Financial planners are unanimous in saying that when it
comes to making investment decisions, women rarely take an initiative.
There is a sense of being overwhelmed by numbers and statistics which,
say planners, women find difficult to digest. More often than not, they
rely on other members of the family, maybe husband or father, to make
investment choices. But social dynamics are slowly changing. More women
are earning independently from an early age and, at the same time,
getting married later than sooner. Then why not invest money
independently?
A study commissioned by DSP BlackRock Investment Managers Pvt. Ltd
and conducted by global research agency Nielsen across 14 cities in
India in July 2013, found that only 23% of working women make their own
investment decisions. The figure for single working women is even lower
at 18%.
Making investment decisions is linked to financial
planning. Although this may sound daunting, it is a simple exercise
about allocating resources to achieve future goals. However, you need to
approach it in context of your current and future routine. You can draw
a broad outline of your finances based on the stage of life you are in
now and then keep adjusting for changes as they happen.
The planning process
Planning has to be done around an objective. “There has
to be a context to planning and investing,” said Suresh Sadagopan, a
Mumbai-based financial planner.
The objective could be an important one like your
13-year-old child’s college education or it could be your desire to
travel around the world. Objectives will depend on individuals and their
lifestyles. But to achieve these objectives, you need to plan ahead.
For single earning women without any children, the
objectives could be linked to buying a car or a house or taking care of
elderly parents. For an earning married woman whose spouse is also
earning, it could be all these and the need to plan for a child. There
are a lot of expenses around childbirth and you can actually invest in
advance to cater to some of these.
Many married women who are working may be looking to take
a sabbatical when the baby is born. Therefore, investing to provide for
the months without the second income is also important. Some of the gap
can be compensated through planned investments.
But the one goal that is common to all women,
irrespective of age and status in life, is retirement. Whether you have
just started earning or have been doing so for 20 years, at some stage
you will retire. And at that point, you won’t want to give up the
lifestyle you are used to living.
Many women make their retirement their spouse’s
responsibility. That’s not the best thing to do. According to Nisreen
Mamaji, founder, Moneyworks Financial Advisors, a Mumbai-based financial
planning firm, “While working women do give some thought to retirement,
non-working married women almost never plan for their retirement. But
it is important for them to at least be aware and involved in the
retirement planning investments because in the eventuality of the
husband not being there, she will have to manage her family and finances
single-handedly.”
That’s not the only reason that women should plan their
own retirement. “The way to look at it is different. Many women actually
retire early to take care of their families and hence, have to plan for
the gap in income which they were earning,” said Aditi Kothari,
executive vice-president and head of marketing, DSP BlackRock Investment
Managers.
Once your objectives and the context to your financial
planning has been set, you can then decide the products through which
you can achieve these goals. This could be an appropriate mix of various
products such as fixed deposits, provident fund, equity and debt mutual
funds, among other things.
Cater for contingencies
Other than investing to meet financial goals, you must
think of contingencies. You could do all the planning, but in the event
of unforeseen circumstances and loss of life, things turn around
completely.
A loss of life can be covered through insurance. If you
are a single working woman without any dependants, this may not be your
primary concern. “Insurance is meant to cover financial dependency and
it’s not needed if death doesn’t result in a financial loss to next of
kin,” said Sadagopan.
However, if you are single and have a loan running, there
is merit in being insured, at least enough to cover the loan amount so
that the liability doesn’t fall on your kin.
Married, and children, make financial dependency really
gain pace. “If both partners are working, insuring the loss of income in
the unforeseen event of death for both is important,” said Mamaji.
Often, even a working mother doesn’t assign too much
importance to her own life to cover the eventuality of death. However,
if the family is accustomed to a particular standard of living that has
been made possible thanks to the joint income, then filling that gap is
important. Thus, insuring both earning members of the family helps
protect the loss of income, which the rest of the family is dependent
on.
If you are not working and your spouse is the only
financial provider for the family, you need to be aware of how much
insurance is there in his name. You need to know whether in the
eventuality of the spouse’s death, critical aspects such as your daily
lifestyle, children’s future education and marriage are catered for.
Since he is the sole earning member, his death will create a big income
gap for the family and this can be covered through term insurance.
The other emergency that may take place is health
related. These are also hard to predict and can get exaggerated if there
are unforeseen occurrences such as accidents. “Medical insurance is
necessary for everybody, no matter the age and status in life,” said
Sadagopan.
In a study, ICICI Lombard found that premium contribution
by women towards health insurance increased by 38% in 2012-13 from
2011-12. Women even have the option of taking on medical insurance that
has maternity benefits.
Ahead
of International Women’s Day on Saturday, Mint’s Lisa Pallavi Barbora
and Vivina Vishwanathan list out the reasons why a woman should take
charge of her money.
What should you do?
Financial independence for women can’t just be about
earning their own money, but also about how they manage it and secure
their and their family’s future, said Kothari. “Today, more women are
earning independently but divorce rates are also increasing. Moreover,
women tend to outlive men. There are good options for investments but
many women don’t know what to do,” she said.
The foremost step towards financial planning is to become
aware, which means understanding how you can make your money work
efficiently for you over a number of years. The objective could be to
ensure your family’s financial security, your retirement or even just
your travel dreams, but the approach has to be to embrace a planned
personal financial management and goal-based investing.
A part of being aware is to get the details right. Ensure
that you name dependants as the nominees in these investments and
insurance policies. Also, it is a good idea to work on a will when you
know who you want to be the beneficiary of your investments. Even if you
have no dependants, it may be wise to draw up a will so that your
family does not have to bear the burden of any liability.
Financial control is the biggest tool in your hand. Use it, and use it well.
ONIKA JAISWAL
PGDM 1ST YEAR
2013-15
SOURCE - LIVE MINT
No comments:
Post a Comment