returning back to the bank/ financial institution, without getting into any legal formalities.

Jointly and SeverallyThe term imposes the liability of all the joint signatories to pay the dues to the bank. It means that if the borrower dies, the joint holders and the legal heirs of the deceased borrower are liable to pay the dues. In case of fixed deposit placed with the bank, it means that all the deposit holders are required to sign the deposit instrument jointly to collect the dues. No single holder can collect the amount of the fixed deposit, either on maturity or otherwise.

ACTIVITY IICalculation of

InterestMEThOd

lectures, Examples and Exercise

TIME45 minutes

ACTIVITY III When to start

savingMEThOd Examples

TIME10 minutes.

ACTIVITY IV Banking Jargon

METhOdlecture TIME

15 minutes


LEARNING POINTS● The sooner you start, the more you will have.

● Earlier you start saving better it is, longer the period of saving better it is. Start today.

● Even if you are in debt, start saving.

● Regularity of saving is important.

● Higher the frequency of saving, better it is.

● Small efforts bring big results.

● Make your money work for you rather than you working for money.

● Saving regularly at smaller intervals for a longer period, at high rate of return, gives you higher lumpsum amount.

TIPS● “You have to make a strong commitment and stick to it.”

● “For one month try keeping a list of everything from a cup of tea to buying a sari. This will give you a better picture of where you’re spending your money.”

● “Use money–don’t abuse it.”

● “Compound interest is better than simple interest when you are investing” and “Interest is generally compounded in one of several ways”.

● Interest can be compounded continuously/weekly/monthly/quarterly or yearly. The more often it’s compounded the better it is for you.


ANNEXURES

Module No 03

Total Annexures 05


ANNEXURE I SAVE SOW ANd REAP


ANNEXURE II EXAMPLES OF SAVING

1. Reduce intake of tea/coffee. If a woman has 3 cups of tea instead of 4 cups a day, she saves ` 5 a day, i.e ` 1,825 at the end of the year.

2. Reduce spending on chocolates or ice cream for children. 3. One needs to think about the money he/she spends each day on incidentals, cup of

tea or on bidis or bhajiyas, pan masalas. When one adds them all one finds that he/she spends more than ` 50 in a family of four. Multiply the expenses for a day by five and you are spending ` 250 a week on incidentals. You may not stop all these expenses but what if you cut that incidental spending in half? If you saved ` 125 per week, at the end of a year you’d have saved ` 6,500. Yes ! ` 1,300 is a lot of money. But may be some of the participants are still not convinced to cut a cup of tea. If one invests the money at 10 percent return, you’d quickly see that at the end of one year one would earn additionally ` 650 from the investments made.

4. Cutting down on one’s expenses could also be:i. A penny saved is much more than a penny earned.ii. If one needs one saree, don’t buy two.iii. If one goes for a movie every week, go twice in a month instead of four times.iv. While making food, you don’t make more than needed. Ensure you don’t waste

kerosene, atta (flour), etc. Ensure kids don’t waste food.5. Other thing is, utilise one’s time efficiently because “Time is Money” which can be done by

utilising the time in any activity which earns money for the individual, i.e. may be sewing clothes rather than chatting with the neighbours on trifle matters.

Because: “A penny saved is more than a penny earned.”

ANNEXURE III1. How many of you put some money from each earning into savings and what is it one,

two, four ..., and the amount, yes you... ` 50. ...2. When you go to grocery store how much do you buy? Only items which you need or also items which you don’t need today. 3. How much do you spend on social occasions in a year? ` 1,000 - ` 5,000?4. How much do you spend on children, on chocolates, ice creams and movies?5. ` 200-300 and if you don’t spend on that what is the amount saved?

Exercise – With Women Participants

a) Give each woman — as many cards as she wants. Ask them to write different ways of saving from their income.

b) Each participant has to write one way of saving money on one card. Thereafter all the cards should be collected from them. Make a list of ways of saving.

This list can be used for other trainings.c) Ask the participants, how many of them follow all or any. Ask them to remember the

other means which, they did not know till date.


ANNEXURE IV INTEREST CALCULATIONS

IV ASimple interest is what we normally just refer to as interest. It is a method of calculating what you earn on your money by applying the stated rate on only the actual balance of deposit for the exact period of deposit. For instance, If one invests ̀ 2000 in an account for one year at 5 percent interest, the bank would pay you ` 100 at the end of the year, i.e. 2,000 × 5/100. You get ̀ 100 just for your money. But if you were earning compound interest on your ` 2,000, you would be in even better shape.

Compound interest is paid on an initial deposit plus any accumulated interest from period to period. Compound interest gives you interest on your interest. It is definitely the way to invest. If the money is deposited on compound interest for one year at quarterly rest, he/she would earn ` 102 instead of ` 100 i.e 2000×5/100×3/12 2025×5/100×3/12 2050.32×5/100×3/12 2075.95×5/100×3/12

Simple interest is a method of calculating what you earn on your money by applying the stated rate on only the balance of deposit for the exact period of deposit.

IVb

Rate of interestRate at which you save is very important. A percentage point as two may not seem to make difference in the short term but it can add up enormously over time.

Example: laxmi starts saving ` 1,000 per month at age 17. She continues to save up to the age of 40 years.

If her investments earned two percent her savings A/C would grow to ` 2,76,460 IF she converts this saving into fixed deposit at 40 for 10 years @ 9 percent her 73, 144 saving would grow to ` 6,54,482.


If she invested her money and averaged 12 percent return over same time frame she would accumulate ` 8,58,643. There will always be a reason why you can’t save. Discipline is the foundation upon which all success is built. lack of discipline inevitably leads to failure.

IV C

Power of CompoundingIf a person invests ` 100 on simple rate of interest, he/she shall earn ` 25 whereas the same amount can earn ` 30 on compound rate of interest.

ANNEXURE V EARLIER ThE bETTER

Examples1) If you start saving ` 50 everyday at the age of 25, you will have ` 4.38 lakh when you

are 45 old, at 8 percent. ( ` 2.73 lakh is your investment and the interest earned is ` 1.65 lakh)

2) If you start saving ` 50 when you are 25, you will have ` 6.66 lakh when you turn 55 at 8 percent. ( ` 3.65 lakh is your investment, the interest earned is ` 2.91 lakh)

3) If you save a rupee a day earning an average 8 percent return for 40 years would give you over ` 23,362 at the end of that period.

4) If you start saving ` 2000 a year when you are 25 and you save that much for ten years earning about 9 percent p.a (per annum) you will have ` 1,47,600 when you turn 65.

5) When Kamala is 20 year old, she starts saving ̀ 50 per week, @ 12 percent p.a. interest rate; she will get ` 2,82,305 when she is 55 years old.

6) Investing ` 25 per week @ 10 percent for 5 years would give you ` 8,131.

