NCERT Solutions Class 9 Social Science Chapter 14 Managing Your Personal Finances

F R E E S T U D Y M AT E R I A L F O R E V E R Y S T U D E N T

CLASS 9 · SOCIAL SCIENCE

NCERT Solutions

Chapter 14:
Managing Your
Personal Finances

NCERT Textbook — Understanding Society: India
and Beyond

BOOK PAGES SECTIONS QUESTIONS MEDIUM

Part II, 107 – 124 12 33 English

Every question Step by step Exam ready
Activities, in-text questions The working shown, not Written to match how
and all exercises. just the final answer. marks are awarded.

Solutions, notes, sample papers & more at 38 pages

Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

CLASS 9 · SOCIAL SCIENCE · UNDERSTANDING SOCIETY: INDIA AND BEYOND

NCERT Solutions — Chapter 14: Managing Your Personal
Finances
This chapter (Part II, Chapter 5 in the textbook) is about personal finance — planning and managing your
own money. It builds on the five pillars: income, budgeting, saving, investing, and protection and risk
management. You meet fixed deposits, bonds, shares and mutual funds, the power of compounding,
inflation, insurance, borrowing and EMIs, the risk–return trade-off, and how personal income tax is worked
out slab by slab. After it you should be able to make a budget, compare investment options and calculate
simple tax and compound interest.

TEXTBOOK BOOK PAGES
Understanding Society: India and Beyond (Class 9) Part II, 107 – 124

SECTIONS QUESTIONS
12 33

MEDIUM
English

The Big Questions — Page 107
Chapter opener
THE BIG QUESTIONS

Q1 What is personal finance and why is it important for individuals?

Personal finance is the planning and management of an individual’s money to meet their needs
and wants. It means deciding how much to spend, how much to save, where to invest, and
how to prepare for future financial needs (page 107).
It is important because:
Money is limited — it must be used efficiently on needs first.
Goals need planning — buying a house in five years or paying for higher education is
possible only if money is planned and saved in advance.
Life is uncertain — savings and insurance help a family face illness, accidents or loss of
income.
Prices rise — investing protects money from inflation.
Good decisions made early build financial security, independence and confidence.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

The chapter begins with a familiar picture: pocket money and festival money kept in a
gullak. Even at that age you are already making money decisions — spend now, or save for
later? As people grow up they earn income and must make many such decisions every
month: rent, food, fees, transport, savings, loans and taxes.

Why: Without a plan, money tends to get spent on whatever comes up first.
Personal finance turns money into a tool for reaching goals instead of a
resource that simply runs out.

Tip: In an exam, give the definition first, then two or three reasons with a short
example each (house, education, emergency).

Q2 What are the pillars of personal finance?

The chapter names five pillars (Fig. 5.2, page 108):

PILLAR WHAT IT MEANS

Income The money you receive — salary, business income, rent, interest,
dividends.

Budgeting Deciding how much to save, how much to spend, and how to spend it
on needs and wants.

Saving Setting aside money for future needs or emergencies.

Investing Deploying savings in assets like stocks and mutual funds so that they
grow.

Protection and risk Safeguarding money and assets through insurance and debt
management management.

The pillars work as a chain. Income is the starting point — without it you cannot spend,
save or invest. A budget divides the income. What is left after needs becomes savings.
Savings are put to work as investments. Protection (insurance, careful borrowing) makes
sure one accident or illness does not wipe out everything built so far.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Tip: Remember the order with “Earn – Plan – Keep – Grow – Guard”.

Q3 What are some common savings and investment options?

Saving can start with a piggy bank (gullak) or a bank savings account. The chapter lists four
common investment options (Fig. 5.5, page 113):
Fixed deposits (FDs) — a lump sum kept with a bank or post office for a fixed period at a
fixed interest rate; among the safest options. PPF, NSC and the Sukanya Samriddhi Yojana
are similar government-backed options.
Bonds — lending money to the government or a company for a fixed period in return for
regular interest.
Stocks (shares) — part-ownership of a company; returns through dividends and a rise in
share price; higher risk, higher long-term returns.
Mutual funds — many investors’ money pooled and invested by professional fund
managers in a basket of shares, bonds and other assets.

OPTION RISK RETURN SUITS WHOM (AS THE
CHAPTER SAYS)

Fixed deposit Low Steady but relatively People who prefer safety over
lower high returns

Government Low (safer than Regular, predictable Those seeking stable income
bond corporate bonds) interest

Mutual fund Medium (spread May be higher People without time or
across assets) knowledge to manage
investments

Shares Highest Potentially highest Investors willing to take
over the long term greater risk for the long term

Bond example from the book: ₹10,000 at 5% a year earns ₹500 interest; if it matures after
one year you get ₹10,500 in total.

