When Mumbai-based maxillofacial surgeon Garima Devrani had her second child in 2019, she had her finances sorted. She had a health insurance policy that covered maternity expenses. She had also created a savings kitty to take care of 6-8 months’ expenses, despite being part of a double-income family. Her efficient planning helped her sail through smoothly during and after delivery, when she had to take a career break. “I knew that my income will not flow in for at least four to six months after delivery. So, my savings served as a cushion,” she says. She had also factored in the caretaker’s expenses. Planning ahead is a must for ensuring contented motherhood as well as the child’s well-being.
Be prepared for contingencies
Chalking out a financial plan that covers your motherhood journey in the initial years is especially critical during the COVID-19 pandemic times. “Your contingency fund has to be significantly larger, as pay cuts and job losses are a reality today,” says Tejal Gandhi, Founder, Money Matters, a financial planning firm. As a thumb rule, you must have an emergency corpus capable of funding your six months’ household expenses. In tough times such as these, you can consider enhancing this to 9-12 months’ expenses. Factor in your income stream (regular or irregular), your current lifestyle, EMIs and so on. If your income is irregular, you will need a bigger corpus, but if you are a working couple with steady income, a kitty equivalent to six months’ expenses should suffice for your family. This corpus will ensure that financial planning for child-related expenses are insulated from any crisis at home.
Buying an adequate health insurance cover should form the core part of your contingency planning. “You will have to deal with various expenses, including delivery, vaccinations for the baby along with any other items that may come with complications. Taking a health policy in advance will help cover some of these costs. Even if you don’t have maternity cover, the new-born baby can be covered under a health plan with renewal once the baby turns 90 days,” says Vaidyanathan Ramani, Head, Product and Innovations, Policybazaar.com. A health cover with maternity benefits, though useful, comes with much higher premiums and three to four year waiting periods.
Plan ahead for the break, career resumption
For your kid, you need to create a dedicated kitty to fund creche and playgroup expenses as also the caretaker’s costs. “This will help you resume work without anxiety over your kid’s well-being. Put in place a financial plan for at least the next five years when you plan on having a child,” adds Gandhi. While Devrani was fortunate to have been able to resume work in a few months, that’s not necessarily the case for all mothers. Take, for instance, the case of IT professional Tanushree Bhatkar, who resumed work recently after a two-year break. “My maternity leave was not extended. It was a hard choice to make, but I had to quit,” she says. She had been investing through SIPs in mutual funds prior to her pregnancy, which came in handy. “I also had savings in liquid instruments and made a part withdrawal from my employees’ provident fund (EPF) corpus,” she says. Sensing the need for investing for her child’s future, she and her husband have already started investing through SIPs in an equity mutual fund for his education.
“Plan well ahead so that your investments are capable of taking care of 4-5 years’ expenses during your break. If your investment horizon is 3-5 years, you can look at investing in balanced equity-oriented funds. You can start withdrawing regularly from the corpus created to substitute your income during your sabbatical,” says financial planner Nisreen Mamaji, CEO, Moneyworks.
The instrument will depend on your horizon and risk-taking ability – equity and equity-oriented mutual funds for longer term horizons and higher risk appetite and fixed income avenues for the short term. “You must diversify your risks. If you are investing Rs 20,000 a month, let Rs 10,000 go into a diversified equity or multi-cap fund and another Rs 10,000 in a hybrid equity-oriented fund,” says Gandhi. Ensure that you regularly review your portfolio to make changes when needed.
If you are already pregnant, you have to look at highly liquid and secure bank fixed deposits to park your savings. Mamaji also recommends tighter budgets once your plan a family. Do not stretch your budgets – focus on needs rather than wants. Depending on your disposable income, luxury cars, jewellery and frequent vacations will have to take a backseat. “Don’t jump into buying an expensive house only to be burdened with huge EMIs and childcare expenses. At times, the wife is compelled to go back to work sooner than she wants to because of high EMIs. Instead, look for a house where one spouse’s income is adequate for servicing the loan EMI,” she explains.
Seize the opportunity in COVID-19 crisis
Do not waste a good crisis, the adage goes. COVID-19 has led to a large number of employees working from home, with IT majors TCS and Wipro indicating that WFH could become a permanent feature. If you are keen on spending more time with your child in the initial years, negotiate hard with your employer to get this option. “COVID-19 has expanded work from home opportunities. You should negotiate for flexible working hours or limited workplace visits – say once a week,” says Mamaji.
For women, this will mean reduced physical and mental exertion during a delicate period.
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