7) Investing ` 5 a week @ 10 percent for 10 years would give you ` 22,300.

8) Assume Ms. A decided to save ` 50 a week @ 10 percent for 30 years, she would get ` 1,95,075. Delay in saving for just one year will accumulate ` 1,84,802. Difference of ` 10,273 In just ` 2,600 saving for one year. This gap will widen every year.

Please Note: The results may vary with the change of interest rates.


MOdULE NO 04CONSUMPTION


ObJECTIVES● To make women understand problem of wasteful

consumption.

● To make them understand problems of borrowing for consumption.

● To make women understand difference between consumption/savings and investments.

CONCEPT1. Spend less than what you earn.

2. live within your means.

3. Don’t borrow for consumption expenses.

4. Don’t spend all your money on bread; spend some on investments in good assets.

POINTS OF dISCUSSION● Balancing your lifestyle according to your

finances.

● Where does borrowed money used for consumption lead to.

● The terms assets and liabilities.

ACTIVITIES 03

METhOdS

Examples

Stories, Role Plays

Discussions

MATERIAL

Stories

Cards

Chalk sticks

Pens

Posters

TIME SChEdULE

2.00 Hours


Steps

1. Explain to the participants the importance of limiting one’s life cycle expenses within their total income. Discuss the same with a role play (refer Annexure I, page 51).

2. Explain the participants the formula of income/expense on a poster and ask them to work out their own expense and income (refer Annexure II, page 52).

3. Explain the habits of rich people v/s middle class v/s poor people (refer Annexure III page 53).

4. Ask the participants which are the unproductive expenses undertaken by them, which they will hence forth stop. Ask them to make a note of it.

Steps

1. Discuss with the participants the cost of borrowing (refer Annexure IV, page 53).

2. Explain to the participants that the borrowed money when used for consumption would make it difficult, in fact, almost impossible to repay within the stipulated period, and the borrower would be prey to a vicious debt trap.

Steps

1. Explain to the participants the meaning of Assets and liabilities by showing them various assets and liabilities on a poster. Asking the participants which of them is an asset and which is a liability and why? (refer Annexure V, page 54).

2. Explain the importance of increasing one’s asset and reduce the liabilities. Play a card game (refer Annexure VI, page 54).

ACTIVITY IBalancing lifestyles

within one’s financesMEThOdRole Play,

DiscussionsTIME

40 minutes.

ACTIVITY 3Assets & liabilities

METhOdS Discussion & Game

TIME40 minutes

ACTIVITY 2 Borrowing & It’s

Utility METhOdS Discussion

TIME35 minutes


LEARNING POINTS● Your assets will feed you and your liabilities will eat.

● Spread your legs according to the size of the bed.

ANNEXURES

Module No 04

Total Annexures 06


ANNEXURE I ROLE PLAY

One of the tutors would become Shanta who is a peon in a company drawing a salary of ` 50,000 p.a. She would be spending ` 21,000 p.a. on food and clothing, ` 10,000 on housing being the basic necessities of life. She would further have spent ` 5,000 on medicine for sickness of herself and her family members. She would be taking life insurance and medical insurance premium of which would be ` 1500 p.a. She spends ` 5000 during all the festivals and the balance she saves in Recurring Deposit and pension scheme. She does not borrow for any of her consumption expenses. After some time, her son wanted to go for higher education (which is a productive loan) and she had to take a loan, so she had to pay an instalment of ̀ 2000 p.a. She did not utilise her savings, but reduced her spending on festivals, but also ensured that the instalments of the loan were paid regularly.

The other tutor becomes Rani who earns her livelihood by stitching clothes and earns ` 55,000 p.a. Her life style is lavish and spends ` 35,000 on food and clothing. She buys a sari or a dress every month. She eats outside food at least twice a month. She spends ̀ 12,000 on housing. Her family medical bill comes to around ̀ 7,000 during the year. She needs to spend at least ̀ 10,000 during the festivals. She borrows ̀ 9,000 for consumption. She is not able to increase her earnings, and the next year her husband falls ill and is hospitalized. She has to spend additional ` 10,000 on the hospital bills. She is yet to repay her old debt and an additional loan to pay the hospital bills has to be taken from the money lender at a high rate of interest.

Thereafter explain how Rani could restrict her expenses as per income, and save money and take medical insurance which would have helped her pay the hospital bills, which would have not made her a prey to debt trap.


ANNEXURE II INCOME V/S EXPENSES

INCOME XXXXX

Less : Expenditure

Food xxxx

Clothing xxxx

Housing xxxx

Medicine xxxx

Festival xxxx

Saving/Borrowings xxx/(YYY)

Income — Expenditure = Savings + Investment

Expenditure — Income = Borrowings

if one’s expenditure is more than income he/she will have to borrow

– will have to pay interest on borrowings.


ANNEXURE III

ANNEXURE IV COST OF bORROWING

discussion

Make every participant remember Module 2 where everyone calculated the interest at simple rate and compound. Ask any participant to tell, at what rate the moneylender gives them loan, e.g. 1.5 percent p.m. at monthly rate. Say a person takes loan of ` 1,000 during Diwali on 1 November. At the end of first month the interest would be ` 15. At the end of second month, if the first month interest is not paid, then the money lender would ask for ` 31 which works out to 1.55 percent p.m. This way the interest would go on increasing. Ultimately as the loan is taken for consumption, and the income level does not increase hence the loan and the interest cannot be repaid in time, which increases the cost of borrowing and the person falls into the vicious trap of debt.


ANNEXURE V ASSETS ANd LIAbILITIES

Machines – Will increase income

House – Rent income OR save rent

Jewellery – Valuable Asset (Appreciation in value)

Savings – Interest Income

Borrowing/loans – Interest Expense

Creditors – On Account of Unpaid Expenses

Example: Hen is an asset giving you eggs which you can sell and earn income, but if you cut it and eat it (consume it) you will never earn any income from it.

ANNEXURE VI EXERCISE

Prepare cards showing liabilities and assets, e.g. machine, creditor, license, etc. and ask women what is asset, what is liability and similarly other exercise of consumption and investment. Give cards and ask them to write/draw examples of consumption expenditure, e.g. marriage, medicine. Give cards and ask them to write/draw examples of investments. Make a list of consumption and investment.

Ask women why this is termed as consumption and why the others as investment.


MOdULE 05bORROWING


ACTIVITIES 02

METhOdS

Stories

Examples

Role Play

MATERIALS

Stories

Cards

Chalk Stick

Pens

Posters

TIME SChEdULE

2.00 Hours

ObJECTIVES

1. To help women to decide whether to borrow or not, from whom to borrow and when to borrow.

2. To help women understand difference between productive and unproductive loans.

3. To help women understand importance of regular repayment and also cost, risk and legal issues of loans from the organised sector and unorganised sector.

