Why Women Should Be Financially Independent
[Women and Financial Planning Series]
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Session 1: Why Women Should Be Financially Independent
We are glad to have you with us for our 1st Session on Women & Financial Planning series
Why Women Should Be Financially Independent
In today's era, it is important for every individual - be it a man or woman - to be financially independent. A large number of women in India are efficient home-makers, but career takes a back seat for many, when they enter motherhood, or when other needs of the household become a priority. There also could be instances when, some of them may need to lead their retired lives alone due to unforeseeable circumstances.
It is therefore important that every woman is financially independent and prepared for any such exigencies. In this first session of the "Women & Financial Planning series", we'll explain why woman need to be in control of finances and be financially independent.
Here are some hard facts...
Hard facts about women & finances
- Women tend to live longer than men (…It's a proven trend over the years)
- If there's one thing women have proved for generations, it is that they manage finances better than men
- They save diligently, but they tip-toe when it comes to investing (And that's perhaps because they do not have a fair idea about how to invest or are confused by the host of investment avenues available.)
- As a consequence, women invest money mostly in traditional assured returns products and gold
- At times, Women tend to excuse themselves from financial matters and pass the responsibility to their spouse/ parents owing to lack of awareness about personal finance (As a result, if their spouse predeceases them, they may face hardships owing to this lack of awareness)
By learning about personal finance and participating in the financial planning exercise, women can augment their pursuit towards financial freedom.
Let's see the path women can take for financial empowerment...
Enlightenment to financial independence / empowerment
- Diligently take part in financial matters of the family – While the family as a whole discusses matters ranging from important to trivial, like monthly grocery, the next holiday destination, children's education, home décor, shopping, etc., women either refrain or are not involved in discussions involving financial matters ranging from income/ expense management to investment decisions. Stereotypically, males have been taking the lead in financial and investment decisions for the family at large. But when women are involved, there's more the family can learn from her perspective and experience. If mothers are exposed to financial matters, children too get exposed which in turn can help the latter to be future-ready to manage their personal finances.
- Women should get involved in financial matters of the family and emphasise on savings to leave the family with a decent investible surplus. While making a household budget, attempt to optimally save; because every rupee saved is a rupee earned.
- Also open a bank account and learn to operate it -- both through branch banking and online banking. This will introduce you to the basics of banking, and gradually to a host of other investment products.
- While investing, be sure of the investment goals – whether capital appreciation or capital preservation, and the financial goals that need to be addressed – be it buying a house, children's education, their marriage, retirement, amongst a host of others.
- Knowing the investment goals helps you to choose investment avenues appropriately. But before going ahead pay close attention to your risk appetite i.e. willingness to take risk.
- Closely watch the cost of living or Inflation or price rise, as it could pose a challenge while managing your household budget besides impacting your investments. What actually matters for investments are the returns earned over and above the inflation rate – also known as the real rate of return or inflation-adjusted returns on investments.
- Look at investment avenues that can beat inflation else the purchasing power of your hard earned money / savings will keep reducing. Wealth creating investment avenues such as mutual funds have the potential to clock higher real returns and help achieve important financial goals in life.
- Mutual funds offer host of benefits such as: diversification, professional fund management, lower ticket size, tax efficiency, offer variety and convenience via Systematic Investment Plans (SIPs), Systematic Transfer Plans (STPs), Systematic Withdrawal Plans (SWPs) besides offering high liquidity. Owing to the plethora of mutual fund products, select mutual fund schemes prudently depending on your risk profile, investment horizon and the financial goal(s).
- If you do not have the skills to select appropriate mutual funds schemes, take the services of an unbiased investment advisor or a mutual fund distributor, who can select mutual fund schemes doing a need-based analysis. But insist on the track record of funds and ensure that they have performed consistently and match your risk appetite and investment objective.
- Investing regularly and in small portions can help create wealth in the long run with much needed discipline. Systematic Investment Plans (SIPs) offer this convenience. They help mitigate market volatility , are lighter on the wallet, and power your portfolio with compounding. Remember: the early bird gets a bigger pie; hence the earlier one starts, the better it may be.
- Besides investing in traditional assured returns debt products, you may also consider debt mutual funds for the sake of benefits mentioned or invest in mutual funds which offer a combination of asset classes like equity, debt, gold, etc. in the desired proportion as per your risk appetite. The debt component helps to reduce the risk in a pure equity portfolio. These are called hybrid funds. Don't be tempted to invest in shares directly in the pursuit of faster wealth creation. Mind you, it comes with high risk. Firstly, one needs to possess the qualities of a good stock-picker and secondly, need high investible surplus to buy the best of stocks. Rather invest in shares via mutual funds. Mutual funds help achieve both these objectives with a professional fund manager to manage to the portfolio and offer economies of scale.
