We recently celebrated Mother’s Day in India, and it is usually seen that homemakers are the best money managers. Even though they might not be investing prudently, they save a lot. So, homemakers are good money managers, but they should invest their savings for capital appreciation.
To work this out, financial literacy and investing knowledge are a must. When it comes to spending, you are pretty stringent. For groceries, you list your requirements, make the budget, stick to it, and save. Imagine the amount you might end up with in a decade or two if that saved amount is invested for the long term and fetches at least 12% per annum.
Here’s how you can plan their financial freedom:
- Buy Insurance – Many households do not have basic term and medical insurance. What if a part of the savings also goes into paying monthly premiums against a term and medical insurance. This will ensure a financial backup in case of any undue emergencies. Insurance is one of the major pillars of personal finance but is often neglected. However, you need to have a basic term plan and additional health insurance.
- Budgeting Expenses – As aforesaid, you are good at budgeting the monthly expenses at the beginning of every month. It keeps your finances in place and tracks the outflow. Additional budgeting for investing a fixed sum of money towards equity markets, debt and insurance using a SIP calculator can make life a lot easier. You may also learn the basics of Excel spreadsheets, where you can index your expenses and track and update them in real-time.
- Learn the basics of investing in stocks – As a homemaker, you must have a basic knowledge of stocks, mutual funds, ETFs, Fixed Deposits, Recurring Deposits etc. Over and above this, you should also learn how to open a brokerage account through a stock investing app, buy and sell shares, calculate the monthly investment amount using a SIP calculator and track it through those apps. If you have this basic knowledge and start SIPs every month in a Nifty 50 ETF, you can grow your money multifold in a decade or two.
- Track investments where they are nominees – This is one of the most neglected but the most important things regarding inheritance planning. Individuals do not nominate their spouses and children, and you have to go through a truckload of hassles in case of any emergency. You should make sure that every account where finances are involved has a nominee, and the nominee should be able to track such banking and investment accounts using any stock investing app.
- Building an emergency fund – Even though you are an excellent money manager, you should also build an emergency fund worth 6-12 months of household expenses. This should cover any undue medical bills and day-to-day expenses if the primary income is lost.
- Build a retirement corpus – All the points mentioned above lead to one thing – early retirement or financial freedom. Even if you invest Rs. 15,000 per month for 15 years, and it fetches a return of 15%, you have a corpus of Rs. 1 crore. That is the power of investing for the long term.
To conclude, homemakers must be taught the fundamentals of finance and investing, which help them make investment decisions independently and multiply the household income and become financially free early in their lives.