CONCEPTS

i. Borrow money for income generation.

ii. Repayment of loan and the interest thereon from income and not by borrowing again.

POINTS OF dISCUSSION

1. Borrowing from organised sector and unorganised sector.

2. Cost of loans and its repayments.

3. Borrowing for productive and unproductive purposes.


Steps

1. Ask the participants: From whom do the participants borrow loans, and note it on the Blackboard. Some of these can be bank, moneylender, vishi, relatives, friends and neighbours.

2. Ask them the rate of interest on their borrowings from each type of lender. Note the rate against each type of loan. Show the participants, that with higher rate of interest they pay more money to the moneylenders. Narrate a story to explain the same (refer Annexure I, page 65).

3. Most of the participants may not be aware of the concept of flat rate and reducing balance. Explain the difference between the two as shown in Annexure II on page 66 & 67. Thereafter ask them to enquire the method of charging interest employed by their lenders.

4. Explain the importance of timely repayment of loan, with a short story (refer Annexure III, page 68).

5. Explain to the participants how to analyse the borrowings, its advantages and disadvantages with the help of a matrix (refer Annexure IV, page 68).

6. Ask all the participants to do an analysis of their existing borrowings and make them realise the risk, cost and legal issues of their existing debt.

Activity I: Borrowing from organised sector v/s unorganised sector.

ACTIVITY 01Borrowing from

organised sector

v/s

Unorganised sectorCOST OF BORROWING

METhOdStory & Discussion

TIME 50 minutes


Steps

1. Explain the concept of productive and unproductive loans to the participants with the help of the role play in Annexure V, page 69. Thereafter ask the participants the types of loans they borrow and segregate their borrowings on the blackboard.

2. Thereafter ask the participants why do they borrow money?

3. Note all the reasons of borrowing on the black board.

4. Ask the participants which of the loans would earn income? Note them with a coloured chalk stick.

5. Ask the participants which of the loans would have to be repaid from their existing earnings? Note these with a different colour chalk stick.

6. Ask them would it be difficult for them to repay the loans? If yes, why?

7. Ask them which type of loans they would take henceforth.

8. Conclude the activity: Using your credit wisely. Use it, don’t abuse it.

Explain

Debt/income ratio.

Debt = debt ratio/ annual income

More than 25 per cent is dangerous

Lesson: Should borrow for productive purpose.

ACTIVITY IIUse of loans

METhOd Role play, Discussion

TIME 55 minutes


Steps

banking Terminology

Guarantor

He/she is a third party who has not taken loan from the bank but, who gives guarantee to repay the borrowed money which is outstanding in the borrower’s account at the bank, in the event of the borrower unable to repay the outstanding amount towards the loan. With the new amendments in place, now the bank can insist upon the guarantor to pay the outstanding dues, before the bank attaches the properties mortgaged by the borrower.

Cash Credit

Normally bank lends money in three forms, Term loan, Cash Credit and Overdraft. In Cash Credit, the borrower is given a specific limit up to which he/she can borrow, depending upon the drawing power of the borrower. The drawing power would depend upon the hypothecated stock on hand, and the book debts in accordance with the ageing acceptable to the bank. The borrower shall also have to place any immoveable/moveable property as collateral security towards the cash credit facilities provided by the bank.

Collateral Security

Whenever any bank gives advances, it marks its lien/charge on moveable/immoveable property. The same is done by executing a stamped document of mortgage in case of immoveable property. In case of moveable property like shares, National Savings Certificates, etc., the physical possession of the movables is kept with the bank. In case of shares, now the lien is marked with the Depository. When a borrower gives his/her property as collateral security, he/she cannot sell such property until the charge is not released by the bank, which in turn shall not do unless the loan amount is fully paid.

ACTIVITY IIIBanking

terminology METhOd lecture

TIME SChEdULE 25 minutes


LEARNING POINTS● Use your loan for productive purpose only.

● Reducing balance method is better than flat rate method.

● Borrowing from moneylender is normally more expensive.

● Debt ratio more than 25 per cent is dangerous.

● Pay loans regularly more frequently.

● Prepayment is good.

TIPS

Sorrows of borrowing:- Makes home life unhappy.

Never gives peace of mind.

Pressure of debts distracts us from daily work.

Never increases self-confidence.

Affects reputation/creditworthiness.

Spoils your old age.

Reduces self-confidence.

Never gives sense of relief.

Sleepless nights.

Paying your loan daily, weekly or fortnightly with an increase in the number of payments you make each year will make a big dent in your interest cost.

Also paying extra on loans under reducing balance method will reduce interest burden.

ANNEXURES

Module No 05

Total Annexures 05


ANNEXURE I dIFFERENCE bETWEEN bORROWING FROM MONEYLENdER

ANd SEWA bANK

Usha took a loan from a moneylender, for the marriage of her daughter. The loan amount was ` 50,000. She was asked by the moneylender to pay interest of ` 1,500 every month. The interest rate works out to 36 per cent p.a. She was also required to pledge her ornaments with the moneylender. She paid interest for 24 months regularly amounting to ` 36,000 after which the moneylender demanded that she pay either the principal amount immediately, or else he shall take away the ornaments pledged with him. Usha was in no position to repay the principal amount, and the moneylender took away the ornaments worth ` 1,00,000.

Shanta took a loan of ̀ 50,000 from Sewa Bank by pledging her ornaments worth ` 80,000. She was asked by the bank to pay 25 instalments of ` 2,340 which included the principal and the interest amount. The interest also was considered on reducing balance. Hence if Shanta pays the installments faster, her interest would also reduce to that extent. At the end of two years Shanta had almost paid the whole amount, and the last instalment of ` 2, 340 was pending, which she paid on time and her ornaments were returned back by the bank.

Usha paid interest of ` 36,000 and lost her ornaments of ` 1,00,000 whereas Shanta paid interest of ` 8,500 and had her ornaments safe in her safe vault.

hence moral of the story is, “It is advisable to borrow from the organised sector and never from Moneylender(s)/vishi, etc.


ANNEXURE II II A

FLAT RATE Say loan from a moneylender who has given a loan for Marriage of Usha’s daughter of ` 50,000 at 3 percent p.m. interest for 36 months

INSTAlMENTS PRINCIPAl INTEREST1 50,000 1,5002 50,000 1,5003 50,000 1,5004 50,000 1,5005 50,000 1,5006 50,000 1,5007 50,000 1,5008 50,000 1,5009 50,000 1,500

10 50,000 1,50011 50,000 1,50012 50,000 1,50013 50,000 1,50014 50,000 1,50015 50,000 1,50016 50,000 1,50017 50,000 1,50018 50,000 1,50019 50,000 1,50020 50,000 1,50021 50,000 1,50022 50,000 1,50023 50,000 1,50024 50,000 1,50025 50,000 1,50026 50,000 1,50027 50,000 1,50028 50,000 1,50029 50,000 1,50030 50,000 1,50031 50,000 1,50032 50,000 1,50033 50,000 1,50034 50,000 1,50035 50,000 1,50036 50,000 1,500

Total Interest 54,000

In the given case Usha has pa id in te res t o f ` 54,000 whereas her principal amount remains outstanding because the instalment which she has paid pertains only to interest and not the principal amount. She has paid interest, which is more than the principal amount, but she still has to pay the principal amount.


