If someone tells you that women should not get involved in financial decisions, you may consider helping them lookup on the internet about countless women, who are Prime Ministers & Finance Ministers of various countries or are leading major financial institutions around the world. Financial Planning for Women is an important concept. The need is now – and there is no other option than financial freedom to get liberation.
Why Financial Planning for Women?
Changed Roles
More women are earning now than they were 3 decades ago and they are earning more than ever before too.
Traditionally, citing inflation and consequent lack of affordability was indeed the last resort for mothers to fend off unreasonable requests from children for costly toys and other goodies.
Times have changed since then. Women today do not just manage a household budget, but also add to it substantially. However, the menace of inflation still cannot be ignored, and hence a 3-pronged approach to wealth creation viz. earning, saving, and investing with a sound financial plan is a must.
A longer life span means a longer post-retirement period
Another important variable at play is life expectancy. In line with other parts of the world, life expectancy for women is higher than men in India too.
As per World Bank statistics (2019), globally, the average life expectancy for women was ~75 years, while that for men was ~70 years.
Consequently, the number of years post-retirement is higher for women.
Coupled with the gender pay gap, longer duration of post-retirement life makes planning for retirement extremely important for women. Something which has been ignored by most.
Download – The 9 Point Action Plan – Women’s Day Special Presentation (Click Here)
Factors beyond control affecting career
At times, traditional gender roles in our society, also lead to the trajectory of women’s careers being different from their male counterparts. This could be on account of childbirth, employment gap on account of child care, other caregiving responsibilities at the household, etc.
While in many households, gender neutrality is slowly becoming the norm when it comes to caregiving responsibilities. But it is still women’s main responsibility. So these implied roles of caregiving make financial planning imperative for women.
Steps Financial Planning for Women
Start taking interest
This brings us to the more important aspect around financial planning for women i.e. How to go about it? To begin with, women, especially younger women, should start taking an active interest in personal finance. Stop paying heed to societal stereotypes of delegating personal finance decisions to spouse/father etc.
In quite a few families, even today, women have limited involvement in financial decisions. This needs to change.
One of the first things that women ought to do post marriage is to have a transparent discussion with their spouse. Know about each other’s financial goals and ascertain key life events/ responsibilities that need to be planned for.
Come up with a financial plan
Next up is drawing a financial plan.
Traditionally, women were responsible for managing household expenses within limited resources. They had to strike a balance between the wants and needs of the family.
Keeping a monthly budget ensured that financial discipline was maintained at all times. Today’s women need to take this to the next level. They can draft a plan, not just for a month, but for years and decades, considering various life events, medical expenses, contingencies, dependencies, and eventually, retirement.
Seeking the advice of a professional financial advisor is ideal.
Channelize savings into investments
Indian women have always been exemplary when it comes to saving well and managing emergencies, including financial ones. This skill could be used by today’s women, who have more financial resources than the previous generation. This will create wealth over the long term, by investing prudently.
SIPs, NPS, SSY with a long-term horizon, can be considered for wealth creation. SIPs create a disciplined approach to investing. It help to keep emotions at bay, and leverage the benefit of rupee cost averaging (purchase of higher units at lower NAV and vice versa).
Don’t put all eggs in the same basket
The propensity of women to take excessive risk in the pursuit of quick returns is generally lower than men. Capital preservation is generally given more importance and rightly so.
In this context, Asset Allocation becomes critical. Just like women of yesteryears never kept all the household money in one place. This was to mitigate the risk of theft, loss, etc. Women today can diversify their portfolio across different asset classes like Equity, Debt, Gold, etc. to mitigate the impact of market volatility.
Plan to meet contingency
Women may also consider investing a portion of their portfolio in Liquid and other short-duration debt funds. This is to meet medical emergencies in their household or to assist their elderly parents, whenever required. This may also come in handy in case of an employment gap for childbirth, child care, etc. Also, they should consider proper Term Plans for themselves & earning spouse.
Being clueless is not an option
It is an increasingly uncertain and fast-moving world that we live in. You would have come across many instances of women in the family or your social circle who were completely clueless. Not aware of their financial assets, liabilities, nominations, etc.
in the event of divorce/sudden demise of their spouse. One cannot stress enough financial independence and planning in today’s uncertain world.
Women empowerment is possible only with financial freedom
More than 55% of 42 crores Pradhan Mantri Jan Dhan accounts belong to women under the PMJDY (Pradhan Mantri Jan Dhan Yojana). This was launched in 2015 to promote universal access to banking facilities across households.
In times like Covid, women from villages received aid in these accounts.
Download – The 9 Point Action Plan – Women’s Day Special Presentation (Click Here)
The connection is very important. One has to think in lines of not being dependent – on male members, on society & fate.
I’m a woman and a certified financial planner myself…women should not be excluded in the equation.