NCERT Solutions for Class 9 Social Science Chapter 14 Managing Your Personal Finances (PDF) – 2027

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.

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

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.

Savings and assets can be protected in these ways (pages 115–118):

• Insurance — pay a regular premium and the insurer pays for covered losses. Health insurance covers medical bills, life insurance supports the family if the breadwinner dies, and general insurance covers vehicles, homes, crops and cattle.
• Responsible borrowing — take loans only when necessary, for productive purposes such as education, and repay on time to avoid a debt burden.
• Diversification — spread money over different assets (as mutual funds do) so one loss does not ruin everything.
• Matching risk to need — keep emergency money in safe, liquid options; take higher risk only with long-term money.
• Investing so that money keeps pace with inflation.

Personal income tax is a direct tax paid to the government on the income a person earns in a financial year (1 April to 31 March). People with income below a certain limit are exempt.

• It is progressive: higher income → higher tax, to reduce income inequality.
• 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.

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.

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.

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.

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:

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.

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.

Model answer: I would use a mix of savings and cutting back on wants, and borrow only for the small gap.

Suppose a racket costs ₹900, the tournament is 6 weeks away and I have ₹400 saved:

Cutting wants is the best first step because it costs nothing extra. Savings are meant for such goals. Borrowing should be the last option and must be repaid on time.

Sample monthly budget (amounts are examples):

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

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.

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).

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.

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:

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.

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.

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.

This happens because of compounding. Each year the money earns 7% interest on the whole amount already accumulated — the deposits plus all the interest earned before.

• In the early years the balance is small, so the interest added is small and the curve is flat.
• Later the balance is large, so 7% of it is a big amount; the yearly increase grows every year and the curve becomes steep.

For Bhavisha, interest in her 5th year is only about ₹311, but in her last year it is about ₹12,995 — far more than her ₹1,000 deposit.

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

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.

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.

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.

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.
• Advertisements show attractive returns; the warning reminds people that past performance may not repeat.
• Scheme documents tell where the money will be invested, how risky it is and what charges apply. Reading them helps people choose a fund that suits their goals.

In the example the family pays more than the price:

Families still choose EMIs because:

• They do not have ₹30,000 at once, but can afford ₹3,000 a month from their income.
• They get the item now when it is needed — a refrigerator keeps food fresh, a two-wheeler gets someone to work.
• They can keep their savings intact for emergencies.
• Large items like a house are impossible to buy at once for most families.

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.

Sai pays no income tax (₹0).

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

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.

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.

A budget is a written plan that balances income and expenses. It helps in three ways:

• It lists present needs — food, rent, school fees, transport — so they are paid first.
• It sets aside a fixed amount for goals before money is spent on wants.
• It cuts unnecessary spending such as frequent eating out or impulse shopping, and the money saved goes to the goal.

Examples: To buy a ₹3,000 bicycle in six months, save ₹3,000 ÷ 6 = ₹500 a month. A family may save each month for a school trip next month, sports equipment after six months, higher education in future, or emergencies.

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

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.

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.

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.

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.

Inflation is the increase in prices of goods and services over time. It reduces the purchasing power of money — the same amount buys fewer things than before. With 6% inflation, a ₹1,000 bag costs about ₹1,060 next year, and about ₹1,791 after ten years.

People should consider inflation because:

• Money kept idle at home loses value every year.
• An investment is truly growing only if its return is higher than inflation.
• Future goals — education, a house, retirement — will cost more later, so they need bigger savings than today’s prices suggest.

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.

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.

Step 1 — Sample budget (saving first, as in Step 4):

Step 2: School fees — need (education). New mobile phone — want, unless the family has none for work. Better seeds/feed — need (raises future income). Festival celebrations — want. Water storage tank — need (water security).

Step 3:

Step 4: Expenses = 1,00,000 − 20,000 = ₹80,000.

Step 5: (1) 20% saved. (2) Needs: education, household, health fund, farm investment, water tank; wants: festivals, a new phone. (3) Savings meet emergencies without loans and fund future goals. (4) Interest is earned on earlier interest too, so growth speeds up every year.