Class 9 · Social ScienceNCERT 2026 Revised Syllabus
Chapter 5: Managing Your Personal Finances (0908CH05)
Understanding Society Part II
Introduces personal finance, budgeting, saving, investment, inflation, insurance, responsible financial decisions and household financial planning.
Chapter code: 0908ch05 · Book: Understanding Society Part II · Class 9 Social Science
Find complete NCERT solutions for Class 9 Social Science, Understanding Society Part II Chapter 5. Every question has a clear, step-by-step answer for chapter code 0908CH05.
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QUESTIONS AND ACTIVITIES(9 questions)
1
Why is managing money wisely important for all individuals irrespective of their income?
Ans.
Managing money wisely is important at every income level because resources are limited while needs and wants are many. Careful planning helps people meet essential expenses, avoid unnecessary debt, prepare for emergencies, save for education or other goals and make informed financial decisions. A budget also helps a person understand where money goes and reduce waste. Even a small, regular saving can build financial discipline and security over time.
2
How can budgeting help people balance their present needs with their future financial goals? Give examples.
Ans.
A budget records expected income and expenses and assigns money to priorities before it is spent. It helps distinguish needs from wants, control unnecessary purchases and reserve a portion for future goals. For example, a family can first set aside money for food, rent, school fees and medicines, then save monthly for a child's education or an emergency fund. A student receiving pocket money can plan for transport and stationery while saving a fixed amount for books. A budget therefore balances today's requirements with tomorrow's needs.
3School Reopening Budget ActivityYour 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 ActivityYour 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 Amount Total Amount ₹3,000 School bag ₹ Books ₹ Uniform and shoes ₹ Notebooks ₹ Pens ₹ Pencils ₹ Art supplies ₹ Total Expenses ₹ Savings ₹
- a.List the school items required for the new academic year.
- b.Find or estimate the price of each item.
- c.Calculate the total and check whether it stays within ₹3,000.
- d.If the total is below ₹3,000, decide whether to add one useful item.
- e.If the total exceeds ₹3,000, identify items that can be postponed or avoided.
- f.Calculate the remaining balance or savings.
Ans.
Illustrative school-reopening budget
The estimated expenses are ₹2,700, which is within the ₹3,000 budget. The remaining ₹300 is kept as savings for an unexpected school requirement. Actual prices should be checked locally; if prices differ, adjust non-essential purchases while keeping necessary items first.
| Item | Amount (₹) |
|---|---|
| School bag | 650 |
| Books | 700 |
| Uniform and shoes | 650 |
| Notebooks | 400 |
| Pens | 100 |
| Pencils | 50 |
| Art supplies | 150 |
| Total expenses | 2,700 |
| Savings/balance | 300 |
| Total available | 3,000 |
4
Hard
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?
Ans.
Saving protects money and keeps it available for future needs, but the interest earned in some savings accounts may be lower than inflation. As prices rise, the purchasing power of money can fall. Investments such as fixed deposits, government securities, bonds, mutual funds and shares may offer returns that help money grow over time. However, returns are not guaranteed for all investments and risk differs. A suitable plan should consider the investor's goals, time period, liquidity needs and ability to bear losses. Emergency savings should generally be kept accessible and relatively safe.
5
Hard
Investment Planning ActivitySuppose 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 ₹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.
- a.Calculate the return on each investment option in the example portfolio.
- b.Try other combinations of fixed deposits, shares and gold.
- c.Find rates or returns from reliable sources and record the date and period.
- d.Prepare an investment plan and explain why each option is suitable or unsuitable.
Ans.
