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Last Updated : Oct 21, 2015 05:20 PM IST | Source: Moneycontrol.com

Financial literacy: Way for financial empowerment of women

Many women ignore personal finance. This can be detrimental to their financial health. It pays to know about the current situation and take charge of family‘s money matters.

Yogin Sabnis

Today, women are making their mark in every field. From being CEOs in the corporate world to safely ferrying passengers in taxis, women are defying stereotypes. You will find supermoms in every neighborhood as many women multitask from raising children to running households and having full time careers. They are good at budgeting and managing household expenses in a limit. Give a woman a few pennies for running the house and she will still save something at the end of the month. They are secret savers for a rainy day.

Ironically, many women take a back seat when it comes to taking larger financial decisions. They leave it to their spouses, fathers, brothers, etc, believing them to be financial experts. Men take the lead for making investments, buying insurance, borrowing a home loan, etc. Attribute it to the social fabric in our country or plain lack of interest on part of women to learn about finances.

We always lay emphasis on involvement of both spouses in the entire financial planning process as it is done for families, not individuals. Women need financial planning as much as men do and there are certain situations which typically apply to women. For instance,

•Women usually have higher life expectancies than men. Comparatively, women thus require a bigger retirement corpus.
•Women, especially non-working can face financial hurdles in the event of death of spouse or divorce.
•There comes a phase in many woman’s life where she has to take a break from work (temporary or permanent) after marriage. It could be due to change in location after marriage, birth of baby, family pressure to resign from work. Nowadays, support systems are tough to find which force working women to stay at home after birth of their babies. These factors restrict their future earning potential.

Women are completely clueless about the basic aspects of financial life. They leave everything to spouses not realizing the hassles they might have to undergo in the event of widowhood, divorce, spouse’s incapacitation, etc.

A minimum basic level of financial literacy is very essential for every woman. Let us examine how she can achieve the same:

The starting point:

1.Prepare a list and be aware of all the essential financial details of your family. This should include:
•Your family’s combined investments including debt options, direct and indirect equity, gold, rental income, etc. You can prepare an excel sheet containing all the investment details so that you are able to track everything at one place and update periodically.
•Location of important documents like mediclaim card, house property papers, vehicle papers, investment and insurance documents, identity and address proof documents, latest bank statements, etc.
•Internet banking passwords
•Nomination status of all investments. Check whether all investment, bank and insurance documents include joint names or at least a nominee. If not, then add it as early as possible
•Document of Will executed by spouse
•Contact details of important people your spouse transacts with – brokers, financial advisors, chartered accountant, bank officials, insurance agents, etc.

2.Ensure that you have a joint bank account with your spouse that can be mutually operated to manage household expenses and EMIs. You can conveniently operate the joint account in your spouse’s absence or his medical emergency.

If your spouse is financially disciplined, you can follow his footsteps. In the case of certain pending financial tasks, take the family matters into your own hands and inculcate financial discipline. If your spouse is not co-operative enough and does not give importance to the process, then chart your own course.

Preparing for emergencies

1.Create an emergency fund equivalent to 4-6 months of living expenses. It would help in the event of a job loss of any one or both of the working spouses or any medical emergency.
2.Check the adequacy of life insurance cover of self and spouse. It should ideally cover all liabilities and future goals to compensate for loss of income in the event of death of any spouse.
3.Buy an independent health insurance cover even if you covered by your employer. Ideally, you can buy a family floater policy which covers you, your spouse and children.

Guide to financial discipline

1.Start saving and investing regularly early on. It is prudent to invest in the right mix of products. Step out of your comfort zone of investing in gold and fixed deposits. Get yourself acquainted with various other investing options like mutual funds, tax saving bonds, corporate fixed deposits, stocks, gold funds. Diversify your investments and allocate your savings as per your short term and long term goals. You can invest in debt options for short term goals of about 3 years and can consider equity mutual funds for long term goals of over 5 years. Try to utilize the maximum investment limit of PPF annually.

2.Update yourself about the tax bracket you fall into and understand the calculations. Take charge of filing your own annual returns and not depend upon spouse. This would help to understand all the tax saving options better. Do not invest for saving tax.

3.Do not ignore retirement goal. You too would require a separate retirement plan like your spouse as you cannot afford to depend on his savings. Start saving for retirement early on. For such a long term goal, invest a portion of your savings in equity. PPF and EPF savings would not be enough for survival during retirement.

To sum up…

Do not rely on advice of friends, colleagues, spouse, financial product agents, bank officials. Be the best judge of your financial needs and concerns. You can consult a competent financial advisor who would guide you in the right direction about your spending habits, financial goals and plan an appropriate investment strategy for you. Taking a personal interest in your family finances would help you take better informed decisions.

Author is a member of The Financial Planners’ Guild , India ( FPGI ). FPGI is an association of Practicing Certified Financial Planners to create awareness about Financial Planning among the public, promote professional excellence and ensure high quality practice standards.
First Published on Oct 21, 2015 05:17 pm