II b REdUCING bALANCE

Say, Rani has taken a loan for purchase of business asset from Sewa Bank loan Amount is ̀ 50,000 and the rate of interest is 1.25 percent p.m. which is repayable within 36 instalments of ` 700 p.m.

Instalment Outstanding Balance

Interest Paid

Instalment Closing Balance

50,000 625 50,6251 50,625 633 1,750 49,5082 49,508 619 1,750 48,3773 48,377 605 1,750 47,2314 47,231 590 1,750 46,0725 46,072 576 1,750 44,8986 44,898 561 1,750 43,7097 43,709 546 1,750 42,5058 42,505 531 1,750 41,2879 41,287 516 1,750 40,05310 40,053 501 1,750 38,80311 38,803 485 1,750 37,53812 37,538 469 1,750 36,25813 36,258 453 1,750 34,96114 34,961 437 1,750 33,64815 33,648 421 1,750 32,31816 32,318 404 1,750 30,97217 30,972 387 1,750 29,61018 29,610 370 1,750 28,23019 28,230 353 1,750 26,83320 26,833 335 1,750 25,41821 25,418 318 1,750 23,98622 23,986 300 1,750 22,53523 22,535 282 1,750 21,06724 21,067 263 1,750 19,58025 19,580 245 1,750 1 8,07526 1 8,075 226 1,750 16,55127 16,551 207 1,750 1 5,00828 1 5,008 188 1,750 13,44629 13,446 168 1,750 11,86430 11,864 148 1,750 10,26231 10,262 128 1,750 8,64032 8,640 108 1,750 6,99833 6,998 87 1,750 5,33634 5,336 67 1,750 3,65335 3,653 46 1,750 1,94836 1,948 24 1,973 -


ANNEXURE III IMPORTANCE OF REGULAR PAYMENT

The amount borrowed from anyone should be repaid regularly, because whether sun rises or sun sets, whether there is a public holiday or a festival, interest for everyday will be debited to the account of the loanee on the outstanding amount, yet to be repaid. If the instalments are repaid regularly, one will not pay any additional interest and the penal charges levied by the institution otherwise.

Regular: Example to explain to the participants the interest cost for irregular payment and the loss of creditworthiness for not paying the instalments regularly.

Rani has taken a loan of `15,000 for purchasing a sewing machine. She paid her 36 instalments of ` 605 amounting totaling to ` 21,780 regularly. The total interest worked out to ` 6,780.

Irregular: laxmi has taken a loan of ` 15,000 for purchasing a television. She did not pay her instalments regularly. She used to pay the instalment every alternate month, hence she paid ` 28,500. The total interest worked out to ` 13, 500.

Rani again went to the bank to purchase another sewing machine and the bank immediately gave her the loan because of her creditworthiness, whereas laxmi went for a loan for sewing machine after repaying the dues but she was not given the loan as she had lost her creditworthiness.

Frequent Payment: laxmi has similarly taken a loan for purchase of Atta Mixing Machine and other accessories for catering services. She had to pay 36 months of ` 605 every month. Laxmi used to make it a point to first pay the loan amount from her earnings and she paid the instalments every fifteen days, hence at the end of 34 instalments her loan was repaid. She saved ` 1210 on interest. Her total payment to the bank was just ` 20, 570.

ANNEXURE IV AdVANTAGES ANd dISAdVANTAGES OF EACh SOURCE OF

bORROWINGS

A Matrix

Party Risk # Cost legalityMoneylender High High low

Relative low High lowVishi High High lowBank low low Medium

# Risk in terms of returning of assets which are pledged with the various parties


ANNEXURE V

ROLE PLAY 4 GROUPS

Monthly income of the family ` 7,000 Monthly expense of the family ` 6,500

Loan taken for different purposes amounting to ` 10,000, from different lenders

GROUP I• Buys TV.• Loan taken from vishi money lender.• Monthly instalments of ` 1,050 for 12 months.• The family watched TV regularly, knowing about all serials.• The earning member falls ill after the family paid 4 instalments, i.e. ` 4,200.• The balance instalments could not be paid.• The vishi moneylender took away the TV and a gold chain of the wife worth ` 10,000 final settlement.

GROUP II• Buys a sewing machine of ` 10,000• Loan taken from a bank.• Monthly instalment of ` 970 for 12 months on reducing balance.• The husband, being the main earning member of the family fell ill and could not go for work for three

months.• The wife stitched clothes and ensured that the family could survive the rough weather and also pay

the regular instalments to the bank.• On payment of regular instalments the family had repaid the loan and the sewing machine was

their! After one year the family bought a TV from the Diwali bonus of the husband, and the saving from the tailoring income of the wife. The family could watch TV in their spare time and enjoy!!!

GROUP III• The son of the family is getting married, and hence takes a loan of ` 10,000• Loan taken from a moneylender.• Monthly instalment of ` 1,050 for 12 months.• There was a business loss and the family could not pay the monthly instalments regularly.• The newly-married bride and the mother-in-law had to do all the household work free of cost for 5

years, and also pay the principal amount.

GROUP IV• The family look a loan to purchase a house amounting to ` 10,000.• Loan taken from the bank.• The monthly instalment is of ` 940 for 12 months.• The stock of goods of the family was lost due to fire. The family was not in a position to repay the

instalments regularly.• The family gave one of its rooms of the house to a paying guest who paid them rent of

` 950, hence the loan for the house properly could be paid regularly and at the end of 12 months, the paying guest left the house, and the family had a house of their own.

MOdULE 06INVESTMENTS


ObJECTIVES1. To help women understand the importance of

investing money, process of capital formation and basic principles of sound investment.

2. To change women’s attitude towards:

i. Money – management.

ii. To impart analytical skills of investment in women.

CONCEPTS1. Saving money is half the battle won, the other

half is making your money grow.

2. Diversity is essential for any type of investment strategy.

3. One does not need thousands of rupees to invest. She/he can start investing with whatever they have, even with ` 50.

4. Capital can be formed by increasing the asset base which is possible through good investments.

POINTS OF dISCUSSION• What is investing steps of investments?

• When should one start investing?

• Broad criteria of investments?

• Process of capital formation.

ACTIVITIES 3

METhOdSExamples

StoriesRole Plays Discussions

MATERIALStories, CardsChalk sticks

PensPosters

TIME SChEdULE2. 00 Hours


Steps1. Explain the meaning of the term investments by

narrating a story (Annexure I, page 83) which would summarise :

Putting your spare money into income generating asset / or an asset which would appreciate with time is an Investment.

