How a Career-oriented woman or Housewife should plan for the right investment

Last Updated: Sat, Dec 22, 2018 19:06 hrs
Working_Woman

It’s the year 2018 and women stand on an equal footing with men. They work as doctors, engineers, nurses, teachers and even CEOs of top banks.

Sadly many women still rely on Fathers, Husbands and Brothers to manage finances.

Very few families allow women to be decision makers in investments. This is pushing women backwards and career-oriented women must step up and make investment decisions.

For many years women were just signatories on investment products chosen by fathers and husbands. But, things are changing with the percentage of women making independent investment decisions jumping from 37% in 2013 to 52% in 2016 according to data from Nielsen.

Here are some investments a career-oriented woman may consider to achieve financial independence.

Investments for career-oriented women

A married woman juggles household chores and a hectic job, leaving little time to choose the right investment. The best investments would be those with limited risk like a fixed deposit. The principal is safe with interest earned on the investment. Banks have been hiking fixed deposit interest rates, making them a great investment for working women.

As earning members of the family, women must plan for their kids' education and marriage.

Rising inflation entails a measure of risk in investment. Systematic Investment Plans or SIPs in mutual funds are an excellent investment to achieve the twin financial goals of children’s marriage and education. SIPs are a way to invest in mutual funds where small amounts of money are invested periodically (quarterly, monthly, weekly) in a selected mutual fund scheme mainly equity funds.

Staying invested for at least 3-5 years may yield inflation-beating returns. There’s risk in the investment, but financial goals may be achieved quickly.

Women have a longer lifespan than men and must invest for retirement.

PPF is a good investment offering interest rate of 8% a year, effective 1st October 2018. Interest rates are reviewed each quarter. PPF has a compulsory 15 year lock-in with the long-term outlook, making it an ideal investment for retirement. PPF also enjoys the EEE benefit.

The investment up to Rs 1.5 Lakhs a year is tax deductible under Section 80C. Interest earned and amounts withdrawn at maturity are tax free.

Women may also opt for National Pension System or NPS which is a retirement-oriented investment. NPS encourages retirement planning at a young age which gives sufficient money at retirement. With a maximum allocation of up to 50% in equity and the rest in debt, NPS offers inflation beating returns. A maximum 60% of NPS Corpus can be withdrawn at 60 years with only 40% of that being tax-free. The remaining 40% must be compulsorily locked in an annuity scheme where monthly pensions are taxed.

Young working women capable of taking high risk and willing to stay invested till 60 years may invest in the National Pension System. Unmarried working women must invest for higher education or marriage. A risk free investment like fixed deposits, post office saving schemes or fixed maturity plans help achieve these financial goals. An investment in Post Office Monthly Income Scheme or POMIS offers 7.3% a year compounded annually with tenure of 5 years. Women who seek capital protection may invest in Post Office Monthly Income Schemes. Fixed Maturity Plans are close-ended debt funds with maturity of a month to 5 years. Women who seek steady returns over a fixed time period may choose Fixed Maturity Plans to meet financial goals.

Investments for a housewife:

A housewife may not earn but still manages the household finances. With inflation pushing household budgets haywire, housewives have no choice but to show a keen interest in investments. It’s not too difficult with housewives called homemakers well educated these days.

Homemakers can open a savings bank account where money saved from the monthly household budget may be deposited. A fixed deposit can be opened jointly with spouse to enjoy high interest rates. A homemaker must be a nominee in all spouses’ investments to be sure there’s money for herself and kids on an unexpected demise.

A homemaker must make sure spouse has availed a term life insurance plan. On an unexpected demise of the breadwinner within the term of the plan, the sum assured could be used to meet daily expenses and children’s education and marriage expenses. A family floater health insurance plan could take care of hospitalization expenses of the entire family.

A homemaker can invest in PPF and enjoy a higher rate of interest than bank fixed deposits. If she is willing to bear risk in investment, she can consider an investment in SIPs of mutual funds. A SIP of just Rs 5,000 a month in a good equity mutual fund scheme can give close to Rs 25 Lakhs in 20 years at a CAGR of 12% adjusted for inflation. An investment in mutual funds is risky. Do weigh the risks before investing.

A homemaker must look at husband’s final will and testament. She must be present when it’s drafted and be completely aware on the contents. Maintaining a proper record of investments, being a nominee in spouse’s investments and staying in control of finances puts the homemaker in an excellent position to meet any financial eventuality.

Be Wise, Get Rich!

Views expressed are personal. C.S. Sudheer is the CEO and Founder of IndianMoney.com.

Also Read: What working women must have in their financial plans