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Life stage financial planning: Saving for children’s goals and retirement in your 40s

Financial planning in your 40s is tricky. Your parents may have retired and may become dependent. Your children’s education and other expenses may shoot up

December 23, 2020 / 10:20 AM IST

Note to readers: No two people’s financial plans can ever be the same. Our income, expenses, goals, aspirations and financial obligations differ. But the first principles are more or less common, depending on your age bracket. Moneycontrol personal finance’s new series called ‘Life stage financial planning’ will tell you what these broad principles are, depending on whether you are in your 20s, 30s, or 60s. This story is about how to plan your finances when you get to your 40s. That’s when you consolidate your portfolio and start planning your succession to ensure you keep everyone secured.

 The 40s age group is a tricky time to be in, financially. Your income is not a problem because you are well-settled in your job and earning much more than what you did in your 20s and 30s. But your expenses are also high. Your lifestyle has improved. Your parents are ageing and their medical expense may be a concern. And your kids aren’t financially independent, yet. So their higher education expenses are a concern as well.

In short, you are sandwiched. And remember, you too are getting closer to your retirement, so you’ve got to save up adequately. What do you do?

Make a will

As your income goes up, which it does typically by the time you reach your 40s, it’s important to make a will. This ensures that your money gets passed on to your rightful heirs.


A Will is a legal document that contains an individual’s wishes on how his/her property and wealth, must be distributed after his/her death. Appoint a trusted executor whose main task is to carry out the wishes you’ve laid out in your will and ensures that your wealth reaches the right hands.

Also watch: Managing Money with Moneycontrol: How to make a will?

Invest more than ever; but involve your spouse, too

You may not have reached your peak salary level yet, but in this age group, your income has been steadily rising. So, invest more. Top-up your systematic investment plans (SIP). But involve your spouse. In case the main earning member passes away, the surviving spouse must know where the money is kept.

Make sure that you make investments in joint names, with ‘anyone or survivor’ mode. This ensures that if one member passes away, the investments smoothly passes on to the next holder.

Also read: The best mode of operating a Fixed Deposit account that factors in emergency withdrawals.


You’re a bit late if you haven’t yet bought a health insurance policy. But it’s not too late yet. Remember that the cost of insurance increases with age, especially after the 30s. “COVID-19 has increased people’s awareness on the need to take health and medical insurance policies. But, even otherwise, it is a must do, for all,” says Dilshad Billimoria, director and chief financial planner, Dilzer Consultants.

Buy a family floater for your spouse and children; a family floater of at least Rs 15 lakh is a good sum-assured to start with.

Make sure your health insurance offers cashless benefits. This helps while paying hospital bills, as you generally don’t have to shell out much from your pocket; your health insurance policy pays the bills directly. Keep your spouse informed about where the policy documents are, the customer care numbers and contact points.

Also read: Opting out of a floater health policy for an individual cover? Know the nitty-gritty


The 40s are a good time to start paying off your loans. These could be car loans, home loans or any form of personal loans you may have taken earlier. Some experts suggest to continue loans through their course, especially home loans, because they offer income-tax benefits. But Moneycontrol personal finance advises you to be debt-free as soon as you can.

In the wake of the current pandemic-linked uncertainties such as job losses and pay cuts, it is good to be debt-free. Also, your salary may probably peak out in your 40s and 50s. It’s good to reduce debt and channelise your loan instalments into some investments.

Consolidate your portfolio

It’s possible that by now you might have invested across multiple avenues; a myriad number of mutual fund schemes, fixed deposits and even government bonds. In fact, those who deal in stocks and shares, often end up with a huge portfolio of equities. Now is the best time to consolidate your investments.

At the same time, avoid complex products that you do not understand. “You could reduce the number of investment schemes, including mutual funds, to make your investment nest-egg more manageable as you grow older. Stay simple,” says Hemant Rustagi, CEO and director, Wizeinvest Advisors.

It’s a good time to hire a financial advisor if you find it hard to devote time to your investments. But get serious about your investments. Review your portfolio at least once a year. Be disciplined. Ensure that you are adequately diversified. Have a mix of debt, equity funds and even fixed deposits. “While equity investments are riskier than most other asset classes, they are important even in the 40s, so that your investments can beat inflation,” says Rustagi.

One tip for your 40s

Do not dip into your emergency corpus, especially to fund your children’s education.

Instead, start saving up first. Money that goes out from investment baskets in the 40s, is hard to get back on track, unless you earn a windfall. Selling ancestral homes or jewellery, unless earmarked specifically for education, in the early stages of financial planning, is a bad proposition.
Vatsala Kamat is a freelancer. Views are personal.
first published: Dec 23, 2020 09:19 am

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