Illustrative one-year calculation (the rates below are assumptions for demonstrating the method, not current quotations or guaranteed returns):
For the fixed deposit, interest = ₹500 × 6.5/100 = ₹32.50. For the stock-market example, gain = ₹800 × 8/100 = ₹64. For gold, gain = ₹200 × 5/100 = ₹10. Total illustrative gain = ₹32.50 + ₹64 + ₹10 = ₹106.50. The assumed portfolio return is 7.1% for the year (₹106.50 ÷ ₹1,500 × 100).Why these choices may or may not be suitable: A fixed deposit generally offers a more predictable interest rate if held according to its terms, although early withdrawal can involve a penalty. Shares or equity funds may offer higher long-term growth but can fall sharply and are unsuitable for money that must be available soon. Gold can diversify a portfolio, but its price fluctuates and it does not pay regular interest. An investor should compare time horizon, risk, liquidity, costs and tax treatment.Important: Stock-market and gold returns are not fixed. If their values fall, the investor may lose money. For the activity, replace the assumed rates with figures collected on the same date from reliable sources, record the source and period, and calculate each gain or loss using `Gain/Loss = Amount invested × Return rate ÷ 100`. A minor should involve a parent or guardian and follow the applicable rules; this is a classroom example, not an investment recommendation.
| Investment | Amount invested | Assumed one-year return | Gain/loss | Value after one year |
|---|---|---|---|---|
| Bank fixed deposit | ₹500 | 6.5% interest | +₹32.50 | ₹532.50 |
| Stock-market investment | ₹800 | 8% rise in value | +₹64.00 | ₹864.00 |
| Gold | ₹200 | 5% rise in price | +₹10.00 | ₹210.00 |
| Total | ₹1,500 | — | +₹106.50 | ₹1,606.50 |
6
Hard
How does inflation affect the value of money over time? Why should people consider inflation while making financial decisions?
Ans.
Inflation is a sustained rise in the general price level. When prices rise, the same amount of money buys fewer goods and services; therefore, its purchasing power decreases. For example, if an item costs ₹100 today and its price rises by 5%, it will cost ₹105 after one year. People should consider inflation while planning education, healthcare and retirement expenses, comparing investment returns and deciding how much to save. The return on an investment should be assessed after accounting for inflation, taxes and risk.
7
Hard
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?
Ans.
No. Higher-risk investments may offer the possibility of higher returns, but they can also cause larger losses; higher returns are never guaranteed. A person should choose investments by considering:
1. Financial goal and amount required.
2. Time horizon — when the money will be needed.
3. Risk tolerance and ability to absorb losses.
4. Need for liquidity and emergency savings.
5. Diversification across suitable assets.
6. Costs, taxes, safety, regulation and reliability of the provider.
A short-term essential goal generally needs safer and more liquid options, while a long-term goal may allow some exposure to market risk. Advice should be taken from qualified, regulated professionals where necessary.
8
Hard
Why do people buy insurance policies even though they may never face a major loss? How does insurance provide financial security?
Ans.
People buy insurance to protect themselves against uncertain events that could cause large financial losses. Many policyholders contribute premiums to a common pool, from which the insurer pays eligible claims according to policy terms. Health insurance can help meet covered medical costs; life insurance can provide financial support to dependants after the insured person's death; and motor or property insurance can cover specified losses. Although a person may never make a claim, insurance transfers or reduces the financial impact of specified risks. Policyholders must understand exclusions, limits, waiting periods and premium obligations.
9
Hard
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: savings, education, household expenses, health and emergency fund, farm or business investment, home improvement, festivals and recreation, and other. Show the amount and percentage for each category. The total must be ₹1,00,000 and 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 is the amount, P is the principal, r is the rate of compound interest and n is the number of years, calculate (1) the amount after 5 years and (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.
- a.Allocate the ₹1,00,000 among the listed categories and show both amounts and percentages.
- b.Classify each expense as a need or a want and justify the classification.
- c.Calculate the five-year compound amount and interest on ₹30,000 at 8% per year.
- d.Apply the “save first, spend later” approach to the ₹1,00,000 income example.
- e.Answer the four reflection questions on savings, needs and wants, security and compound interest.
- f.Create a pie chart showing the allocation.