Page 3 of 38

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

It uses a slab system — income is split into ranges taxed at 0%, 5%, 10% … 30% (Table 5.1,
FY 2025–26).
Slabs are proposed by the Ministry of Finance in the Union Budget; the CBDT administers
direct-tax laws.
Salaried people first subtract a standard deduction of ₹75,000.
Example: Priya earns ₹14 lakh → taxable income ₹13,25,000 → tax ₹78,750. The money funds
schools, hospitals, roads and defence.

Taxable income = 14,00,000 − 75,000 = ₹13,25,000

First ₹4,00,000 at 0% = 0
Next ₹4,00,000 at 5% = ₹20,000
Next ₹4,00,000 at 10% = ₹40,000
Remaining ₹1,25,000 at 15% = ₹18,750

Total = 20,000 + 40,000 + 18,750 = ₹78,750

Why: Only the part of income that falls inside a slab is taxed at that slab’s rate.
Priya does not pay 15% on her whole income.

Did you know? Income tax is different from GST. GST is an indirect tax added
to the price of goods and services, so everyone who buys pays it, whatever
their income.

In-text Questions — Page 107

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Chapter opening: pocket money
IN-TEXT

Q1 Have you ever received pocket money or money from relatives during festivals or
special occasions? Think about how you usually use that money. Do you spend it
immediately or save some of it?

Model answer: I usually save a part of it and spend the rest on something planned. For
example, if I receive ₹1,000 on Diwali, I keep ₹600 aside and use ₹400 for things I need or have
wanted for some time, such as a book or art material.
Spending everything at once leaves nothing for later needs. Saving some of it lets me buy
bigger things later and helps in an emergency.

Your own answer: Write honestly about what you do. If you usually spend
everything, say so and add one change you could make, such as saving a fixed
share (say a quarter) of every gift.

Q2 Do you keep your savings in a piggy bank (gullak) or somewhere else?

Model answer: I keep small amounts in a gullak at home, and when it fills up my parents help
me deposit it in a savings bank account opened in my name with them.
A gullak is convenient and teaches the habit of saving, but the money does not grow and can
be lost. A bank account is safer and earns interest, so the money slowly grows.

Later in the chapter (page 111) Priya keeps ₹500 in a piggy bank and still has ₹500 after a
year, while Sameer puts ₹500 in a scheme at 8% and has ₹540. With prices rising every
year, money that does not grow buys less over time.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Your own answer: Mention where you actually keep your savings and one
advantage and one drawback of that place.

Q3 How do you manage expenses, such as travelling to school, buying stationery, or
occasionally purchasing food from the school canteen?

Model answer: I divide my expenses into regular and occasional ones.
Regular: bus fare to school — a fixed amount every week, which I keep aside first.
Planned: stationery — I check what I need at the start of the month and buy it together.
Occasional: canteen food — I fix a limit, say ₹50 a week, and stop when it is used up.
I note what I spend in a small diary so that I can see where my money goes.

This is exactly the first step of budgeting in Fig. 5.3 — identify your expenses, large and
small. Separating needs (fare, stationery) from wants (snacks) shows where you can cut
back if money runs short.

Your own answer: Use your real expenses and amounts.

Q4 Have you ever planned your spending to save for something you wanted later, like
visiting your grandparents during summer break?

Model answer: Yes. I wanted to buy gifts for my grandparents before visiting them in the
summer break. The gifts would cost about ₹1,200 and I had 4 months, so I saved:

₹1,200 ÷ 4 months = ₹300 a month

I did this by spending less on snacks and keeping the money aside as soon as I got my pocket
money. By the holidays I had the full amount.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

This uses the goal-setting questions on page 109: What do I want? How much will I need?
By when? What steps will help? A clear goal with a monthly target makes saving much
easier — just like the chapter’s example of saving ₹3,000 for a bicycle in six months by
putting away ₹500 every month.

Your own answer: Replace the goal and the amounts with your own.

THINK ABOUT IT — Page 108
Income (Earnings)
THINK ABOUT IT

Q1 Have you ever thought about earning your own money? What kind of skill would you
require and which work would you choose?
(The box adds: There are many ‘Earn While You Learn’ programmes that allow college
students to continue their education while earning an income through part-time work,
internships, or apprenticeships. This not only provides financial support but also helps
them gain practical skills, work experience, and a better understanding of the real-
world workplace.)

Model answer: Yes. Right now my main job is studying, but I could earn a little in small, safe
ways with my parents’ permission, without affecting school:
Making and selling handmade items (cards, rakhis, painted diyas) at a school fair — needs
creativity, costing and selling skills.
Helping younger children with reading or maths — needs subject knowledge, patience and
communication.
When I go to college, I would choose an ‘Earn While You Learn’ option such as a part-time job
or internship linked to my subject. It would give me income, practical skills and real work
experience.

