Okay But Why Does Nobody Tell Us How Money Actually Works?

Okay can we just talk about this for a second.

We spend years learning how to find the hypotenuse of a triangle. We memorise the periodic table. We can tell you exactly what happened during the Battle of Plassey in 1757.

But nobody — not once, in all of school — sat us down and explained what a savings account actually does. Or what happens when you borrow money. Or what EMI means. Or why our parents stress about money in ways that seem to have nothing to do with how much they earn.

It's actually kind of wild when you think about it. Money is something we will deal with every single day of our adult lives. And we were taught basically nothing about it.

So here it is. The crash course. Everything you actually need to know, starting from zero.

First things first: where does money come from?

No, not from the government printing it (though technically yes, but that's a whole other rabbit hole). For most people, money comes from work — you provide a skill or your time, and someone pays you for it.

That payment is called income. And here's the first thing nobody tells you: your income is not all yours. Before it even hits your account, some of it goes to the government as tax, and some goes to your retirement fund (EPF, if you're in the formal sector). The amount that actually reaches you is called your take-home pay or net salary.

Right now, as a student, your 'income' might be pocket money, gifts, or money you've earned from tutoring or selling things. Same principles apply.

What a bank actually does with your money

This one surprised me when I really understood it. When you put money in a bank, the bank doesn't just hold it for you like a locker. It actually lends most of your money to other people — businesses, home buyers, etc. — and charges them interest on those loans.

In return for letting the bank use your money, they pay you interest too. That's why your savings account earns you a small percentage every year. The bank is essentially renting your money from you.

The catch? Bank interest (usually 3-4% per year) is often less than inflation (the rate at which prices rise — around 5-6% in India). So if your money just sits in a savings account, it's actually losing purchasing power over time. That's why investing matters — but we'll get to that.

The three things you can do with money

Every rupee that comes to you has exactly three possible destinations:

Spend it — buy things, pay for experiences, meet daily needs. This is obvious.

Save it — put it aside for future use. A savings account, a piggy bank, whatever. It stays relatively safe but doesn't grow much.

Invest it — put it to work so it can grow. More risk than saving, but over time, significantly higher returns.

The goal is not to put everything into one category. The goal is to be intentional about how much goes into each — which is literally what a budget is.

Interest: the most important concept in all of money

Interest is the cost of borrowing money, or the reward for lending it.

When you borrow (a loan, a credit card, an EMI): you pay interest to the lender. This is how banks make money.

When you save or invest: you receive interest or returns. This is how you make your money work.

The magic happens when interest compounds — meaning your interest earns interest. Rs 10,000 at 10% per year becomes Rs 11,000 after year one. But in year two, you earn 10% on Rs 11,000, not Rs 10,000. Over decades this becomes genuinely mind-blowing.

The flip side: compound interest on debt is brutal. A credit card charging 36% per year compounding monthly will eat you alive if you only pay the minimum. The same mechanism that builds wealth destroys it when it's working against you.

One thing to do this week

Look at your bank account (or ask a parent to show you theirs). Find the interest line. Find any charges. Actually read each line. Five minutes of attention to your own money is worth more than any article I can write.

What's the one money thing you've been confused about but never asked anyone to explain? Drop it in the comments. We'll answer every single one.

— Daughters of India, because nobody else is having this conversation with us 💸