And

Money that makes money and which then makes more money.

2. Conclude the activity by asking the participants which of the following would they term as investments:

a. One who has some money and he puts in a cupboard.

b. One who has some money and he places it in a fixed deposit with a bank.

c. One who buys a scooter for taking his wife to the market for shopping household goods and to go to movies?

d. One who buys an auto-rickshaw to carry passengers and earn money?

e. One who buys gold for the marriage of her daughter?

ACTIVITY I Understanding the term investment

METhOdStory & Discussions

TIME SChEdULE 25 minutes


Steps

1. Explain to the participants the options available for anyone to decide their future and what steps one can follow for a better tomorrow. The same could be depicted through a poster as shown below. The explanation to the poster would be :

a. Earn, then save a part of it, invest it in income generating assets, earn income out of the investments and then spend the income earned out of the investments. OR

b. Earn, then spend whatever is earned and again earn, thereafter spend. There would be no savings and no investments. There would a situation where one would have to borrow in case of emergency and fall under a debt trap.

2. Ask the participants which option they would choose and how they would do it. Encourage each of them to answer and ask open-ended questions to the participants in accordance to their reply.

ACTIVITY II Steps of

Investment

METhOd Discussion

TIME SChEdULE 15 minutes.


Steps

1. Explain to the trainees that sooner they divert some of their income into investments, the sooner they will be able to work less and the sooner they will have money working for them (refer Annexure II, page 84).

2. Explain to the participants the need for forming the habit of putting some money away for growth in order to change their self-image.

a. Ask the participants who in their community is well respected.

b. Ask them why he/she is respected in their community.

c. Ask them whether it is because they are prosperous.

d. If they are prosperous, why they are prosperous and conclude the step by explaining that if one has reasonable wealth and is not a borrower for life cycle needs then he/she would always be well respected in the community.

3. Explain that if one doesn’t have savings and investment, he/she will never be wealthy. Narrate a short story to explain the step as depicted in Annexure III, page 84.

4. Explain to the participants that once they can see their savings grow, they will be motivated to move to the next level and realise that wealth is when small efforts produce big results and poverty is when big efforts produce small results. Make them remember the habits of rich people discussed in the module of borrowings.

ACTIVITY IIIEarlier the Better

METhOdExamples,Discussion

Stories

TIME 25 minutes


Steps

1. Explain to the participants the “Principle”: one of the rules is to divert a portion of one’s money into “income-producing assets”. Then use the income from their assets to pay for comforts.

“Investment Portfolio” is a group of investments, carefully planned to meet specified financial goals.

2. Explain to the participants that money should circulate; it should be invested and is not to be stored or hoarded. One should not keep his/her money idle.

3. Explain to women using the matrix the three criteria of investments which is how to analyse investment decisions

● Safety: while investing you must ensure your investment is safe.

● Liquidity: you may want your money back. Whether it will be possible to get it back when you want or if you want money back in 10 years. You may invest your money in long-term investments.

● Returns: Rate of return is very important. Many times all these criteria contradict with each other, e.g. long-term investments might have higher rate of return, but they are not liquid or the investments where there are higher returns are not safe. While investing we have to look into all three aspects and balance them. Refer to the examples of criteria for investments in Annexure IV, Page 84

ACTIVITY IV Earlier the Better

METhOdExamples,Discussion

Stories

TIME 25 minutes


StepsExplain to the participants with the help of the poster, the various aspects of Capital formation and how it affects everyone.

ACTIVITY V Process of Capital Formation

METhOdExamplesDiscussion

StoriesTIME

40 minutes


LEARNING POINTS● Investing, that is, putting your money to work for you is a necessity

if you want to accomplish important financial goals, i.e. owning a home, educating your children, peaceful old age and so on.

● Earlier you start, better it is.

● Higher the rate better it is. A small difference in the rate makes a big difference.

● Investment decisions should consider primarily safety, liquidity, and rate of returns.

● Gambling is very risky and is not an investment.

TIPS ● Do not invest all your money in one investment. Do not put all your eggs

in one basket. Diversify investments.

● Save 10 per cent of everything you earn from an early age and you will end up with a comfortable sum. Invest 10 per cent and you could end up being rich.

● Prosperity does not come from what you earn. It comes from what you do with what you have.

● Sooner you start investing, the more time you have on your side to accumulate.

ANNEXURES

Module No 06

Total Annexures 04


ANNEXURE I

STORY

A farmer named laxminarayan lived in a village named Ramikpura. He had two sons and a wife. They had a small piece of land. One of the monsoons, rain poured adequately and the crop for the year was very good. Laxminarayan earned handsome profits, on sale of the whole crop. He earned thrice the amount he used to earn every season. laxminaryan had taken a loan to purchase the tractor for tilling his land. He also used to give the tractor on rent to others when he did not require it and earn some money, which he used in purchasing fertilizers for a good crop.

Raman, the Branch Manager of the bank who had given the loan, visited the house of laxminaryan for inspection of the tractor. laxminarayan was discussing the tour plan of the long pilgrimage and also the preparation of the elder son’s wedding, next winter. Raman, interrupted the family chat. Raman reminded laxminarayan of the outstanding instalments of the loan taken for the tractor. laxminaryan answered that Raval, the astrologer has predicted that, next year he will earn twice what he has earned this year, so he shall pay the instalments with additional interest next year, because he has promised his wife Rama a tour to Badri Kedar this year. Raman, then asked Laxminarayan, what was the budget for the tour. He promptly replied, ` 10, 000. Raman, then asked, what was the budget for the son’s wedding next year. He again replied ` 30,000. Raman casually questioned, from where will he get so much money? laxminarayan promptly replied, he had saved ̀ 15,000 this year, whereas next year he shall save ̀ 30,000, and hence repay Bank’s loan with interest, i.e ` 6500 and his son’s wedding, after a pause he further said, if necessary he would borrow money from the relatives.

Raman asked Rama, could she not plan her trip after two years and have her son’s wedding where the total expense of the wedding would be ` 5,000 ? Rama waited for a moment and then asked, why are you advising like this? Raman explained:

“If you don’t go to the pilgrimage this year, the tractor loan can be paid, and you don’t have to pay additional interest of ` 1,000. So you save ` 1,000 directly. The balance amount of ` 10000/- if invested in fixed deposit with the bank, would ensure that the money when required for the marriage was easily available, i.e ` 5,000 and from the interest earned their son could go for a honeymoon with his wife, whereas they can go for a short pilgrimage from the balance money”. Further they would not have to worry about the monsoon the following year.

Rama immediately agreed and said, “Raman, you have shown a way of how money can work for YOU rather than YOU work for money”.


