are married with young children and your spouse is no longer working. Your expenses are rising and you may pile on credit card debts. Since you have only one income coming in, you should be cautious with your expenditure.
After meeting all your expenses, you must set aside as much as possible towards investment.
You probably are planning to take a home loan soon and maybe already have a car loan. You cannot take too much of risk since you are the sole breadwinner.
Needs: Your immediate short-term need is to save up enough to pay the down payment of your home loan. Moreover, you also need to consider buying term insurance, or if you already have it, to increase the cover substantially since your spouse is not working. You may also consider buying disability insurance for yourself to cover any contingencies such as loss of job or prolonged illness.
In the medium term, you must save up for your children’s education and also build an emergency corpus for medical needs.
You must buy medical insurance for your family to cover medical costs. In the long term, your biggest goal is your own retirement. It is the age of nuclear families and no one except yourself will be paying for your retired years. You need to build up a sufficiently large corpus to enable you to continue to live the lifestyle that you did while you were working. Moreover, with inflation and increasing medical costs, your retirement is not going to be a cheap affair either.
Choice of investments
- Short term (less than 5 years): In the short term, you need to invest in instruments that provide liquidity and carry low risk. Investing in equities is not a good option for the short term since returns in equities are highly volatile and you run the risk of losing your money. Instead, for the short term, liquid mutual funds , bank fixed deposits and short term bonds are a good option for you.
- Medium term (5-10 years): In the medium term, you may not require liquidity, but at the same time, you cannot take big risks either. Hence, you can look at debt instruments that offer a slightly longer lock-in and hence come with higher returns too. For instance, National Savings Certificate (NSC), Kisan Vikas Patra (KVP), RBI bonds – all make for good investments as they provide returns of 8 per cent and have a lock-in of 6-8 years. You may also look at debt or even balanced mutual funds.
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- Long-term (more than 10 years): Your long term needs are at least 10 years away. That gives you the chance to benefit from equities, which, although risky in the short term, are known to provide great returns in the long term. So equity mutual funds would be a good option to consider here.