- Date : 14/10/2021
- Read: 4 mins
A structured and consistent investment plan will help you achieve your life goals and secure the financial future of your children.
Single mothers juggle multiple responsibilities. They have to anchor the family, manage a career, and take care of the children. Amid the daily hustle, single mothers need to get their financial planning right to secure their children’s lives as well as their own future.
Having a financial blueprint and investing in goal-appropriate assets can ensure that your life goals are fulfilled, irrespective of the curveballs life throws at you.
Make a financial blueprint
The first step is to identify your various goals and classify them over the short, medium and long term. For example, buying a car within a year or two is a short-term goal, saving up for a college fund 5-7 years down the line would be considered a medium-term goal, and building a nest egg for your retirement 20-25 years from now would be a long-term goal.
Categorise all your goals and assign the appropriate rupee value after accounting for inflation and other ancillary costs. Having a set of well-defined goals can help you stay disciplined and makes it easier to monitor and measure progress.
Related: 7 Ways to earn as a single mother without a salaried job
Get your savings started
The next step is to get started on a consistent savings plan. Account for all your expenses such as rent or EMI, groceries, utility, travel, and discretionary expenses, and draw up a budget to structure a savings plan.
The 50:30:20 rule is a widely used system that is easy to follow. As per the structure, allocate 50% of your liquid income for essential expenses such as rent, utilities, groceries, etc., 30% towards wants such as apparel, dining out, entertainment, vacations, etc. and the balance 20% towards your savings.
Related: Best health insurance plans for single moms
Undertake goal-based investing
Goal-based investing is an approach that suggests a different investment bucket for each financial milestone. It ensures an effective investment strategy based on the timeline, risk, and rupee goals. Here are some investments you can consider for different needs.
Mutual Fund SIPs:
- Investment horizon: 5-7 years +
- Average returns: 12% p.a.
- Risk level: High
There are various mutual funds that you could choose from based on your risk tolerance and investment tenure. For short-term needs like saving for a car, you could explore liquid or debt funds, whereas a systematic investment in equity-based funds is a potent tool to compound wealth over the long term for your retirement. Here are some of the best equity mutual funds to invest.
Public Provident Fund:
- Investment horizon: 15 years (extendable in blocks of 5 years)
- Average returns: 7% p.a.
- Risk level: Very low
For the risk-averse mother, PPF is an option to consider for long-term goals. The 15-year lock-in period and consistent interest income can help you build a corpus for your child’s higher education or to meet the down payment on a house.
Small savings schemes:
- Investment horizon: Maturity linked to age
- Average returns: 6.8-7.6% p.a. (reviewed quarterly)
- Risk level: Very low
If you have a lump sum amount in hand, you could consider government-sponsored schemes such as National Savings Certificate (NSC) or Sukanya Samriddhi Yojana (SSY) if you’re the mother of a girl child. Not only are the interest rates attractive compared to other debt investments, contribution towards NSC, SSY, and PPF also make you eligible for tax deductions up to Rs 1.5 lakh p.a. under Section 80C of the IT Act.
FD/Liquid funds:
- Investment horizon: Till required
- Average returns: 4-7.5% p.a.
- Risk level: Low
Children are prone to accidents and health issues. It is important that you prioritise an emergency fund that you can dip into when required. Bank deposits and liquid/ short-term mutual funds work best. The investment and redemption process is quick and simple as required in times of contingency.
Related: Best Rates For Bank Fixed Deposits To Invest In 2021
It doesn’t matter how small you start. As long as you remain consistent with your investing plan, you will be able to achieve your life goals and secure the financial future of your children. Here’s how to take care of yourself as a single woman
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax advice. You should separately obtain independent advice when making decisions in these areas.
Single mothers juggle multiple responsibilities. They have to anchor the family, manage a career, and take care of the children. Amid the daily hustle, single mothers need to get their financial planning right to secure their children’s lives as well as their own future.
Having a financial blueprint and investing in goal-appropriate assets can ensure that your life goals are fulfilled, irrespective of the curveballs life throws at you.
Make a financial blueprint
The first step is to identify your various goals and classify them over the short, medium and long term. For example, buying a car within a year or two is a short-term goal, saving up for a college fund 5-7 years down the line would be considered a medium-term goal, and building a nest egg for your retirement 20-25 years from now would be a long-term goal.
Categorise all your goals and assign the appropriate rupee value after accounting for inflation and other ancillary costs. Having a set of well-defined goals can help you stay disciplined and makes it easier to monitor and measure progress.
Related: 7 Ways to earn as a single mother without a salaried job
Get your savings started
The next step is to get started on a consistent savings plan. Account for all your expenses such as rent or EMI, groceries, utility, travel, and discretionary expenses, and draw up a budget to structure a savings plan.
The 50:30:20 rule is a widely used system that is easy to follow. As per the structure, allocate 50% of your liquid income for essential expenses such as rent, utilities, groceries, etc., 30% towards wants such as apparel, dining out, entertainment, vacations, etc. and the balance 20% towards your savings.
Related: Best health insurance plans for single moms
Undertake goal-based investing
Goal-based investing is an approach that suggests a different investment bucket for each financial milestone. It ensures an effective investment strategy based on the timeline, risk, and rupee goals. Here are some investments you can consider for different needs.
Mutual Fund SIPs:
- Investment horizon: 5-7 years +
- Average returns: 12% p.a.
- Risk level: High
There are various mutual funds that you could choose from based on your risk tolerance and investment tenure. For short-term needs like saving for a car, you could explore liquid or debt funds, whereas a systematic investment in equity-based funds is a potent tool to compound wealth over the long term for your retirement. Here are some of the best equity mutual funds to invest.
Public Provident Fund:
- Investment horizon: 15 years (extendable in blocks of 5 years)
- Average returns: 7% p.a.
- Risk level: Very low
For the risk-averse mother, PPF is an option to consider for long-term goals. The 15-year lock-in period and consistent interest income can help you build a corpus for your child’s higher education or to meet the down payment on a house.
Small savings schemes:
- Investment horizon: Maturity linked to age
- Average returns: 6.8-7.6% p.a. (reviewed quarterly)
- Risk level: Very low
If you have a lump sum amount in hand, you could consider government-sponsored schemes such as National Savings Certificate (NSC) or Sukanya Samriddhi Yojana (SSY) if you’re the mother of a girl child. Not only are the interest rates attractive compared to other debt investments, contribution towards NSC, SSY, and PPF also make you eligible for tax deductions up to Rs 1.5 lakh p.a. under Section 80C of the IT Act.
FD/Liquid funds:
- Investment horizon: Till required
- Average returns: 4-7.5% p.a.
- Risk level: Low
Children are prone to accidents and health issues. It is important that you prioritise an emergency fund that you can dip into when required. Bank deposits and liquid/ short-term mutual funds work best. The investment and redemption process is quick and simple as required in times of contingency.
Related: Best Rates For Bank Fixed Deposits To Invest In 2021
It doesn’t matter how small you start. As long as you remain consistent with your investing plan, you will be able to achieve your life goals and secure the financial future of your children. Here’s how to take care of yourself as a single woman
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax advice. You should separately obtain independent advice when making decisions in these areas.