ANNEXURE II EXAMPLE OF EARLIER ThE bETTER

If you start saving ` 50 everyday @8 percent p.a. compound interest: • When you are 25 you will get ` 4.38 lakh when you are 40. • When you are 30 you will get ` 2.55 lakh when you are 40.• When you are 40 you will get ` 1.10 lakh when you are 45.

ANNEXURE III STORY

Continuing the story of Annexure INext year, unfortunately the prediction of the astrologer did not come right because the rains were not good. Raman went before the son’s wedding to laxminarayan’s house, where the preparation for the Wedding was going on. laxminaryan immediately thanked Raman for his advice of not going to the pilgrimage, and having his son’s wedding for the fixed deposit with the bank. Laxminaryan then said: “Raman, I would be investing my savings this year in a house, and give it on rent which would generate income for us. Thereafter I would invest my savings every year in assets which create wealth and not on consumption and unproductive expenses.

ANNEXURE IV CRITERIA OF INVESTMENTS

80/20 plan Out of total income:

Spend 10 per cent in general saving Invest 10 per cent to build asset base that will support you

The remaining 80 per cent to live and clear debts

The object of investing is to place your money into assets that will provide you with an ongoing and increasing income. Invest in bank, shares, bonds, and properties. By investing in proper instrument you can maximise your returns. leveraging means you use a small amount of capital to hold a much larger value asset. It means using other people’s money.

Example

If you have ` 20,000 and you invest in an interest bearing investment, only then you receive interest on ` 20,000. At 5 per cent interest your investment would grow by `1,000 a year.

On the other hand let’s assume you invest ̀ 20,000 and borrow ̀ 80,000 to buy a property worth ` 100,000. You would get growth on ` 1,00,000. At 10 per cent per annum your investment would grow by ` 10,000 a year.


When you make a real decision you draw a line and it is not in sand but in cement.

Explain to women: Invest your money in attractive rates of interest but Beware of the Risk Element. Rate of return on investment is very important. A small difference in rate of return will make a big difference over a longer period.

Example

On ` 12,000 for 40 years @ 2 percent p.a will get ` 26,500

On ` 12,000 for 40 years @ 5 percent p.a will get ` 84,500

On ` 12,000 for 40 years @ 12 percent p.a will get ` 1,16,612

CONCLUSIONInvesting is a process of making choices

● You can keep in your house, give to neighbours or relatives.

● You can keep in bank in Saving a/c, Fixed Deposit Account, and Recurring Account.

● You can buy assets, equipment.

● You can buy a house.

● You can buy gold, silver, shares, bonds, post office certificates.

● Investment Portfolio could be a combination of all such investments.

● One can choose and construct his/her investment portfolio with one’s financial situation.

MOdULE 07INSURANCE


ObJECTIVESMake Women Understand:

a. The Concept of Insurance

b. Types of Insurance

c. Usefulness of each type of Insurance

CONCEPTThe solution to hedge risk of unexpected events is available in form of “Insurance”.

POINTS OF dISCUSSION● The types of unexpected events and the after-

effects in case of such events.

● Understanding insurance and the different types of insurance. How to hedge risks with the help of insurance.

ACTIVITIES 2

METhOdDiscussion

MATERIALStories Chalk sticks

Pens Posters

Blackboard

TIME SChEdULE2.00 Hours


Steps

1. Explain to the participants the types of unexpected events, namely natural calamities like, fire, earthquake, floods, personal events like hospitalisation because of illness, becoming handicapped because of some accident, accidental death of any family member.

2. Ask the participants how each of the above events would affect one’s livelihood in the event of such a situation. Make a note on the black board (refer Annexure I, page 95).

3. Ask the participants how would they overcome such events? Make a note on the black board, (refer Annexure II, page 95).

4. Ask them how would, they fulfil their life-cycle needs if they lose their job because of accident. Many of them would answer in the negative. This would lead to Activity II.

Steps

1. Explain to the participants the concept of insurance, (refer Annexure III, page 95).

2. Explain to the participants the modus operandi of Insurance (refer Annexure IV, page 96).

3. Differentiate the term Insurance v/s loans v/s Fixed Deposits (refer Annexure V, page 96 & 97).

4. Explain the various types of insurance available at Sewa Bank.

5. Explain the formalities to be completed to obtain each type of insurance.

6. Explain the benefits of insurance by a role play as explained in Annexure VI, page 97.

ACTIVITY I Unexpected Events

METhOd Story & Discussions

TIME 25 minutes

ACTIVITY IIInsurance

METhOd Story & Discussions

TIME 25 minutes


LEARNING POINTSInsurance hedges against risk of:

● Accidents

● Health and Illness

● Death of family member

● Natural calamities like floods, cyclone, famine

● Riots

● Fire

One does not have to borrow money, neither has to spend one’s savings when a loss is incurred because of above mentioned risks.

ANNEXURES

Module No 07

Total Annexures 06


ANNEXURE I GENERAL IMPACT OF UNEXPECTEd EVENTS

General impact of unexpected events:Reduction in IncomeReduction in SavingsReduction in Wealth When assets are destroyed, increase in debt and amount paid towards interest would also increase insecurity and mental tension.

What happens in the case of accident to the earning member of the family?There is no income for the family till the earning member goes back to work. This leads to either utilising all the savings, if any, or taking loans at high rate of interest or starvation. The family has to spend all their savings, if any, or take loans (by pledging valuable assets) for the medical expense. If the accident is serious, at times there are instances where there is permanent disability to the earning member and the family has no source of income.

What happens in the event of death of a family member?If the person who dies was bedridden, the family will have to spend its savings towards the medicines of the person. If the earning member of the family dies accidentally, then the income of the family stops.

Similarly what happens in the event of floods, riots, storm or fire?The asset, business and/or otherwise may be destroyed or may require repairing.

ANNEXURE II IF ThEY dO NOT hAVE INSURANCE

Spend all the savings, if any.Borrow money, pay heavy interest, and pledge assets.Stand in queue for any subsidy if made available by government or NGOs.

ANNEXURE III CONCEPT OF INSURANCE

Insurance hedges, to a large extent, losses against unexpected events. In this case, a group of people contribute to a corpus of funds by paying a specific amount termed as insurance premium to insure them against the specific risk because of unexpected events. If any of the participants to the insurance scheme is affected by the unexpected event, the Insurer, i.e. the insurance company would compensate a part of the loss to the insured participant.

All participants to the corpus are giving a helping hand to each other because all are not affected by unexpected events. Some, who are affected, may be compensated from the earnings of the whole corpus.

