Single Mothers must Prioritize Investment Decisions

In the last blog we spoke on Safety Nests, let's understand the type of expenditure that is required.

? Child Care Expenses

You must get help from extended family for child care. If that is not an option, then child care expenses also need to be allocated in your monthly budget.

? Create a WILL

After a person dies, ideally, even if his wife must inherit his assets, it’s not that simple. This becomes possible only if there is a will to this effect, else, if there are other claimants, the legalities involved are many. I personally feel every parent must brace themselves for untoward experiences that involve the children taking undue advantage of their vulnerabilities. Appoint a super-reliable guardian if you have minor children.

? Avoid loans as far as possible

You may be tempted to borrow and tide over the financial crunch, especially if you are a newly single mother. But you must be wary of loans that you know will be hard to repay, and ultimately end up in an ocean of debt.

? Do not rely on Credit Cards

Credit cards charge hefty interest rates and fees, and, hence, you must endeavor to break the habit of relying on them and get your finances in order, for good. Buy only if absolutely useful.

? Understand Investments to Grow your Wealth

Women are known to be risk-averse and shy away from investment prospects. I truly believe, this stems from the fact that women tend to neglect to educate themselves about the financial investment opportunities and their potential of compounding the principal sum invested. There are several investment options, but I will discuss the ones with greater or guaranteed returns at the lowest risk. Here are a couple of potential investment ideas:

o Systematic Investment Plan (SIP) in mutual funds - is a facility offered by mutual funds to the investors to invest in a disciplined manner. SIP facility allows an investor to invest a fixed amount of money at pre-defined intervals in the selected mutual fund scheme. The fixed amount of money can be as low as Rs. 500. Examples of a few popular SIP funds in 2021 are ICICI Pru Blue Chip Fund Growth, HDFC Mid-Cap Opportunities Fund-Growth.

o Recurring Deposits (RD) - is best suited for salaried people and those with a low annual income. You can deposit a fixed amount of their income every month for a pre-determined tenure. After maturity, the principal amount is returned along with interest earned. Having to deposit money regularly also helps one to develop the habit of saving.

o Fixed Deposits (FD) - is the safest and most popular investment option. You can invest a lump sum amount at one time in a bank benefit from the interest earned over the fixed period at maturity.

For children’s school or college fees, you can invest in RD while for long-term goals with greater benefits, like children’s marriage or higher studies abroad that call for a lump sum amount, you can go with Mutual Funds and other options. Understand the difference between FD and RD, Mutual Funds, and choose what suits you best after taking advice from trusted and certified consultants.

? Invest in a retirement plan

What are the two big long-term financial security goals in the life of a single parent? Retirement and your child’s college education. In the likely event you can’t comfortably save for both, what would you choose to invest in? It has to be - Retirement. Why? In the worst case, your child can get education loans — but there’s no such thing as a retirement loan! Alongside your Employee Provident Fund (EPF), you can also voluntarily invest in a Public Provident Fund (PPF) – very useful in times of volatility in the job situation.

#sakshamfinanceseries, #singleparents #singlemoms #singlemothers #money #investments #goals #life #parenting