Skills that help in almost any work: clear communication, punctuality, honesty, basic use of
a computer, and simple accounting — knowing your costs, your price and your profit.

Page 8 of 38

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Why: A budget balances income and expenses. When a new expense appears,
something else must be reduced or savings must be used — otherwise you end
up in debt.

LET’S EXPLORE — Page 109
Budgeting (Planning Expenses)
LET’S EXPLORE

Q1 Think of all your expenses and prepare your monthly/weekly budget using the
template on Page 122.

Sample monthly budget (amounts are examples):

TOTAL AMOUNT (POCKET MONEY) ₹1,000

EXPENSES AMOUNT

Bus/auto fare to tuition ₹300

Stationery ₹150

Canteen snacks ₹200

Sports/hobby ₹100

Friends’ birthday gifts ₹50

Total expenses ₹800

Savings ₹200

Check: 300 + 150 + 200 + 100 + 50 = 800, and 1,000 − 800 = ₹200 saved (20%). Needs come
first; wants get a fixed limit.

Follow the four steps in Fig. 5.3: identify expenses, set a savings goal, track actual
spending against the plan, and review and adjust each month.
A weekly budget is the same plan divided by four: about ₹250 a week, with ₹50 saved
each week.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Your own answer: Replace the amounts with your real ones. If your expenses
are larger than your money, cut a want first.

THINK ABOUT IT — Page 111
Saving
THINK ABOUT IT

Q1 What would you do if you received ₹100 today? Would you save some or all of it, or
spend it right away?

Model answer: I would save at least part of it. For example, I would put ₹60 in my savings
towards a goal I am working on and keep ₹40 for something I actually need this week, such as
a notebook.
Spending all of it immediately gives a moment’s pleasure but nothing for later. Saving even
small amounts regularly adds up — ₹60 every week becomes more than ₹3,000 in a year.

₹60 × 52 weeks = ₹3,120

Your own answer: Any sensible split is fine if you can give a reason for it.

Q2 In the Grade 9 Part 1 Chapter ‘Building Blocks in Economics: The Problem of Choice’,
you learnt about wants and needs. Would you prefer spending the money on a want or
a need?

On a need first. Needs are things essential for living and studying (food, health, education,
school supplies); wants are things we would like but can live without (a new gadget, eating
out).

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Because money is scarce and has other uses, every choice has an opportunity cost. Spending
on a want when a need is unmet leaves an essential gap. Once needs are covered and some
money is saved, a planned want is fine.

Why: Budgeting, as page 109 says, helps people prioritise important expenses
and control impulse shopping. Needs-first is that priority in action.

Q3 Financial experts often suggest saving first and spending what is left. Do you agree?

Yes, I agree. If we spend first and plan to save what is left, usually nothing is left. Saving first
makes savings a fixed habit:

Expenses = Income − Savings

For example, if a family receives ₹1,00,000 and saves ₹20,000 first, only ₹80,000 is available
for spending (page 124). The family then adjusts its spending to fit, and future needs and
emergencies are taken care of.
The only caution: for very poor families, essential needs like food and medicine must be met
first, so they may save smaller amounts.

Why: Spending tends to grow to use up whatever money is available. Taking out
savings at the start protects them from everyday temptations.

Q4 Do you think individuals with low income can also save? Why or why not?

Yes, they can, though it is harder. Most of their income goes on necessities, so the amount
saved will be small. But small amounts saved regularly add up — ₹10 a day becomes ₹3,650 in
a year.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Saving matters even more for low-income families because an illness or loss of work can push
them into debt. They can use safe options such as a bank or post-office account, small savings
schemes, and government health insurance like Ayushman Bharat PM-JAY.
It becomes very difficult only when income does not cover even basic needs.

₹10 × 365 days = ₹3,650

Why: Saving depends more on habit and planning than on the size of income.
But we should be fair: when income is below the cost of essentials, the solution
is higher income and support, not just advice to save.

LET’S EXPLORE — Page 112

Page 13 of 38

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Class 9 Social Science Chapter 14 Managing Your Personal Finances
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Power of Early Investments
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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

AGE BHAVISHA’S AMOUNT INTEREST EARNED THAT DHRUV’S AMOUNT
(₹) YEAR (₹) (₹)

30 5,751 311 0

35 13,816 838 0

45 40,995 2,617 13,816

55 94,461 6,114 40,995

65 1,99,635 12,995 94,461

Amount after n yearly deposits of ₹1,000 at 7% = 1,000 × (1.07ⁿ − 1) ÷ 0.07
Bhavisha: n = 40 → ₹1,99,635 (she deposited ₹40,000)
Dhruv: n = 30 → ₹94,461 (he deposited ₹30,000)

Bhavisha put in only ₹10,000 more than Dhruv but ended with about ₹1,05,174 more. Her
first ten years of deposits had 30 extra years to grow.

