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Sometime ago, I met a friend who was recently divorced and was looking to begin a new chapter in her life. The first issue, she was facing, was how to access her bank account online, track her investments and pay bills. Since she was not familiar with these things – she wasn’t involved in the family’s financial decisions such as investments, and basically got an allowance from her husband every month. She was a successful professional, had saved reasonable money which was managed by her husband but left her job a year back to raise her kid.
As I was listening to her story and trying to help her sort out things, it got me to think as to what she could do to handle this situation better. The answer was quite obvious- Financial literacy & Independence.
Need of the Hour – Find financial balance for better tomorrow
Women empowerment in our country has a come a long way. From flying jets to winning medals for the country to running large organizations or multi-tasking between work & home, women are defying all odds and unleashing their true potential.
However, one area where women are still visibly lagging behind men is – Financial Planning. This is not because women can’t manage their finances. Research proves that women are better money managers than men. Live examples are – women in every Indian family have been managing household expenses since ages, but when it comes to understanding investment products, retirement planning, and handling long-term finances, the same is left to their fathers, husbands or other male members of the family. The skill they exhibit in managing their home finances does not get extended to their personal financial front.
Why is it important for women to be financially independent?
Empowerment & raising their confidence: Our society is plagued with gender inequality, one of the reasons for the same is the gap between men & women when it comes to controlling and managing finances. Financial literacy helps to overcome this disparity and ensures that women are confident and empowered to make the right choices. Financially independent women can take their own decisions and don’t have to depend on anybody. This leads to high self-esteem and helps in fulfilling dreams and aspirations for which they have to otherwise depend on their parents or spouses.
Handling Contingencies: Emergencies can arise anytime and if we are not prepared, it can cause hardships. Situations such as husband losing his job, unfortunate demise, divorce, and disability to work can arise in any household at any point of time. Women, if financially literate & independent, can fight and come out of such situations quite easily. As they say ”one should hope for the best but be prepared for the worst”.
Catalyst in country’s growth: At a gathering of women leaders from the world’s top 20 economies, International Monetary Fund’s chief Christine Lagarde said, ‘India’s GDP can expand by a whopping 27% if the number of female workers increases to the same level as that of men’.
If most women in our country start earning, they will become consumers and start spending money, thereby boosting the Gross Domestic Product (GDP). Also, this will lead to an increase in the tax collection for the government which can be used for the welfare of the society.
Meeting family’s aspirations & managing rising cost of living: Every family has aspirations to stay in their own house, have a car (and keep upgrading it), travel & create fond memories and give all facilities to the children. However, with a steady increase in the cost of living it is becoming increasingly difficult to fulfil all aspirations with a single breadwinner. Women who are financially independent can play a very important role by contributing towards achieving these objectives.
Here are 3 things women must do to achieve greater financial independence:
Be a part of the family’s financial plan or have one for themselves: Every woman should be a part of the family’s financial plan and be aware of the savings, where is the money getting invested and what would be the desired outcomes of these investments. Women bring to the table – valuable inputs and discipline to the family’s financial plan. If single, it’s imperative for women to have such a plan for themselves and monitor it regularly.
Invest what you save: Women are great money savers but not many are good investors. The savings from one’s job or from household expenses if invested prudently can go a long way in achieving financial independence. The traditional saving instruments such as fixed deposits, PPF or similar products don’t even beat inflation. It’s important for women to understand other financial products like mutual funds which offer better returns, tax efficiency, diversification and help in achieving the life goals.
Build an emergency fund: This will help to see you through the rainy days when there’s a temporary loss of income or periods of extraordinary expenses, without having to depend on others especially, if you are single.
Even today, we hear about women who won’t leave that bad relationship or a bad job because they don’t have the financial independence to take the leap. So ladies, take charge of your finances and lives!!
The author of this post is Mr Pradeep Bhasin, Business Head-Mutual Funds at Wishfin. He has done Bachelors in Commerce from Delhi University and completed PGDM from Narsee Monjee Institute of Management Studies, Mumbai specializing in Marketing & Finance. Pradeep has 16 years of experience in the wealth management and mutual fund industry. In his previous roles he has worked with HDFC Asset management Company, ABN Amro Bank, ICICI Bank ,Standard Chartered Asset Management Company Limited and Sundaram Asset Management Company Limited