In the earlier decades after independence, our mothers were mostly housewives. But they understood the value of money. They may not have known anything about investments, mutual funds or perhaps even insurance. But they did have a keen grasp of money matters – budgeting, saving and beating inflation.
Many of us may be financially independent now, but most of us owe our first financial lessons to our mothers. On May 9, we celebrate Mother’s Day. We at Moneycontrol asked women leaders in finance, the one important money lesson they learnt from their mothers. And we probed them on one important money gift that children should gift their mothers, on this day.
Lesson 1: Build an emergency corpus
Renu Sud Karnad, Managing Director of HDFC says that to build an emergency corpus was one of the biggest money lessons she learnt from her mother. “She had a belief that money not spent is saved; such amounts were kept aside for emergency purposes,” she says.
Karnad remembers her how mother would save more, rather than spend. For instance, given a choice, Karnad recollects her mother always choosing to travel by train, instead of taking flights. Any money saved would go straight into her emergency kitty. “She preferred a little effort or pain for a bigger gain. Seeing her, I learnt to build an emergency fund and its importance,” says Karnad.
These days, most financial advisors suggest building an emergency corpus to take care of contingencies. It comes in handy during COVID-19 times when there is a likelihood of a loss of jobs and incomes. You can still build an emergency corpus with limited resources, if you haven’t already.
Also read: Covid-19: Money lessons for the second wave from the first
Lesson 2: Have a budget and spend wisely
For mothers, budgeting for the monthly expenses and analysing the spending are vital tasks. Siddhika Aggarwal, Co-Founder of SHEROES Money remembers her mother maintaining the diary of monthly expenses. In that diary, she would keep track of monthly grocery bills, utility bill payments, etc. She would do this exercise every month diligently.
While Aggarwal was exposed to this very fundamental aspect of financial management early on, she was still careless with her expenses after she started earning. “It was only when I defaulted on my credit card bill that I understood the importance of what my mother did month after month. Now, with multiple apps, I don’t have to maintain a diary but I do keep a tab on my expenses and ensure I save my money!”
Lakshmi Iyer, Chief Investment Officer (Debt) & Head-Products at Kotak Mahindra AMC recalls her mother advising her not to spend beyond her means. “Over the long term, a greater influence of her words has proved to be a positive impact on my spending habits and investment decisions,” says Iyer.
Also read: COVID-19: Money lessons for the second wave from the first
Lesson 3: Define financial goals and invest to achieve
Our mothers have not thought in terms of return on investments, but they knew why we must save. In simple words: financial goals. Karnad emphasizes on the efforts and financial planning that goes into buying a house. “If your plan is to buy a house through a home loan, then you have to manage accordingly in terms of how much initial amount you need to put in and balance by a home loan,” says Karnad.
Today, mutual funds allow you to start a systematic investment plan (SIP) that allows you to automate your monthly investments for reaching a target in five, 10 more years.
Iyer recalls her mother investing money in fixed deposits for a big purchase later. “That taught me patience. This has really helped me to ride market volatility with limited impact,” says Iyer.
Let’s now turn thing around. What are the important financial lessons women business leaders taught to their mothers?
Lesson 1: Diversifying investments
Most mothers, just like Karnad’s, have the habit of investing money in fixed deposits or park amounts in savings accounts. “She was earning measly returns on those savings and investments. So, I explained to her the other investment avenues available and importance of diversifying her savings into other asset classes such as mutual funds and government savings schemes,” says Karnad. She then agreed to diversify her investments.
Lesson 2: Investing in digital gold schemes
Usually, most mothers prefer to invest in physical gold coins and jewellery. They are hopeful of making good returns by investing in physical gold over the years. “Actually, while buying a physical gold jewellery for investment, she was paying 15-20 percent on making charges,” says Aggarwal. By investing in physical gold, her mother’s investment was suffered depreciation instead of earning real return by investing in gold.
“I have now stopped her from buying any physical form of gold unless she genuinely wants to wear the Gold Jewellery. I have explained the benefits of investing in sovereign gold bonds (SGBs) and now she invests in SGBs, which allow her to earn some interest instead of losing sums,” says Aggarwal.
Similarly, Iyer has also convinced her mother to move away from investing in physical gold, to gold funds (in paper form) which don’t have any storage costs involved, unlike a bank locker.
Also read: Want to take health insurance cover for your parents during COVID-19? Here are the options
Gifting a health insurance policy to your mother
Older people need medical assistance quite often and in this pandemic, it’s most important to have adequate health insurance cover.
“My mother takes care of everyone in the family. She holds all of us together. The one thing that was most important to me was to have the right kind of health insurance for her. Something a lot of us overlook. I increased her sum insured to Rs 20 lakh from Rs 5 lakh earlier in 2019. And fortunately, this increased policy came to use when she was COVID positive last year and had undergone hospitalisation,” says Aggarwal.
Also read | The best gifts for your mum on Mother’s day
Even Karnad recalls that the first thing she did after she started working was taking a health insurance policy for her mother that would take care of medical expenses. “Having a health insurance meant that she would not have to worry about the best medical care when it is needed without getting her savings drained,” says Karnad.