Ans.
Step 1 — Illustrative budget
Step 2 — Needs and wants: School fees are a need because education is essential. Better seeds or livestock feed are productive needs for a farming/livestock household. A water-storage tank may be a need where reliable water access is a problem. A new mobile phone is generally a want if the existing phone works; festival celebrations are usually discretionary wants, although modest cultural participation may be important to the family.Step 3 — Compound interest: P = ₹30,000, r = 0.08, n = 5.
A = P(1 + r)^n = 30,000 × (1.08)^5 = 30,000 × 1.4693280768 = ₹44,079.84 (approximately ₹44,080).
Interest = A − P = ₹44,079.84 − ₹30,000 = ₹14,079.84 (approximately ₹14,080).Step 4 — Save first: If ₹20,000 is saved from ₹1,00,000 first, the amount available for spending is ₹80,000.Step 5 — Reflection: In the sample budget, ₹10,000 is saved, which is 10% of the total. School fees, essential household costs, health needs and productive farm inputs are needs; a new phone and optional recreation are wants. Savings provide funds for emergencies and future goals. Compound interest earns returns on both the original principal and previously accumulated interest, so money can grow faster over time. The sample allocation is illustrative and should be adjusted to the family's actual needs and income.
| Category | Amount (₹) | Percentage |
|---|---|---|
| Savings | 10,000 | 10% |
| Education | 12,000 | 12% |
| Household expenses | 25,000 | 25% |
| Health/emergency fund | 10,000 | 10% |
| Farm/business investment | 25,000 | 25% |
| Home improvement | 8,000 | 8% |
| Festivals/recreation | 5,000 | 5% |
| Other | 5,000 | 5% |
| Total | 1,00,000 | 100% |
THE BIG QUESTIONS — Chapter overview (Textbook p. 107)(5 questions)
BQ1
What is personal finance and why is it important for individuals?
Ans.
Personal finance means making informed decisions about how money is earned, spent, saved, invested and protected. It helps individuals and families meet daily needs, plan for education or housing, prepare for emergencies, manage debt, protect assets and achieve long-term goals. A budget and suitable saving and investment decisions reduce waste and improve financial security, whatever a person’s income level.
BQ2
What are the pillars of personal finance?
Ans.
1. Income: money received from work, business, rent, interest or other sources.
2. Budgeting: planning income and expenses and prioritising needs.
3. Saving: setting aside money for future goals and emergencies.
4. Investing: putting savings into suitable assets to seek growth or income.
5. Protection and risk management: managing debt and using suitable insurance or other safeguards against financial loss.
BQ3
What are some common savings and investment options?
Ans.
Savings options include savings accounts, recurring deposits, fixed deposits and government-backed small-savings schemes such as PPF and NSC. Investment options include government or corporate bonds, shares and mutual funds. A person should compare safety, expected return, risk, liquidity, time horizon, fees and tax treatment. Returns are not guaranteed for market-linked products, and investment choices should match the person’s goals and ability to bear losses.
BQ4
How can you protect your savings and assets?
Ans.
Individuals can protect savings by maintaining an emergency fund, keeping money with regulated financial institutions, using strong passwords and two-factor authentication, never sharing OTPs or PINs, checking statements and avoiding suspicious offers. Suitable health, life, motor, home or crop insurance can reduce the impact of covered losses. Borrow only when necessary and ensure that EMIs are affordable. Read policy documents and loan terms carefully and seek qualified advice for major decisions.
BQ5
What is income tax?
Ans.
Income tax is a direct tax paid by individuals or entities on taxable income according to the applicable law and tax regime. Taxable income is calculated after permitted deductions or adjustments, and rates may be structured in slabs. Revenue from income tax helps fund public services such as education, healthcare, roads, defence and other infrastructure. Tax rules, slabs, exemptions and filing requirements change, so real returns should be prepared using current official information.
