- Date : 25/10/2021
- Read: 4 mins
The investment opportunity and diversity offered by mutual funds can be the answer to a lot of financial woes that single mothers face.
Single mothers are constantly worried about their long-term financial well-being. While the imminent need of housing, food security, and educational and social opportunities for their children are primary concerns, the lack of clarity regarding long-term goals can make for sleepless nights.
Getting started with savings and putting an investment plan in place should be a priority for every woman. While mutual funds may not be the answer to all your financial woes, the availability of a wide range of funds across risk categories, investment horizons, and tax structures can make them a potent tool to achieve your goals. So, let’s look at a few financial goals and the part mutual funds can play to help you achieve them.
Need: Emergency fund
An emergency fund should be a priority on your money management to-do list, considering children are prone to health issues and accidents. Alternatively, you could face a sudden disruption in income, as we saw with the COVID-19 pandemic. An emergency fund allows you to take care of any unforeseen expense or tide through rough times without having to disrupt or compromise on any other financial goal. Ideally, women should put aside funds equivalent to at least 4-6 months’ worth of expenses.
Investment: Liquid funds
Liquid funds offer returns that beat savings bank account interest rates and even those on short-term deposits. Liquid funds have other distinct advantages too. Unlike bank deposits, you don’t need a large sum to start off your investment. You can keep adding to the fund every month as you save. Also, when you need the funds, you can withdraw only the amount required while the rest can continue to compound, which means there’s no need to break the entire investment. Here are the best liquid funds to invest in 2021.
Related: What are the income tax implications of selling or switching mutual funds?
Need: Child’s vocational course/ acquiring an asset for the family
As a parent and a contributing member of the family, you may require to plan for goals 2-5 years down the line. You may be looking to enrol your teenager in a vocational class or save up to make the down payment on a house. To get to your savings goal, you need to choose an investment that delivers good returns while keeping your capital secure for foreseeable use.
Investment: Debt and gilt funds
Debt funds invest in high-yield corporate bonds while gilt funds invest in government securities. Both offer stable returns. If you have an investment horizon of up to five years, either of these mutual funds will serve as a good investment choice. Again, these funds offer more returns than standard time deposits and also offer indexation benefits for an investment horizon longer than three years, thereby helping to increase your real returns. Best debt funds to invest in in 2021.
Related: Important things to consider when investing in a mutual fund
Need: Children’s higher education/ retirement nest egg
With children’s education getting progressively expensive, it is important that you start planning for the goal much ahead of time. Make a start while your children are still in school. Considering you are putting aside funds for a long-term plan, take the opportunity to kick off your retirement fund as well, so that your sunset years are stress-free. Time is the single most critical factor that will allow you to compound your investments. The earlier you start, the easier it becomes to get to your goals.
Investment: Equity mutual funds
A long-term and systematic approach to equity investment will allow you to ride out volatility and significantly compound your savings. Systematic Investment Plans (SIPs) are budget-friendly and flexible. Even a modest allocation of Rs 10,000 per month for 20 years will give you a Rs 1 crore corpus at an estimated 12% return! You can make SIP investments for a college fund, building a retirement nest egg, prepaying a mortgage, and even to save tax via Equity Linked Savings Schemes (ELSS) up to Rs 1.5 lakh per year. Check these Equity funds with over 100% returns in 2021.
Single mothers are constantly worried about their long-term financial well-being. While the imminent need of housing, food security, and educational and social opportunities for their children are primary concerns, the lack of clarity regarding long-term goals can make for sleepless nights.
Getting started with savings and putting an investment plan in place should be a priority for every woman. While mutual funds may not be the answer to all your financial woes, the availability of a wide range of funds across risk categories, investment horizons, and tax structures can make them a potent tool to achieve your goals. So, let’s look at a few financial goals and the part mutual funds can play to help you achieve them.
Need: Emergency fund
An emergency fund should be a priority on your money management to-do list, considering children are prone to health issues and accidents. Alternatively, you could face a sudden disruption in income, as we saw with the COVID-19 pandemic. An emergency fund allows you to take care of any unforeseen expense or tide through rough times without having to disrupt or compromise on any other financial goal. Ideally, women should put aside funds equivalent to at least 4-6 months’ worth of expenses.
Investment: Liquid funds
Liquid funds offer returns that beat savings bank account interest rates and even those on short-term deposits. Liquid funds have other distinct advantages too. Unlike bank deposits, you don’t need a large sum to start off your investment. You can keep adding to the fund every month as you save. Also, when you need the funds, you can withdraw only the amount required while the rest can continue to compound, which means there’s no need to break the entire investment. Here are the best liquid funds to invest in 2021.
Related: What are the income tax implications of selling or switching mutual funds?
Need: Child’s vocational course/ acquiring an asset for the family
As a parent and a contributing member of the family, you may require to plan for goals 2-5 years down the line. You may be looking to enrol your teenager in a vocational class or save up to make the down payment on a house. To get to your savings goal, you need to choose an investment that delivers good returns while keeping your capital secure for foreseeable use.
Investment: Debt and gilt funds
Debt funds invest in high-yield corporate bonds while gilt funds invest in government securities. Both offer stable returns. If you have an investment horizon of up to five years, either of these mutual funds will serve as a good investment choice. Again, these funds offer more returns than standard time deposits and also offer indexation benefits for an investment horizon longer than three years, thereby helping to increase your real returns. Best debt funds to invest in in 2021.
Related: Important things to consider when investing in a mutual fund
Need: Children’s higher education/ retirement nest egg
With children’s education getting progressively expensive, it is important that you start planning for the goal much ahead of time. Make a start while your children are still in school. Considering you are putting aside funds for a long-term plan, take the opportunity to kick off your retirement fund as well, so that your sunset years are stress-free. Time is the single most critical factor that will allow you to compound your investments. The earlier you start, the easier it becomes to get to your goals.
Investment: Equity mutual funds
A long-term and systematic approach to equity investment will allow you to ride out volatility and significantly compound your savings. Systematic Investment Plans (SIPs) are budget-friendly and flexible. Even a modest allocation of Rs 10,000 per month for 20 years will give you a Rs 1 crore corpus at an estimated 12% return! You can make SIP investments for a college fund, building a retirement nest egg, prepaying a mortgage, and even to save tax via Equity Linked Savings Schemes (ELSS) up to Rs 1.5 lakh per year. Check these Equity funds with over 100% returns in 2021.
