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The A to Z of Women and Money Management

A woman can either be a homemaker, a working woman who is married, a single working woman or a single mother.

March 07, 2014 11:09 IST | India Infoline News Service
The women have a complex relationship with money. While a woman likes money and spends it like any other rational person, she also prefers to let the man in her life manage it for her. Women are also usually more risk averse compared to men. Of course, there are exceptions. But, women in general and in India especially are hesitant to manage money.

A woman can either be a homemaker, a working woman who is married, a single working woman or a single mother. Whatever be the case, it is absolutely critical that women understand money management and participate actively in financial decisions.

Here are the various dynamics of money a woman should understand to become financially aware and independent too:

Plan for changes in life: A woman’s life is more prone to change than a man’s life. A working woman can face a loss in income due to a career break. Relocation after marriage or time off from work due to child birth can be some reasons for an income break. If the working woman is financially strong with a savings pool, then it becomes easier to deal with the loss in income. A married woman may face adversities like a divorce or death of the spouse. In the case of a divorce and if there is a child in question, it becomes even more critical for a woman to be financially strong, as it can affect custody issues. She should be financially prepared to face such changes in life.

Have a safety net: An emergency fund or contingency savings is absolutely critical for any person. This assumes greater significance for a woman. Working women should regularly save money in a liquid fund by investing monthly. She should build a safety net to meet emergencies. This is not only to meet adversities in her life, but also if some untoward incident befalls her family. Homemakers should also take active steps in the same direction. She may be given a monthly amount by the spouse to run the family. Allocating a small portion of this amount for emergencies can well serve the purpose.

Awareness of financial matters: Money management not only means awareness about spending on daily needs, but also involves saving enough to plan for goals and future needs. Finance is often thought of to be a complex subject, and this is one reason why many women stay away from it. Working women with regular income can take the help of a financial planner to understand about investments and goal planning. A homemaker should take an interest in the family’s finances and understand at least the basics from her spouse. This awareness can go a long way in improving family finances as well. With awareness comes responsibility. Women should actively discuss financial matters with the family and involve the children as well.

Budgeting and spending: It is generally considered that women spend more than men. Although this may not always be true, having knowledge about the dynamics of money can help a woman significantly. When a working woman faces shortage of money, it is easy for her to borrow or spend on her credit card. If she does not understand the negative effects of such borrowings, it is very easy for her to fall in a debt trap. In this case, she may be earning a lot, but reckless financial behaviour can leave her with no savings. An Indian homemaker is generally given a fixed amount by her spouse and is expected to run the house with this money. Although a homemaker may excel in budgeting for daily needs, it is vital for her to understand the importance of spending lesser than what she gets, and save the surplus.

Goal Planning: In a traditional Indian family, it is usually the male member in the household who plans for goals. Be it children’s’ education, marriage or even a holiday, the woman of the house is usually not involved. This needs to change. A homemaker may give suggestions on these things, but if she does not have an understanding about the financial aspects of each goal, then this may not be financially good for the family. Even in the case of a working woman, she may simply let her husband or father use her money towards the goals planned. This is not healthy. Knowledge about goal planning becomes even more critical for single mothers. In this case, they have a dependent for whom they should plan as well. So, proper awareness and participation is essential. Involving the woman in financial decisions can not only help in enhancing her awareness, but a woman’s smart inputs can also benefit the family’s financial position.

Retirement Planning: Women tend to live longer than men. Women also usually marry older spouses. As a result, it is important to plan for retirement assuming that the spouse will not be around. Although men plan for retirement keeping in mind their spouses, sometimes, there is a shortfall in the corpus after their death. So women should understand retirement planning and be aware of the various sources from which retirement income comes in. For unmarried women, retirement planning should be done solely based on their single income. Many working women tend to forget about saving for retirement after their marriage or when there is a break in income. This affects the retirement corpus. Women should try and maintain the continuity in saving for retirement even if there is a stoppage in their earnings.

Insurance: There are several types of insurance policies in the market today. Of these, the most important are health insurance and life insurance. Having a medical cover for self and family can go a long way in keeping savings intact in today’s world of rising medical expenses. Married women are usually covered as a part of the husband’s health cover. Nevertheless, it is important for married women, both working and homemakers, to understand the details of the health policy. As single women have nothing to fall back upon, they must take a health policy in their name to protect themselves. The other insurance which is crucial is life insurance. Women, especially those with dependents, should necessarily take a pure term cover on their life, naming the dependent as the nominee. A single mother should prioritise this as the first thing to be done for the safety of her child. In addition to taking an insurance policy, women should also be aware of the policies taken by the spouse. In many cases, the wife is named as the nominee and is not even aware of this. An insurance cannot replace the loved one, but it can atleast give the woman the financial support to deal with the loss.

Estate Planning: Women should familiarise themselves with various aspects of estate planning to better deal with the loss of a loved one. Women with assets should write a Will and get it registered. It is also important for a man to educate his spouse about his Will and keep her informed of it. Only if a woman is aware of her husband’s estate planning will she be able to provide for her children.

In today’s world, where women are becoming more career oriented, awareness about money management is critical. Reading personal finance blogs or books, attending seminars and taking part in online forums are some easy ways for women to enhance knowledge about finance. Men on their part should include women in financial decisions and help them with the required awareness.  This Women’s Day, financial independence and women empowerment should be the new mantra for every woman.

The author is Co-Founder of a Financial Consulting Firm & a freelance writer

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