96 Consumer Empowerment: A Resource Manual for Finance Management for Rural Women 96

ANNEXURE IV MOdUS OPERANdI OF INSURANCE

Say every participant has to give a yearly premium of ̀ 100 and there are 35,000 members who have joined a particular insurance scheme. The corpus of the scheme, i.e. the total fund of the scheme would amount to ` 35,00,000. Of the total 35,000 members , 1,000 die.● Compensation to the insured is ` 3000 hence the total amount of compensation to

1,000 members would be ` 3,00,000. Of the 35,000 members, 500 fall sick.● The compensation to the insured is ̀ 1,000 hence the total amount of compensation

to 500 members amounts to ` 5,00,000.● Of the 35,000 members 500 members gave birth to a child.● As the women would stop earning during some of these months, there would

be a scheme to compensate such women, and hence a compensation of ` 300 is assumed to be given, making the total compensation for maternity to ` 1,50,000.

● Of the 35,000 members 10 members die because of accident. ● These members are to be paid ` 40,000 hence a total of ` 4,00,000 is to paid to

the legal heirs of the deceased.● Of the total 35,000 members 500 members are affected by the floods during

monsoon. ● These members are to be paid ` 2,000 hence ` 10,00,000 would have to be

shelled out from the kitty of the corpus towards the unexpected event. The total compensation to 1610 affected members would amount to ` 23, 50,000. Hence if the fund is managed properly, and the corpus is able to earn at-least to cover up the administrative expense, the balance of ̀ 11,50,000 will be carried forward to the next year, where the existing members would pay the fixed amount of premium, and the Insurer would require to make more members to ensure that many can provide a better helping hand to all its members.

ANNEXURE V INSURANCE V/S LOAN

lOAN INSUARANCE The amount borrowed has to be repaid with interest within the stipulated time period

The insured amount is received in lumpsum by the person who is insured on the happening of the event. Neither the lumpsum amount needs to be repaid nor is any interest required to be paid.Interest is a charge on the borrowed funds.Insurance premium is for participation to the fund. It is not returned but added to the common pool. Only on the happening of an event the insured amount is paid to the persons or their legal heirs.


FIX DEPOSIT INSURANCEThe amount is invested in lumpsum on which interest is earned for the invested period. The amount invested and the interest is paid to the fixed deposit holder at the end of the period.

The interest earned is small in comparison to the amount invested.

The insurance premium is paid at the end of a specific period for a particular duration of time, on which, in some cases certain returns are earned, only if the event does not occur and insured amount is not required to be paid.

The insured amount, if paid on happening of the event is much more in comparison of the premiums paid.

ANNEXURE VI ROLE PLAY

3 GROUPS

3 Incidents, Namely- Accident, Floods and Fire

INCIdENT I

Family trapped in floods. Their house is washed away in floods with all its assets like sewing machine, cot, cupboard, etc. The family does not have insurance. They have to stand in a queue to get food packets and relief grant from the government. The family has to start afresh and their morale is low.

INCIdENT II

An earning member of the family meets with an accident and is permanently disabled. The earning member had taken insurance. The family received compensation for the medical treatment and also a monthly fixed amount for the lifetime of the earning member. The disability did not become a burden to the family.

INCIdENT III

Family is trapped in a house ablaze with fire. All the assets are destroyed and the earning member of the family dies in the incident. The family had both life insurance and fire insurance. The family gets lumpsum amount on account of accidental death from life insurance. They put the money in a fixed deposit and get interest thereon every month, which takes care of their lifeline needs. The fire insurance helps them buy a new house and the family members are motivated to come out of the hard times, for a better tomorrow.

MOdULE 08 MAKING A FINANCIAL PLAN


ObJECTIVES1. To analyse the current status of Income and

Expenses of the participants.

2. To make women understand the concept of “Budget”.

3. To make women work on a “Financial Plan” for themselves.

CONCEPTSWomen utilise the financial services and their knowledge base to make a financial plan for a better tomorrow.

POINTS OF dISCUSSIONConcept of “Budget” Path of Discipline

The path of Borrowings ■=> Savings «=>Investments ■=> A Better Tomorrow

ACTIVITIES 2

METhOdSDiscussions

MATERIALBlack BoardChalk sticks

PensPosters

TIME SChEdULE2.00 Hours


Steps1. Explain to the participants the meaning of a Budget,

i.e. Expected Income during the Period. less Expected Expenses during the Period Equal

to Surplus/Deficit. Firstly make the participants realize that the Budget

is not for one single individual, but for all the members of the family, and the income of the family and the expenses of the family are to be included in the preparation of the budget. It is a taxing thing to do, but necessary to ensure a tension free life.

Explain to participants how to include all anticipated Income/Expenses during the period under review. If they anticipate that they would not be able to work for some days, they should reduce their income to that extent. Similarly, explain to the participants how to work on the expense side. Explain to them how to segregate the expenses into unavoidable expenses and avoidable expenses, (refer Annexure I, page 107)

2. Explain to the participants, the need to rework their Budget if it has a deficit instead of surplus, which can be done by keeping a track on their income and expenses on a regular basis. Explain to them how to segregate expenses — avoidable and unavoidable expenses segment. Explain to the participants the need to cut down on avoidable expenses.

3. Thereafter ask the participants, their plan to utilise the surplus, if any. Simultaneously, ask them how they would overcome a situation of deficit. Make a note of all the answers given on a blackboard. Ask them to remember the past modules of Borrowings and Investments. Explain to them to take action accordingly.

4. The participants should then be asked to review their Actual Income and Expenses with the Budgeted Income and Expenses. Explain to them, the need to introspect the additional expenses, so that they do not repeat the mistakes in the ensuing period. The participants should ensure that they have a surplus at the end of the next period. This is the Act of Discipline which they need to bring amongst them, (refer Annexure II, page 109-110).

ACTIVITY IBudget

METhOd Example

discussionstories

TIME 60 minutes


Steps1. Explain to the participants that a financial plan could

be short term, medium term and long term.2. Thereafter explain firstly the importance of deciding

long-term financial goal, for a good financial plan.3. Make the participants remember the first module

wherein they had decided certain financial goals. Ask them the changes in their goals, if any and the reasons for the change. Make them realise the importance of prioritising their goals.

4. The usefulness of firstly working on a long-term plan on the basis of long-term financial goals needs to be explained to the participants. The long-term goals can be like buying a house, making life peaceful for old age, higher education for children, buying gold, silver, vehicle, computer, etc.

5. The participants should be explained that the first step to financial planning is to always work hard to increase their regular income. Thereafter the various components of financial planning explained in the different modules, namely, savings, borrowings, consumption expenses, investment and insurance should be used to achieve long and medium-term goals.

6. Ask them which steps they would take to achieve their long-term financial goal. Make a note of the same on the blackboard. The steps can be:

Find Outa. The amount required to achieve the financial goal.b. The time required to earn the amount to achieve

the financial goals.c. The sources of earning/getting the amount required

to achieve the financial goal. Explain to the participants that the easiest way

would be borrowings, but it would become the toughest while repaying the principal amount and the interest added to it. Hence make them remember the module on borrowings, where loans could be taken for productive use, i.e. generating more income.