IN-TEXT QUESTIONS AND ACTIVITIES — Chapter 5 (Textbook pp. 107–120)(11 questions)
p. 107
Reflect on how you use pocket money or money received during festivals and special occasions.
- a.Reflect on how you use pocket money or money received during festivals and special occasions.
- b.Explain whether you spend or save it immediately.
- c.Describe where you keep savings, such as a piggybank or another safe option.
- d.Explain how you manage daily expenses and plan a saving goal.
Ans.
Model response: I divide the money into three parts: essential or planned spending, savings for a future goal and a small amount for optional treats. I keep savings in a safe place with the help of a parent or guardian and record what I spend. For travel, stationery and canteen purchases, I estimate the cost beforehand and avoid spending the entire amount immediately. The exact amounts should reflect the student’s real circumstances.
p. 108
Have you thought about earning your own money? What skills would you need and what work would you choose?
- a.Consider whether you have thought about earning your own money.
- b.Identify the skills you would need.
- c.Suggest suitable work you could choose, keeping your age, safety and school responsibilities in mind.
Ans.
Model response: A student could develop skills such as explaining school subjects, designing simple posters, basic coding, craft-making or helping with a supervised family/community project. The most important requirements are honesty, punctuality, communication, problem-solving and safe use of technology. Any paid activity by a young person must follow applicable child-protection and labour laws and be approved by a parent or guardian; education and safety must come first.
p. 109
Set a financial goal by answering the four questions given in the textbook.
- a.What do I want to achieve?
- b.How much money will I need?
- c.By when do I want to achieve this goal?
- d.What steps can help me reach this goal?
Ans.
Model goal: I want to buy a badminton racket costing ₹1,200. I need ₹1,200 and would like to buy it in six months. I will save ₹200 each month, compare prices before buying and avoid unnecessary spending. The goal is specific, measurable and time-bound. Replace the product, amount and deadline with your own realistic goal.
p. 109
You and your friends need new badminton rackets for a tournament. How would you manage the budget?
- a.Estimate the total cost of the badminton rackets needed for the tournament.
- b.Explain how you would manage the budget.
- c.Suggest expenses that could be reduced and state whether borrowing would be appropriate.
Ans.
First find the number of rackets required and compare prices and quality at different shops. Calculate the total cost, including any necessary accessories. Decide how much each person can contribute and whether existing savings are sufficient. If the amount is too high, choose a durable lower-cost option or postpone non-essential purchases. Borrowing should be considered only with parental guidance and a clear repayment plan. Record the expenses so that the group does not exceed its budget.
p. 109
Prepare a weekly or monthly budget using the template referred to on page 122.
- a.Prepare a weekly or monthly budget using the template referred to on page 122.
- b.List the sources of income or money available during the chosen period.
- c.Classify expenses into needs and wants, and distinguish fixed from variable expenses where appropriate.
- d.Set aside a realistic amount for savings and check that total planned expenses do not exceed available income.
Ans.
Model weekly budget (illustrative): money available ₹500; travel ₹150; stationery ₹80; meals/snacks ₹100; school activities ₹50; savings ₹100; other ₹20. Total = ₹500. A monthly budget should use actual amounts and include regular as well as occasional costs. If expenses exceed income, review wants first, compare prices and adjust the plan rather than using unplanned debt.
p. 111
Reflect on receiving ₹100, spending on needs or wants, saving first and whether low-income people can save.
- a.What would you do if you received ₹100 today? Would you save some or all of it, or spend it right away?
- b.Would you prefer spending the money on a want or a need?
- c.Do you agree with the suggestion to save first and spend what is left?
- d.Can individuals with low income also save? Why or why not?
Ans.
