Chapter 14 Solutions — Managing Your Personal Finances

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1. 1.
   Why is managing money wisely important for all individuals irrespective of their income?
2. 2.
   How can budgeting help people balance their present needs with their future financial goals? Give examples.
3. 3.
   School Reopening Budget Activity: Your parents have given you ₹3,000 to prepare for the new school year. Make a list of the items you need, find out their prices (by visiting local stores, or asking a parent or teacher), and prepare a budget. Calculate the total cost and check whether it stays within ₹3,000. If your total is less than ₹3,000, you may add one additional item of your choice. If…
4. 4.
   Why is saving alone often not enough to build wealth in the long run? How do investments help increase the value of money over time?
5. 5.
   Investment Planning Activity: Suppose you received cash gifts worth ₹3,000 on your last birthday and decided to save ₹1,500. With the help of your teacher, calculate the returns you might have earned if you had invested this amount in different combinations of investments. For example, what returns would you have received if you had invested ₹500 in a fixed deposit, ₹800 in the stock market, and…
6. 6.
   How does inflation affect the value of money over time? Why should people consider inflation while making financial decisions?
7. 7.
   Different investment options involve different levels of risk and return. Do you think taking higher risks is always the best way to earn higher returns? How should a person decide which investment option is most suitable for them?
8. 8.
   Why do people buy insurance policies even though they may never face a major loss? How does insurance provide financial security?
9. 9.
   Imagine your family receives ₹1,00,000 from farming, a small business, livestock sales, and savings. Help your family decide how to use the money wisely. (Step 1: Prepare a Budget allocating among Savings, Education, Household expenses, Health and emergency fund, Farm or business investment, Home improvement, Festivals and recreation, Other. Step 2: Classify each expense as a need or a want…