Financial Planning for Mothers

Financial Planning for Mothers

This is a guest article

A mother handles myriad responsibilities in a household. It not only includes running the household and taking care of children and family but also today, many working mothers are planning and aspiring for the future needs for their children like their education, health and marriage. While any mother concentrates on executing these responsibilities with utmost diligence, they may not necessarily be aware of the most optimal way of reaching her own financial goals to ensure a good education and life for their children and hence the importance of financial planning.

While the market today is flooded with myriad investment options such as insurance, mutual funds, fixed deposits etc, as a mother its very important for a woman to identify the investment options best suited for her own and her family’s goals and time frame.

The first and foremost step to financial planning for mothers is to identify and set their financial goals. Some of the common financial goals for any mother irrespective if earning or homemakers are saving for the education and marriage needs of her children. In addition to these, a mother also needs to ensure that her life and health is protected and insured as well. While the investment needs of working mothers and stay at home mothers can more or less be the same, they need to plan their insurance or protection needs differently.

Most working mothers contribute a certain amount of money every month towards their household expenses and child care, because of which their families are used to a particular standard of living. It therefore becomes very important for working mothers to take care that they are not under insured so that in the case of an unfortunate event of their demise, their children do not suffer from any financial stress. Working mothers should also take care to have sufficient health insurance to protect themselves against accidents or sudden critical illnesses.

Similarly while stay at home mothers may not be contributing financially towards the household expenditure, they are the glue of the whole family in every other way. It becomes essential therefore that they are not only insured but more important also covered against any critical illnesses and accidents.

The next key financial goal for any parent including mothers is saving for child’s education and marriage. It is one of the major concerns for all Indian parents. While it may not be a financial burden for mothers in the initial years, the cost of education can become serious a matter of concern once the child goes to college. To reduce the burden of the exorbitant cost of education, mothers should start saving and investing for it as early as possible. There are various investment options available in the market to address this need such as child education plans in the market offered by insurance companies and some mutual funds as well as other form of savings. While investing and deciding the financial goal or corpus, it’s advisable for mothers to understand the nature of investment, time horizon, liquidity needs, rate of inflation as well as past performance to make a correct choice. For example a simple MBA may cost between Rs 4-8 lakhs today but 10-12 years down the line it may cost Rs. 25 lakh. Investment options like “child education insurance” protect the child’s education against the parent’s death and make sure that their education and career plans are uninterrupted even in the bread earner’s absence.

Similarly for marriages, while gold has always a very attractive investment option for most women, it is not a very highly recommended one, given the rising prices. Mothers can even explore investing in fixed deposits and balanced funds offered by mutual fund companies and insurance companies for medium to long term horizon. They can even look at investing in equities if the they would require money in the time frame of 5-8 years. For women who can afford the cost of EMIs, investing in real estate is also an excellent option if you would like to leave your children with a home to live in. Working mothers can also avail tax benefits on home loan EMIs paid. In addition to these roughly 6 months of the family monthly expenditure should be kept in liquid cash for any emergency or sudden expenditure arising in the family.

Lastly, apart from covering their life and saving for their children’s education and marriage, it is essential for all mothers to plan for their retirement. Women, especially working mothers, need to plan their retirement so that they are able to maintain their own standard of living without being dependent on children or anyone else. Apart from the provident fund for working mothers, which will give them a lump sum of money on retirement, they should also invest in retirement plans offered by life insurers and mutual funds. Stay at home mothers should also explore investing money regularly as early as possible in retirement plans.

Hence, the key to a good and efficient financial planning is to start investing as early as possible. Mothers, given the many members of their family they take care of, even starting early with small amounts will help them build a big corpus with the power of compounding.


Insurance: A Guide

"Remember kids, I have life insurance" - Adam Savage

This is a guest article from Tatyana Levin

These days one must be financially savvy. Money is not easy to come by and should be managed carefully. With the availability of tools that make it easy to keep track of current events, the stock market, and even your own money, it would be almost a crime to not utilize these tools to make the best and most informed financial decisions. Unfortunately, the more there is, the more there is to keep track of. This applies both to tracking tools and money (the small curse within the comfort of having money to keep track of).

 The savvier ones of us dabble in investments, and the savviest make their living that way. The key is that they know what to invest in. Not magically, of course; investors do a significant amount of research to learn how to optimize their portfolios, but they have the understanding.

A grossly overlooked investment is insurance. This may be because is not typically referred to as an investment with the exception of whole life insurance that has a specific investment component within it. Webster’s defines the word “invest” as a commitment of money for a return and “insurance” as a guarantee. This makes insurance the safest type of investment, because your returns are guaranteed.  But returns are not always financial in the case of insurance. They can be, if there is an unforeseen accident, but the most certain return is the feeling of security.

Now there are many different types of insurance, and what you need depends on your current situation. Obviously you only need auto insurance, found using auto insurance leads if you have a car, and you only need renter’s insurance if you rent and have possessions that you would need insured. Insurance is for those who have something to lose. With an attachment to something, either emotional of physical (or dependence, not like physically being glued to your car), comes the fear that it will be damaged or ruined in some way. For example, if your house caught on fire, you would be devastated. What would add insult to injury is not having a way to recover from this horrible disaster.

 These types of examples are not unique to this article. That is the way that insurance is sold. As they say that clichés are clichés for a reason, insurance is promoted this way for a reason.  The foundation of the concept of insurance is uncertainty, and it is the same uncertainty that is conjured up when investing.

The main difference between insurance and investment is that not having insurance creates a feeling of uncertainty while investments by nature are uncertain. Therefore, investing in insurance creates security and is the only secure investment that exists (and is legal). Getting insurance should be one of the easier financial tasks if you apply all the resources available with technological advances like smart phones.

About the Author: This article was written by Tatyana Levin, a copywriter for InsuranceFiles.com