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How can single mothers save money, and where should they invest?

If you are looking for a long-term investment, investing in equity funds (large-cap or blue-chip funds in particular) is a great option. For medium-term goals, investing in hybrid funds is a good idea

May 09, 2021 / 08:41 PM IST

Archit Gupta

Being a single mother is not easy. They not only have to take care of their children but also the finances. Single mothers have to get their finances right to secure their future and raise their children.

Saving money and investing it in suitable options is essential. Having a robust financial plan makes handling finances easier for them.

How can single mothers save money?

Single mothers have to draw a budget plan and religiously follow it to save money. The best way to do this is by following the rule of 50:30:20. As per this rule, individuals will have to allocate 50% of their income towards needs such as groceries, rent or EMI, utilities, and so on.


30% of the income must be set aside for wants such as dining out, apparel, vacation, and so on. They must save the remaining 20% of their income.

This sum should first be utilised towards building an emergency fund, which is at least six times their monthly income. This corpus must be accessed when financial distress occurs due to developments such as loss of income or medical emergency.

They can build an emergency fund by transferring 20% of their income to a different savings account. They may also consider mutual funds like liquid funds for this purpose. They should look to cut down on their expenses on wants. It would be best to spend only on the absolutely essential items.

The more one saves, the more they may invest, which makes their future better. Once an emergency corpus of sufficient size has been built, single mothers should invest their monthly savings and surplus amount. The following are some of the investment options that single mothers may consider investing in:

i) Public Provident Fund (PPF)

Investing in PPF is an excellent option for single mothers. The lock-in period of 15 years helps them achieve their long-term financial goals, such as raising funds for children's higher education and purchasing the dream house. Apart from that, they can also claim tax deductions of up to Rs 1,50,000 a year.

ii) Mutual Funds

Investing in mutual funds is an excellent option not only for a single mother but for everyone else as well. There are various types of mutual funds available, and investors should pick the one that matches their financial goals, risk tolerance and investment tenure.

For instance, if you are looking for a long-term investment, investing in equity funds (large-cap or blue-chip funds in particular) is a great option. For medium-term goals, investing in hybrid funds is a good idea. You may consider investing in arbitrage and liquid funds to raise money for a short-term financial goal. Investing in mutual funds via a monthly systematic investment plan (SIP) helps you instil a sense of financial discipline.

iii) Bank deposits and government saving schemes

Risk-averse single mothers may consider investing in bank deposits and government saving schemes. If you have a lump sum, you may invest it in a bank fixed deposit or post office time deposit. If you are to invest a small sum regularly, then recurring deposits (RDs), National Savings Certificates and Post Office Monthly Income Scheme (POMIS) are great options. If you are a mother to a girl child, you may invest in Sukanya Samriddhi Yojana (SSY).

Remember, investments should be made based on your financial goals, risk tolerance and investment tenure. Do not blindly follow others. An investment suiting somebody may not necessarily suit you.

Apart from these, it would be best for single mothers to purchase a health insurance policy covering themselves and their dependents. This would alleviate the need to access savings or break investments during a medical emergency. As the children of a single mother are dependent entirely on their mother, it would be best to buy a term life insurance policy.

If an untoward incident takes the life of a single mother, the sum assured of the policy would take care of the future finances of their children. Single mothers should have their children as the nominee for all their properties, bank accounts and insurance policies.

Disclaimer: The views and investment tips expressed by the investment experts on are his own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.
Archit Gupta is Founder & CEO, ClearTax
first published: May 9, 2021 07:53 am
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