About the book: The text on page 112 says Dhruv ends with “only about 40%”
as much as Bhavisha. From the book’s own figures, 94,460 ÷ 1,99,635 ≈ 0.47,
so it is about 47% — still less than half. (The chart rounds Dhruv’s ₹94,460.79
down to ₹94,460.)

Q2 Talk to your parents and find out the fixed deposit rates of their bank. You can also
refer to the bank’s website.

Sample report (the format to follow; the rates below are made up for illustration — fill in your
own bank’s current figures):

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

PERIOD OF RATE FOR GENERAL PUBLIC (PER RATE FOR SENIOR CITIZENS (PER
FD YEAR) YEAR)

1 year 6.5% 7.0%

3 years 6.75% 7.25%

5 years 6.5% 7.0%

What I found: the rate depends on the period, it is fixed for the whole period once the FD is
made, and senior citizens usually get a little more. At 6.5%, ₹10,000 kept for one year earns
₹650.

Interest for 1 year = 10,000 × 6.5 ÷ 100 = ₹650

Questions to ask your parents: Which bank? What is the rate for 1, 3 and 5 years? Is there a
penalty for breaking the FD early? Is the interest paid out or added to the deposit?

Tip: Banks publish their current FD rates on their official websites. Rates
change from time to time, so always write the date on which you checked.

LET’S ANALYSE — Page 114

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Stocks (Equity or Shares)
LET’S ANALYSE

Q1 Look at the graph below that displays the performance of BSE SENSEX over the years.
It fluctuates over short time periods; however, it can go up significantly in the long run.
Why do you think these fluctuations happen? Discuss possible reasons with your
classmates and find out more from newspapers, the internet, or by speaking to your
family members.

BSE SENSEX (1998–2026)
90,000

80,000

70,000
→ eulaV xednI XESNES ESB

60,000

50,000

40,000

30,000

20,000

10,000

0
9991–8991
0002–9991

7002–6002

3102–2102
1002–0002
2002–1002
3002–2002
4002–3002
5002–4002
6002–5002

8002–7002
9002–8002
0102–9002
1102–0102
2102–1102

7102–6102
8102–7102
9102–8102

5202–4202
6202–5202
4102–3102
5102–4102
6102–5102

0202–9102
1202–0202
2202–1202
3202–2202
4202–3202

7202–6202
Year →
Fig. 5.6, page 114 — BSE SENSEX over the years (redrawn; values read off the book’s graph,
so they are approximate).

The SENSEX tracks the share prices of 30 large companies, so it moves whenever their share
prices move. Share prices change with (page 114):
Company performance — good profits push prices up; losses pull them down.
Economic conditions — growth, inflation, interest rates, the Union Budget and government
policies.
World events — the graph’s sharp falls in 2008–09 (the global financial crisis) and 2019–20
(the COVID-19 pandemic, March 2020).
Investor mood and news — fear makes many sell at once; confidence makes them buy.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

In the long run the index rises — from about 3,500 to over 70,000 — because the economy
grows and companies earn more. That is why shares suit those who invest for the long term.

Reading the graph (values approximate):

PERIOD WHAT THE GRAPH SHOWS

2007–08 → 2008–09 about 15,300 → 9,700: a fall of over a third

2009–10 back up to about 15,800 within a year

2018–19 → 2019–20 about 37,600 → 28,800

2020–21 → 2024–25 about 48,100 → 77,800: a strong recovery and rise

Other causes students often find in newspapers: changes in oil prices, buying or selling by
foreign investors, elections, wars and natural disasters.

Why: In the short run prices follow news and feelings; in the long run they
follow the actual earnings of companies. Someone who sold in fear in 2008–09
or 2020 locked in a loss; someone who stayed invested saw the index recover
and climb.

THINK ABOUT IT — Page 115
Mutual funds
THINK ABOUT IT

Q1 Have you heard this disclaimer in mutual fund advertisements on the television?
“Mutual fund investments are subject to market risks. Please read all scheme-related
documents carefully before investing.”
Why do you think this is included?

It is included to warn and protect investors.
Mutual funds invest in shares, bonds and other assets whose prices go up and down. If the
investments perform poorly, investors may incur losses (page 115). Returns are not
guaranteed, unlike a fixed deposit.

Page 18 of 38

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

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THINK ABOUT IT — Page 117
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Borrowing and Credit

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Large items like a house are impossible to buy at once for most families.

₹6,000 is 20% more than the price, paid over one year. Whether it is worth it depends on
how useful the item is and whether the EMI fits the budget.

Why: Borrowing is helpful when used for something useful or productive, but
harmful when used for unnecessary consumer goods (pages 116–117).

Q2 Can having too many EMIs affect savings and emergency funds?

