Money Smarts: Personal Finance for Employees

Your offer letter says ₹12 lakh CTC, yet the monthly credit is well short of ₹1 lakh. What is CTC?

• Current tax contribution
• Cash to credit
• Company travel claim
• Cost to company

Answer: Cost to company. Cost to company counts everything the employer spends on you, including parts you never see as monthly cash.

₹1 lakh a month on paper, ₹82,000 in the bank. That smaller figure is your…?

• Basic pay
• Gross salary
• In-hand (take-home) pay
• Monthly CTC

Answer: In-hand (take-home) pay. Take-home is what lands after tax, PF and other deductions.

₹60,000 in hand: ₹30,000 on rent and bills, ₹18,000 on fun. By 50/30/20, the last ₹12,000 goes to…?

• Travel
• Taxes
• Savings
• Gifts

Answer: Savings. 50% needs, 30% wants, 20% savings and paying off debt.

You spend ₹40,000 a month. How big should your emergency fund be?

• About ₹10,000
• About ₹40,000
• About ₹1.2 to 2.4 lakh
• About ₹24 lakh

Answer: About ₹1.2 to 2.4 lakh. 3 to 6 months of expenses cushions a job loss or hospital bill without a loan.

Two identical index funds: one takes 0.2% of your money a year, the other 1.5%. That yearly charge is the…?

• Exit load
• Expense ratio
• NAV
• Capital gains tax

Answer: Expense ratio. The expense ratio comes out of your money every year, so the cheaper fund leaves you more.

A lender pulls your CIBIL score. Between which two numbers can it fall?

• 300 and 900
• 0 and 100
• 1 and 10
• 500 and 1000

Answer: 300 and 900. CIBIL runs from 300 to 900; lenders generally like 750 and above.

By the Rule of 72, ₹5 lakh growing at 8% a year becomes ₹10 lakh in about…?

• 9 years
• 6 years
• 12 years
• 18 years

Answer: 9 years. Divide 72 by the rate: 72 / 8 = 9 years.

Your employer puts 12% of your basic pay into PF. The 8.33% slice of it (up to a wage ceiling) goes to which scheme?

• Employees' Pension Scheme
• Gratuity fund
• Public Provident Fund
• National Pension System

Answer: Employees' Pension Scheme. That slice funds the Employees' Pension Scheme and the rest goes to your EPF. Your own 12% goes fully into EPF.

A permanent employee in India usually qualifies for gratuity after how many years of continuous service?

• 1 year
• 5 years
• 3 years
• 10 years

Answer: 5 years. Five years is still the rule for permanent staff under the Code on Social Security, 2020. Fixed-term employees now qualify after one year.

A Public Provident Fund (PPF) account opened today matures after how many years?

• 5 years
• 10 years
• 21 years
• 15 years

Answer: 15 years. After 15 years you can withdraw, or extend the account in blocks of five years, with or without fresh deposits.

Investing a fixed sum in a mutual fund every month is called a SIP. What does SIP stand for?

• Secure Interest Plan
• Systematic Investment Plan
• Savings Insurance Policy
• Stock Index Purchase

Answer: Systematic Investment Plan. Regular investing means you buy more units when prices are low and fewer when they are high, and the habit matters more than timing the market.

Your savings account pays 3% a year while prices rise 6% a year. What happens to your money's buying power?

• It grows by 3% a year
• It stays the same
• It doubles in 12 years
• It shrinks each year

Answer: It shrinks each year. Your real return is roughly 3% minus 6%, so minus 3%. Money for long-term goals needs to grow faster than inflation.

You pay only the "minimum amount due" on your credit card bill. What happens to the rest of it?

• It is waived
• It attracts interest, often at a very high rate
• It moves to next year, interest-free
• Your bank pays it off for you

Answer: It attracts interest, often at a very high rate. Card interest is steep, and while any balance is unpaid you also lose the interest-free period on new purchases. Pay the full amount whenever you can.

Which type of life insurance gives the biggest cover for the lowest premium, but pays nothing if you outlive the policy term?

• Term insurance
• Endowment plan
• ULIP
• Money-back policy

Answer: Term insurance. With no savings part attached, almost all of the premium buys protection for your family.

You change jobs but your provident fund follows you under one permanent 12-digit number. What is it called?

• PAN
• Aadhaar
• IFSC
• UAN

Answer: UAN. The Universal Account Number stays the same for your whole career; each new employer links its PF account to it.