ACTIVITY IMaking financial plan

METhOd Example discussion

stories

TIME 60 minutes


Note

One can always think of taking a loan for productive use, which can be repaid in instalments from the income generated and from the savings.

a. How and where to invest the savings to generate more income, considering the matrix of safety, liquidity and returns explained in the module on investments for investment decision.

7. Explain to the participants the next step would be to decide the medium-term financial goals to achieve long-term goals.

8. The participants should then learn the need to work on their lifeline needs in such a manner that lifeline needs do not hinder the achievement of medium term goals, (refer Annexure III, pages 111 & 112).

9. The importance and the method of usage of the budget to achieve medium-term goals can then be briefed to the participants (refer Annexure I A, page 108).

10. lastly to achieve the medium-term goals one needs to work on short-term goals, which again can be achieved by a budget on a monthly/weekly basis.


ANNEXURES

Module No 08

Total Annexures 03


ANNEXURE I ILLUSTRATIVE bUdGET

SHORT-TERM BUDGET SAY One Month :

PARTICUlARS AMOUNT

EXPECTEd INCOME

Family Income (Net of business expenses) ******

less :

UNAVOIdAbLE EXPENSES

Routine Household Expenses

Food Bill ******

House Rent ******

Education Expense (monthly fees) ******

Transportation (say..bus fare for the members of the family) ******

Household Goods (soap(s), kerosene, Matchbox, etc.) ******

Cable Rent

Drugs & Medical Bills (routine) ******

OThER UNAVOIdAbLE CASh OUTFLOWS

Instalment (due for the month) on loans ******

Insurance Premium ******

Instalment for Pension Scheme ******

AVOIdAbLE EXPENSES

Entertainment Expenses ******

Travelling for leisure ******

Expenses for vices, namely cigarettes, alcohol, etc. ******

EXPENSES ON

New Clothes ******

Toys & Games for Children ******

Chocolates and Ice-creams ******

Surplus/Deficit ******

If Surplus,

Deposit money in Recurring Account/ Fixed Deposit


ANNEXURE I A MEdIUM TERM bUdGET

ShORT TERM bUdGET say One Year:

EXPECTEd INCOME

Family Income (Net of business expenses)

Interest from Investments

bORROWINGS

Purchase of Productive Asset

Sale of Investments to meet major expenses like marriage, pregnancy

Less :

Expected Annual Household Expenses

Expected Education Expenses for Children

Provision for Medical & Drug Bills for the Year

Instalments for the Year (including Interest on loan)

Insurance Premium(s) for the year

Provision for Non-routine Expenses

Festival Expenses

Pregnancy

Clothes

Marriage

Surplus/Deficit If Surplus

Investments

Gold/Silver, Fixed Deposit, Others.


ANNEXURE II REVIEW STATEMENT

BUDGET ACTUAl DIFFERENCEEXPECTED INCOMESalary of the Husband ****** ****** *******Income from vegetable vending ****** ****** ******OTHER NOT BUDGETED INCOME ****** *******Total ****** ****** *******less:UNAVOIdAbLE EXPENSES Routine

Household

Expenses

Food Bill ****** ******* *******

House Rent ****** ****** *******

Education Expense (monthly fees) ****** ****** *******

Transportation ****** ****** *******

Households ****** ****** *******

Cable Rent ****** ****** *******

Drugs & Medical Bills (routine) ****** ****** ********

Other Unavoidable Cash Outflows

Instalment (due for the month)

on loans ****** ******* *******

Insurance Premium ****** ******* ******

Instalment for Pension Scheme ****** ******* *******

AVOIdAbLE EXPENSES

Entertainment Expenses ****** ******* *******

Travelling for leisure ****** ******* *******


Expenses for vices ****** ******* ******

Expenses on :

New Clothes ****** ******* *******

Toys & Games for Children ****** ******* *******

Chocolates and Ice-creams ****** ******* *******

OThER NOT bUdGETEd EXPENSES ******* ******* *******

Surplus/Deficit ****** ******* *******


ANNEXURE III LIFELINE NEEdS ANd MANAGEMENT OF dEFICIT

SOURCES OF FUNdS FOR LIFELINE

UTILISATION OF FUNdS FOR LIFELINE


MATCHING – SOURCE: APPLICATIONS OF FUNDS

SOURCE OF FUNdS APPLICATION Returns on Investments

Borrowings -

Organised Sector

Unorganised Sector

Marriage

Festivals

loan Repayment -

Organised Sector

Unorganised SectorIncome from sale of Investments

Income from Salaries and Business

Household

Investment

Recycling Personal

Others

Please note: Annexure III is just one of the examples which is possible with anyone. One needs to work in accordance with his/her own situation. Thereafter each one needs to match the application of funds with the source of the fund. Only the method is given.

Hence the task is to make the participants work on their own plan! That is all about finance! The real test for all.


REFERENCES

• Ad FLAG (2000), Report to the Secretary of State for Education and Employment, Adult Financial Literacy Advisory Group, www.dfes.gov.uk/adflag.

• Anon (1999), ‘Training to Win: Employee Development Key to Success’, National Real Estate Investor, 41(14), 5-6.

• Anon (1999a), ‘Communication, Education Keys to Retirement Planning’, Employee Benefit Plan Review, 54(5), 30-32.

• Bond, M. & A. Boucher, (2000), ‘Towards Developing Financial Literacy Programs for Adults’, Journal of Access and Credit Studies, Spring,19-32.

• Bond, M. (1998), ‘Money Matters’, Adult Learning, November,10 (3), 8-10.

• Browder, D.M. & E. Grasso, (1999), ‘Teaching Money Skills to Individuals with Mental Retardation: A Research Review with Practical Applications’, Remedial & Special Education, 20 (5), 297-309.

• Cohen, C.E. (1994), ‘What you Need to be Financially Literate’, Working Women, 19 (7), 26-31.

• Collins, J.R. & S. Mammen, (1998), ‘The Attitudes and Behavior of Young Adults Toward Credit’, Consumer Interests Annual, American Council on Consumer Interests, Vol. l44, p. 156.

• FSA (2001), ‘Women and Personal Finance: The Reality of the Gender Gap’, Consumer Research 7, Financial Services Authority, UK, www.fsa.gov.uk

• Schagen, S & A. Lines, (1996), Financial Literacy in Adult Life: A Report to the National Group Charitable Trust, National Foundation for Educational Research, Berkshire, UK

• Silvers, C. (1997), ‘Smashing Old Stereotypes of 50-plus America’, Journal of Consumer Marketing, 14 (4), 303-09.

URVASHI PANDE Consumer Empowermentconsumereducation.in/monograms/Consumer_Empowerment... ·...

Documents

Transcript of URVASHI PANDE Consumer Empowermentconsumereducation.in/monograms/Consumer_Empowerment... ·...