Yes. Each EMI is a fixed payment that must be made every month, whatever happens. With
many EMIs, a large part of income is gone before the month even starts, so:
Little or nothing is left to save.
No emergency fund can be built; an illness or job loss may force the family to break its
savings or borrow more.
Missed EMIs bring penalties and make future loans harder to get.
The family can fall into a debt burden.
So one should take a loan only when necessary and be sure it can be repaid on time.

Example: monthly income ₹40,000; EMIs for a phone (₹2,000), a TV (₹3,000) and a
two-wheeler (₹4,000) = ₹9,000
Left for all other needs and savings = 40,000 − 9,000 = ₹31,000

Add one more EMI for a car, and the room for saving shrinks even further. The chapter
calls this responsible borrowing: take loans only when necessary and ensure they can be
repaid on time.

LET’S ANALYSE — Page 120

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Personal Income Tax
LET’S ANALYSE

Q1 Sai’s taxable income is ₹3,80,000 in a financial year. How much income tax does he
have to pay according to the above tax slabs?

TABLE 5.1. NEW TAX REGIME (APPLICABLE FOR FY 2025–26)

ANNUAL INCOME (₹) TAX RATE (%)

Up to ₹4 lakh Nil

₹4 lakh–₹8 lakh 5%

₹8 lakh–₹12 lakh 10%

₹12,00,001–₹16,00,000 15%

₹16,00,001–₹20,00,000 20%

₹20,00,001–₹24,00,000 25%

Above ₹24,00,000 30%

Sai pays no income tax (₹0).

Taxable income = ₹3,80,000
First slab: up to ₹4,00,000 → rate Nil
₹3,80,000 < ₹4,00,000, so all of it falls in the Nil slab
Tax = 0% of ₹3,80,000 = ₹0

His income does not reach the next slab, so no part of it is taxed at 5% or more.

Compare with Priya (page 120): her taxable income of ₹13,25,000 crosses into the 15%
slab, so she pays ₹78,750. Sai’s whole income lies inside the first slab.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Did you know? The textbook keeps the slab method simple and leaves out two
rules of the actual law for FY 2025–26. Under the new regime, a rebate (under
section 87A, up to ₹60,000) means a resident individual whose taxable income
is not more than ₹12 lakh pays no income tax, and a 4% health and education
cess is added to any tax that is payable. Answers in this chapter follow the
book’s Table 5.1 only. Sai pays nothing either way, because his income is below
₹4 lakh.

Q2 Ask your parents, relative or a person in your neighbourhood if they file personal
income tax returns. Make a small report on the procedure to file an income tax return.
You may refer to the following website: https://incometaxindia.gov.in/Pages/tax-
services/file-income-tax-return.aspx

Sample report: How my uncle files his income tax return
My uncle is a salaried employee. He files his income tax return (ITR) online every year, after
the financial year ends:
1. Register/log in on the Income Tax Department’s e-filing portal using his PAN.
2. Collect documents: Form 16 from his employer, bank interest certificates and proof of tax
already deducted.
3. Choose the right ITR form (many salaried people use ITR-1) and the assessment year.
4. Check the pre-filled details of income and tax deducted, and correct or add anything
missing.
5. Calculate the tax; pay any balance online, or claim a refund if extra tax was deducted.
6. Submit and e-verify the return, for example with an Aadhaar OTP. An acknowledgement is
issued.
Filing honestly and on time is a citizen’s duty and avoids penalties.

Tip: A good report has a title, the name/role of the person you spoke to (or “a
family member”), the steps in order, the documents needed and one thing you
learnt.

Did you know? A return is not complete until it is verified. Any refund is paid
directly into the taxpayer’s bank account.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Your own answer: Write the steps as described by the person you interviewed
— they may use a tax practitioner or a different form, and that is fine to report.

Questions and activities — Pages 121–124
End of chapter
QUESTIONS AND ACTIVITIES

Q1 Why is managing money wisely important for all individuals irrespective of their
income?

Managing money wisely matters for everyone because:
Wants are unlimited, money is not — at every income level, choices must be made
between needs and wants.
Emergencies come to everyone — illness, accidents, loss of income. Savings and
insurance protect rich and poor alike.
Inflation affects everyone — money kept idle loses value; investing protects it.
Goals need planning — a house, children’s education or old age need years of saving.
Debt can trap anyone — high earners with many EMIs can be as stressed as low earners.
As the chapter concludes, managing money is not just about earning more; it is about careful
decisions on spending, saving, investing, protection, borrowing and taxes.

For a low-income family every rupee counts, and one emergency can push it into debt, so
a budget and small regular savings are vital. A high-income person faces different risks:
spending rising with income, idle money losing value, and a larger tax liability to plan for.
Both need a plan.

Why: The choices people make today shape their financial future and their
ability to achieve financial stability (page 121).