Model response: I would first consider whether I have an immediate need, then save a portion of the ₹100 and use the remainder for a necessary or planned purchase. Needs such as food, transport or school supplies should generally come before wants such as an extra treat. “Save first, spend later” encourages discipline, but the amount must be realistic after essential expenses. People with low incomes may save small amounts when possible, but they also need fair wages, affordable services and protection from emergencies; saving is not equally easy for everyone.
p. 112
Why are the curves in Fig. 5.4 flatter at first and steeper in later years? Find the fixed-deposit rates offered by a bank.
- a.Explain why the curves in Fig. 5.4 are flatter in the early years and steeper later.
- b.Find fixed-deposit rates offered by a bank.
- c.Record the date, tenure and relevant customer category when comparing rates.
Ans.
At the beginning, the investment base is small, so the annual addition is modest. As returns are reinvested, future returns are earned on a larger balance, producing compound growth and a steeper curve. For the second task, compare current fixed-deposit rates from the official websites of two or more banks. Record the date checked, deposit period, general-customer rate and senior-citizen rate where applicable. Rates change, so do not treat an old textbook figure as a current offer.
p. 114
Why does the BSE SENSEX fluctuate over short periods even though the graph may rise over the long term?
- a.Explain why the BSE SENSEX fluctuates over short periods.
- b.Explain why the long-term graph may show a different overall trend.
Ans.
Share prices change as investors respond to information and expectations. Short-term fluctuations can be caused by company profits or losses, policy announcements, interest-rate changes, inflation, exchange rates, global crises, elections, natural disasters and changes in investor confidence. Over long periods, economic growth, business expansion and rising corporate earnings may contribute to an upward trend, but the market does not rise every year and past performance does not guarantee future returns.
p. 115
Why do mutual-fund advertisements include the warning that investments are subject to market risks?
- a.Explain why mutual-fund advertisements carry the warning that investments are subject to market risks.
- b.Describe what an investor should understand before investing.
Ans.
Mutual funds invest in market-linked assets such as shares and bonds. Their value may fall due to company performance, interest rates, economic conditions or market volatility, and investors can lose part of their money. The warning communicates that returns are not guaranteed and that investors should understand the scheme’s objective, risk level, asset mix, fees, time horizon and exit conditions before investing. Diversification can reduce some risks but cannot remove market risk.
p. 117
Why might a family buy something on EMI even if it costs more in the long run? Can too many EMIs affect savings and emergency funds?
- a.Explain why a family might choose to buy something on EMI even if the total cost is higher.
- b.Explain how too many EMIs can affect savings and emergency funds.
Ans.
A family may choose an EMI because it cannot or does not want to pay the full price at once, because the item is urgently needed, or because instalments fit its monthly cash flow. However, the total amount paid includes interest and possibly fees. Multiple EMIs can consume a large share of income, leaving less money for savings, essentials and emergencies. Before borrowing, compare the total repayment, interest rate, fees, loan duration and affordability.
p. 120
Sai’s taxable income is ₹3,80,000. How much income tax does Sai pay under the tax slabs shown in the textbook? Also prepare a short report on how to file an income-tax return.
- a.Calculate Sai’s income tax under the tax slabs shown in the textbook for taxable income of ₹3,80,000.
- b.Prepare the requested report on income tax and the Income Tax Return (ITR), using the textbook’s assumptions.
Ans.
Calculation using the textbook table: Sai’s taxable income = ₹3,80,000. The first slab is “up to ₹4,00,000” at 0%. Therefore, tax = ₹3,80,000 × 0% = ₹0 under the table printed in the textbook. This is a classroom calculation, not a statement about every filing obligation or a substitute for current tax rules.
Model report on filing an income-tax return: A taxpayer gathers PAN and income details, salary or interest statements, tax-deduction information and the relevant annual tax statement. They select the applicable assessment year and tax regime, calculate income and permitted deductions, complete the return on the official Income Tax e-Filing portal, check the entries, submit the return and complete e-verification. They save the acknowledgement and respond to any official notice. Current rules, forms, deadlines and filing requirements should be checked on the official portal or with a qualified tax professional.