5 things about personal finance and savings all women should know
A small article on simple things in savings and personal finance every layman (or woman) should know. All too often the terms "tax" or "SIP" make women apprehensive. It need not be so. Women are natural investors and risk takers. Just a basic understanding of a few savings and finance instruments will go a long way in making one financially empowered.
All too often I find ladies and even working ladies deferring to their husbands for simple financial decisions. Many a times I find women joining "ladies kitties" groups just to have a small spending "kitty" in a few months depending on the number of members. Why is that women always take the back step when any personal finance topic comes up? I can understand the attitude of leaving the paperwork to darling hubby (that's a smart thing to do) but wont it be a good thing to be aware of how to make money grow in the simplest of manners without falling for shady schemes, thinking of kitties as investments and using the lotto to earn dubious money?
Here are the simplest things to know about personal finance.Bank RD accounts
Walk into a bank and add a recurring deposit to your savings account. The RD or Recurring deposit will earn more than the monthly amount one spends on kitty. Add to that the food layout. Bingo! You have a nest egg at the end of one year. Dealing with TDS
Just remember to fill up the relevant forms so that you don't pay unnecessary Tax at source (TDS) if you don't come under the Taxable group. Now that we are in Taxes we need to know something about it. Be sure to know the tax slab you fall under. Everyone has an income these days what with bank accounts, PAN cards, Aadhar Cards all being interlinked. So it makes life simpler to understand the basic slabs of individual tax. And very often you don't need to pay a bomb to the CA to file your returns. Its simple and can be done online. TDS = Tax Deductible at Source. Insurance
Insurance is a topic everyone is familiar with thanks to LIC. But again - people still think of a policy as a savings instrument. Insurance is not savings - much as the companies selling it try to promote it as such. Insurance is well and truly insurance against something bad happening in your life and you and your family being prepared for that eventuality. When you add savings to it, it becomes expensive. Always try and buy a simple insurance without frills. Like a no-frills life insurance product is called a term insurance. It is very cheap and ensures that the family lives life relatively well off in case of any accident. Bonds
Bonds are some of the best savings instruments I have found for people keen on assured returns. While a savings component in an insurance product might give 5-6%, a bond issued by an approved authority may well give 4-5% extra return! Infrastructure bonds are very popular and are regularly issued. They have a tax savings component too.Mutual Funds
Mutual Funds are not everybody's cup of tea. While SIPs in Mutual Funds are becoming popular, it requires a good amount of patience. SIP (Systematic Investment Plan) in a Mutual Fund is like a recurring deposit in a mutual fund. Identifying a scheme is important. Sticking to the SIP over the cycle of an Equity market or for 3 - 4 years is also important. It is always better to start when the market is low and continue for a couple of years. Unfortunately most new investors get into the SIP bandwagon when the stock market is high and zipping and lose faith when the inevitable fall comes. Then they start selling at a loss. It is like buying gold when the price is high and selling at a low price! A look at the Nifty or Sensex will easily give a graph of the market. Mutual Funds are still the kings of investments especially in a fast developing country like India. Just requires faith and patience and google to start off there!
The author has rightly pointed out about 'ladies kitties' groups which is generally used as a preferred saving option by housewives, though practically there may not be any return on the same which is possible in banks recurring deposits. Many banks offer flexible recurring deposits also which serve the dual purpose of a savings account as well as recurring deposits and offer an interest in the range of 7% to 8%. Since in the 'ladies kitties' groups , there is no interest accumulation and expenses are to be incurred on partying, that becomes more like a social gathering than a savings scheme. In my opinion, the first time women users should start by opening a savings account of their own coupled with a recurring deposit scheme. Generally the bank officials offer full guidance and facilitate opening as well as operations of such accounts.