Financial Planning for Mothers

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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.

Article is written by Aviva India

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