- Consider investing in gold, as the precious yellow metal is an effective portfolio diversifier and a hedge against inflation. Gold exchange traded funds (ETFs) (for the convenience of buying gold in electronic form, low ticket size, liquidity benefits, purity and tax efficiency) and gold savings funds are convenient investment avenues vis-à-vis physical gold.
- Do not to put all your eggs in one basket. Diversify investments wisely, as it helps lower down the risk to your investment portfolio. In the endeavour of wealth creation for financial independence, ensure that the asset allocation is set right. Asset allocation refers to investing money in various asset classes – equity, debt, gold – based on your risk appetite, financial goals and investment horizon prudently. Charting a prudent asset allocation can help reduce the risk to your overall investment portfolio.
- Every investment has a cost associate with it. So don't ignore the cost of investing. A low cost of investing can help you clock a better rate of return on investments.
- Track investments regularly, say once a quarter or semi-annually. It will provide a better sense of understanding on how investments are performing, their alignment to your financial goals, and highlight deviations/ underperformance if any. In case an investment is under performing, you can take suitable measures.
- Likewise, avoid timing the market to make short term profits, instead invest for the long term via SIPs to help you create wealth.
- Besides investing, don't forget to indemnify risk - to life, health and property. Buy the correct insurance policy with an optimal insurance cover. This can help you manage untoward events better, and reduce the toll on your finances and keep the path to long-term wealth creation relatively unhindered. In case of life insurance, keep insurance and investment needs separate; because when we buy insurance, the primary objective is indemnifying risk to life and not investing. Hence for life insurance, prefer a pure term insurance plan vis-a vis traditional or Unit-Linked Insurance Plans. Check that every member in the household is adequately insured for both life and health.
- Also have a contingency fund in place i.e. save for rainy days. Keep aside 6 to 12 months of your regular expenses in a savings bank account or liquid funds. This will keep you well-prepared to handle contingent situations and will protect your financial health.
- Also get involved in visits to the financial advisor or tax consultant. This helps for better engagement in the financial planning and tax planning exercise.
- (And last but not the least) Always keep reading and seeking knowledge on personal finance and investing; it is empowering! There are various online and offline investor education initiatives from mutual fund houses or their distributors that provides guidance on financial and investing planning.
Here are the benefits that draw along...
What are the benefits?
- • Financial independence = Financial freedom
You depend less and are better informed when it comes to managing money
- It provides a sense of financial security
- It can help money work for you through wise investing, by of course assuming some level of risk. It can also help you pursue entrepreneurial ventures and make you insightful.
- You begin to value money; it will liberate you and expand your vision
- And if you plan and invest wisely, it will help you live a peaceful retired life
So before we end our today's learning session, here are a few…
Key takeaway points…
- It is important for every individual to be financially independent – be it a man or a woman
- Financial independence results in empowerment, … and prepares you to handle any exigencies
- Hence be in control of your finances, save diligently and avoid tip-toeing when it comes to investing
- Prudently take part in financial matters of the family
- Open a savings bank account. It will introduce you to the basics of banking and encourage you to save
- While investing, be sure of your investment goals
- Don't ignore inflation while investing. It has the effect of eroding the purchasing power of your hard earned money
- Select investment avenues for the portfolio prudently – taking into account your investment goals, risk appetite and investment horizon.
- Mutual funds are a promising investment avenue for wealth creation
- If you're aren't able to select funds, take services of an unbiased investment advisor
- Diversify your portfolio and set the asset allocation right
- Track your investments and goals, it will help you take timely corrective measures
- Don't forget to indemnify risk - to life, health and property. Buy an optimal insurance cover
- (And last but not the least) Financial independence can also help you live a peaceful retired life
So to end our learning exercise today, we now invite you to test your learning by taking up this simple quiz (and win exciting prizes!)
Just Click On The Link Below.
The Information contained in this video transcript is not a complete representation
of every material fact and is for information purposes. All details are provided
on a best effort basis. It is not to be used or considered to be an offer to sell
or buy units of Franklin Templeton Mutual Fund schemes. This video transcript is
for information purposes only, provided on an ‘as is’ basis. Nothing in it should
be construed as personal financial advice. You are responsible for your own investment
decisions and the recipient is advised to consult a professional financial advisor
prior to arriving at any investment decision. The video transcript is for personal
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