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. com
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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Q3 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 your total exceeds ₹3,000, decide which item(s) you can postpone or avoid
buying to stay within your budget.
Use the budget template provided and ensure that all expenses are accurately
calculated.

SCHOOL REOPENING BUDGET

TOTAL AMOUNT ₹3000

EXPENSES AMOUNT

School bag ₹

Books ₹

Uniform and shoes ₹

Notebooks ₹

Pens ₹

Pencils ₹

Art supplies ₹

Total Expenses ₹

Savings ₹

Sample budget (prices are examples; use those in your area):

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

EXPENSES FIRST LIST (₹) FINAL BUDGET (₹)

School bag 700 100 (repair old bag)

Books 600 600

Uniform and shoes 1,100 1,100

Notebooks (12 × ₹40) 480 480

Pens (10 × ₹10) 100 100

Pencils 50 50

Art supplies 200 200

Extra item: geometry box — 150

Total expenses 3,230 2,780

Savings −230 (over) 220

The first list exceeded ₹3,000 by ₹230, so I postponed a new bag and repaired the old one.
The total fell to ₹2,630, so I added one item, a geometry box. Final: ₹2,780 spent, ₹220 saved.

First list: 700 + 600 + 1,100 + 480 + 100 + 50 + 200 = ₹3,230 → 3,230 − 3,000 = ₹230
over
After repairing the bag: 3,230 − 700 + 100 = ₹2,630 (less than ₹3,000)
Add geometry box: 2,630 + 150 = ₹2,780

Savings = 3,000 − 2,780 = ₹220

How to choose what to cut: keep items you cannot do without (books, uniform,
notebooks). Postpone items that can still be used for a while (an old bag, last year’s shoes
if they fit). Buying second-hand books from seniors is another good saving.

Your own answer: Use the real prices you collect, and state clearly which rule
you applied — adding one item or postponing one.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Q4 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?

Saving alone is not enough because money kept idle does not grow, while prices keep rising.
Inflation reduces purchasing power: if a school bag costs ₹1,000 today and inflation is 6%, it
may cost about ₹1,060 next year. The same ₹1,000 kept at home will then buy less.
Investments help because they earn returns — interest, dividends or a rise in value:
They can make money grow faster than inflation. Sameer’s ₹500 at 8% became ₹540,
while Priya’s stayed at ₹500.
Through compounding, returns earn further returns. Bhavisha’s ₹1,000 a year at 7% from
age 25 grows to ₹1,99,635 by 65 — on deposits of just ₹40,000.

Inflation at 6%: 1,000 × 1.06 = ₹1,060
Sameer: 500 + 8% of 500 = 500 + 40 = ₹540
Bhavisha: deposits = 40 × 1,000 = ₹40,000; amount = ₹1,99,635; growth ≈ ₹1,59,635

Why: Saving is like storing seeds; investing is like planting them. Stored seeds
stay the same; a planted mango tree gives fruit for many years (page 111).

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Q5 Investment Planning Activity
Suppose you received cash gifts worth ₹3000 on your last birthday and decided to
save ₹1500. 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 ₹200 in gold? Try other combinations and find
information on the returns from different investment options using reliable sources,
such as newspapers, magazines, or official websites. Based on your findings, prepare
an investment plan explaining why you think each investment option is suitable or
unsuitable.

Sample working for one year. The rates are assumed for practice only: FD 7%; gold +10%
(kept the same in both years for simplicity); mutual fund +12% in a good year or −5% in a bad
year; shares +15% in a good year or −10% in a bad year. Replace them with figures you find.

COMBINATION GOOD YEAR BAD YEAR

A: FD ₹500 + shares ₹800 + gold 535 + 920 + 220 = ₹1,675 (+ 535 + 720 + 220 = ₹1,475 (−
₹200 ₹175) ₹25)

B: FD ₹1,000 + mutual fund ₹500 1,070 + 560 = ₹1,630 (+₹130) 1,070 + 475 = ₹1,545 (+₹45)

C: FD ₹1,500 ₹1,605 (+₹105) ₹1,605 (+₹105)

My plan: keep most of it in an FD (safe, assured, and I may need the money soon) and put a
small part in a mutual fund through my parents for the long term. Shares give the highest
possible return but can lose money; gold is suitable only in small amounts.

A (good): 500 × 1.07 = 535; 800 × 1.15 = 920; 200 × 1.10 = 220; total 1,675 → return
175 ÷ 1,500 ≈ 11.7%
A (bad): 800 × 0.90 = 720; total 535 + 720 + 220 = 1,475 → loss ₹25
B: 1,000 × 1.07 = 1,070; 500 × 1.12 = 560 or 500 × 0.95 = 475
C: 1,500 × 1.07 = 1,605

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

SUITABLE OR UNSUITABLE FOR A CLASS 9 STUDENT, AND WHYom
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OPTION
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directly short run.
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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

After 1 year: 1,000 × 1.06 = ₹1,060
After 10 years: 1,000 × (1.06)¹⁰ ≈ ₹1,791
So ₹1,000 kept idle for 10 years buys only about 1,000 ÷ 1.791 ≈ ₹558 worth of today’s
goods.

