FINANCIAL EMPOWERMENT FOR WOMEN
(PART 2 OF 4)
3. CONTINGENCY FUND
· Most women don’t have funds that are clearly earmarked for contingencies like
o Unexpected job loss of self or spouse
o Overshooting of hospitalization expenses more than the insurance amount
o Permanent disability of self or spouse hampering earning abilities
o Stranded with an adulterous husband, leading to a divorce.
· They have to then depend on their other investments irrespective of their liquidity.
· Real estate is not easily disposed off, fixed deposits have inflexible limits, and a provident fund should ideally be slotted as a retirement corpus and not dipped into prematurely.
· Besides, there will be a penalty or tax in case of premature withdrawal of these funds.
· Instead, keep reserve cash equal to 4-6 months of your expenses in a sweep-in savings account, which combines the benefits of liquidity with higher interest rates.
· The other option is short-term liquid funds, which invest in low-risk instruments and can be redeemed within 24 hours, besides offering higher rates of interest than a savings account.
4. ASSET ALLOCATION FOR MONEY GROWTH
· Asset allocation simply means putting your money in different investment avenues.
· Aim for growing your savings to a large corpus depending on your goals, time horizon and risk appetite.
· You can put the money in asset classes such as
o Debt (fixed deposits, bonds, debt funds) for stability and income
o Equity (stocks, mutual funds) for growth and income
o Gold (gold, jewellery, gold ETFs) for safety and retirement
o Real estate (land, house) for income and retirement
o Insurance (term, health, loan) for security and risk cover
· Learn the basics of all these assets on the Internet for removing your financial ignorance.
· Each type of investment works in a different way and needs a different investing strategy.
· Adopt a balanced approach and spread your money in a mix of equity, debt, gold and real estate, by neither being too greedy nor excessively fearful.
· Avoid direct exposure to stocks, and invest in mutual funds, which are managed by experts.
· Build a large corpus with less hardship through regular monthly investing of your savings for 10-15 years, through systematic investment plans (SIPs) of diversified equity mutual funds.
· The Internet will also help you to find the returns of mutual funds, stocks, gold, real estate, etc. to enable you to decide your desired asset allocation.
· Conduct your own research if you do not want to burn your fingers by the advice of others.
· Otherwise, employ a financial adviser who will formulate a suitable asset allocation, suggest products and monitor your portfolio, at a cost which would still be money well spent.