If an FD pays 7% and inflation is 6%, the real gain is only about 1% a year. If a savings
account pays less than inflation, the money is actually losing buying power.

Why: Purchasing power decides your standard of living. Planning that ignores
inflation will fall short when the goal arrives.

Q7 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?

No. Higher risk only offers the possibility of higher return — it can also bring losses. Shares
have the highest potential return but the highest risk, and share prices can fall sharply in the
short run, as the SENSEX graph shows. Money needed soon, or for an emergency, should not
be put at such risk.
A person should decide by looking at four factors (Fig. 5.8):
Risk — how much loss can I bear?
Return — what do I need the money to earn?
Time horizon — when will I need it? Long-term money can take more risk.
Liquidity — will I need cash quickly?
So: emergency or short-term money → FD or savings; long-term goals → some mutual funds or
shares; and diversify across options.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

GOAL TIME SUITABLE CHOICE
HORIZON

Emergency fund Any time Savings account / FD — liquid and safe

College fees in 2 Short FD or government bond — assured
years

Retirement in 30 Long A mix including mutual funds and shares — time to
years recover from falls

Why: The risk–return trade-off (Fig. 5.9) means you cannot get high return
without accepting risk. The “best” investment is the one that matches your
goals, your risk tolerance and when you will need the money.

Q8 Why do people buy insurance policies even though they may never face a major loss?
How does insurance provide financial security?

People buy insurance because no one knows in advance whether illness, an accident, death of
the earning member, fire, flood or theft will happen. They prefer to pay a small, certain
premium rather than risk a large, sudden loss that could wipe out their savings. If no loss
happens, they still had peace of mind.
How insurance gives security: it works on risk sharing. Many people pay premiums into a
common pool, and those who suffer a loss are compensated from it. So insurance:
pays hospital bills (health), supports the family if the breadwinner dies (life), and covers
vehicles, homes, crops and cattle (general);
helps families recover from setbacks without selling assets or taking loans;
encourages regular saving and planning through premiums.

Using the chapter’s example: a family pays ₹500 a month, which is ₹6,000 a year. A single
hospital stay can cost far more than that. Without insurance, the family would have to use a
large part of its savings.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Why: Most people in the pool will not need a big payout in a given year, so the
premiums of many can pay for the losses of a few. Each person pays a little to
avoid the chance of losing a lot.

Did you know? Schemes like Ayushman Bharat Pradhan Mantri Jan Arogya
Yojana give health insurance cover to eligible low-income households (page
116).

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Q9 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
Allocate the ₹1,00,000 among the following categories:

CATEGORY AMOUNT (₹) PERCENTAGE (%)

Savings

Education

Household expenses

Health and emergency fund

Farm or business investment

Home improvement

Festivals and recreation

Other

Total 1,00,000 100%

Step 2: Needs vs Wants
Classify each expense as a need or a want and give a reason. Examples: School fees;
New mobile phone; Better seeds or livestock feed; Festival celebrations; Water storage
tank.
Step 3: Save for the Future
Suppose your family saves ₹30,000 at 8% compound interest per year. Using the
formula A = P(1 + r)n, where A: Amount, P: Principal, r: Rate of compound interest, n:
number of years, calculate:
1. The amount after 5 years.
2. The interest earned.
Step 4: Save First, Spend Later
Many financial experts recommend: Expenses = Income – Savings. If your family
receives ₹1,00,000 and saves ₹20,000 first, only ₹80,000 is available for spending.
This helps ensure that future needs and emergencies can be met.
Step 5: Reflect
1. What percentage of the money did you save?
2. Which expenses were needs and which were wants?
3. How can savings improve a family’s financial security?
4. How does compound interest help money grow?
Challenge: Create a pie chart showing how the ₹1,00,000 was allocated across
different categories.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

co m
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Step 1 — Sample
ag
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Step 5: (1) 20% saved. (2) Needs: education, household, health fund, farm m
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a s e
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example Household 25% → 90°, Savings
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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Savings
₹20,000 (20%)
Education
5% ₹15,000 (15%)
7% 20% Household expenses
₹25,000 (25%)
Health and emergency fund
15% ₹10,000 (10%)
15% Farm or business investment
₹15,000 (15%)
Home improvement (water tank)
10% ₹7,000 (7%)
Festivals and recreation
25% ₹5,000 (5%)
Other
₹3,000 (3%)

Sample allocation of ₹1,00,000 (one possible plan).

Step 3 year by year (interest each year is 8% of the amount at the start of that year):

YEAR AMOUNT AT START (₹) INTEREST AT 8% (₹) AMOUNT AT END (₹)

1 30,000.00 2,400.00 32,400.00

2 32,400.00 2,592.00 34,992.00

3 34,992.00 2,799.36 37,791.36

4 37,791.36 3,023.31 40,814.67

5 40,814.67 3,265.17 44,079.84

The interest grows from ₹2,400 in year 1 to about ₹3,265 in year 5, although the rate stays
8%. That growing interest is compounding. With simple interest, five years would give only
5 × 2,400 = ₹12,000.

Why the savings help (Reflect 3): A family with ₹20,000 saved and a ₹10,000
health fund can pay for an illness, a crop failure or a death of livestock without
borrowing at high interest or selling land and animals.

Your own answer: Your family may divide the money differently — for example
more for farm investment in a sowing season. Any plan is good if needs come
first, something is saved first, and the total is exactly ₹1,00,000 (100%).

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Chapter at a glance
Personal finance is the planning and management of an individual’s money to meet needs
and wants: how much to spend, save and invest, and how to prepare for the future.
Its five pillars are income, budgeting, saving, investing, and protection and risk
management (Fig. 5.2).
A budget is a written plan balancing income and expenses. Its steps are identify expenses
→ set a savings goal → track spending → review and adjust. Saving ₹3,000 in six months
means ₹500 a month.
Saving keeps money aside; investing makes it grow and beat inflation (₹1,000 at 6%
inflation → about ₹1,060 next year). Compounding rewards starting early: ₹1,000 a year at
7% from age 25 gives ₹1,99,635 at 65; from 35 only ₹94,460.
Common investments: fixed deposits (safest, fixed rate), bonds (₹10,000 at 5% → ₹500 a
year), shares (highest risk and potential return) and mutual funds (pooled, diversified,
professionally managed).
Insurance (health, life, general) protects against losses through premiums and risk sharing.
Borrowing is useful for productive purposes; too many EMIs eat into savings.
Choose investments by risk, return, time horizon and liquidity; lower risk usually means
lower return (Fig. 5.9).
Income tax is a direct, progressive tax charged by slabs (FY 2025–26: nil up to ₹4 lakh,
then 5% … 30%). Priya: ₹14 lakh − ₹75,000 standard deduction = ₹13,25,000 → tax
₹78,750.

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

Quick revision
TERM WHAT IT MEANS WHERE IT WHAT THE CHAPTER SAYS
APPEARS IN THE ABOUT IT
CHAPTER

Personal finance Planning and managing Opening, page 107 Covers spending, saving,
one’s own money investing and preparing for future
needs

Budget Written plan that balances Budgeting, pages Four steps: identify, set goal,
income and expenses 109–110 track, review; controls impulse
spending

Saving Keeping part of income Saving, page 110 Needed for emergencies, comfort
aside for future use and future investment

Investing Putting savings into assets Investing, page 111 Like planting a mango tree; helps
to earn returns money beat inflation

Inflation Rise in prices over time Margin note, page 111 Reduces purchasing power:
₹1,000 bag → about ₹1,060 next
year at 6%

Liquidity How quickly an asset turns Pages 111 and 117 Cash is most liquid; one of four
into cash without losing factors in choosing investments
value

Compounding Earning returns on earlier Power of Early Bhavisha (from 25) ends with
returns Investments, page 112 ₹1,99,635; Dhruv (from 35) with
₹94,460

Fixed deposit Lump sum kept for a fixed Investment options, Among the safest; assured
period at a fixed rate page 113 returns; PPF, NSC, Sukanya
Samriddhi are similar

Bond Loan to a government or Page 113 ₹10,000 at 5% → ₹500 a year;
company for regular interest government bonds safer than
corporate

Shares and Part-ownership of a Page 114 (Fig. 5.6) High risk, high long-term return;
SENSEX company; index of 30 large prices fluctuate in the short run
BSE companies

Mutual fund Pooled money invested by Page 115 Reduces risk by portfolio
professional managers diversification; still subject to
market risk

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Class 9 Social Science Chapter 14 Managing Your Personal Finances AglaSem · NCERT Solutions

TERM WHAT IT MEANS WHERE IT WHAT THE CHAPTER SAYS
APPEARS IN THE ABOUT IT
CHAPTER

Insurance and Contract: regular premium Protection, pages 115– Works on risk sharing; health, life
premium in return for cover against 116 and general insurance
losses

EMI and debt Fixed monthly loan Borrowing and Credit, ₹3,000 × 12 for a ₹30,000 fridge;
repayment; money owed pages 116–117 too many EMIs hurt savings

Income tax and Direct, progressive tax on Taxes, pages 118–120 Standard deduction ₹75,000;
slabs yearly income Priya pays ₹78,750; administered
by CBDT

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