Mother's Day: Here is some advice on financial planning for mothers

Dear Mothers,

The best gift that you can give your children is the gift of financial planning.

Make sure that you save a portion of your salary for the children and their well-being. This portion should be used for their milestone needs- like birthday presents, trips or some course which they are keen on doing. Consider investing in a mutual fund or a saving insurance plan which you can redeem on the occasion.

You can also save a portion of your salary in Public provident Fund (PPF) which can be used for yourself or your children later. This is especially important as it is the one of the few investments that offers tax exemption at the time of investment and redemption and the interest is also exempt from income tax.

Health is a very important aspect of life, so it is crucial that your entire family is insured against any major illness. Make sure that your child, spouse, and parents are covered. In most cases, your employer may provide basic health coverage- ensure you take to top-up plans if the coverage is insufficient.

Life insurance is also a must. In the case of an unfortunate event- at least your child’s future should not get compromised. Even if you are not working, it is wise to take term insurance. Also, ensure that your spouse has a sizeable life cover for the family’s financial security.

Plan for your retirement through the New Pension Scheme (NPS)- with a higher allocation to equity. This allows you to gain inflation beating returns in the long term and enables you to purchase annuity after superannuation. This is essential to maintain financial independence during old age and to avoid burdening your children later in life, especially when one has been independent all their life.

Investing for your children’s education and marriage can also be attained through mutual funds or through insurance savings schemes or ULIPs. Those who cannot withstand volatility can look to invest in the long-term guarantee plans of insurance companies for their long-term goals.

Gold, as an asset class, has gained popularity in recent years. If you are investing in gold, consider Gold ETFs, as they are liquid, are bought on a real time price basis, and are stored in a demat account which eliminates the hassle and locker charges.

Physical gold also entails heavy making charges which adds more cost to the jewelry purchased. However, for occasions like weddings where jewellery is needed, Gold ETFs can be liquidated, and gold of the same value can be purchased. Similarly, silver ETFs can be also considered for exposure to precious metals

As a parent, providing a secure home for the family is a priority. Buying a house is a major decision, and it is advisable to make this investment at the earliest opportunity Make sure that the house you live in becomes loan free as soon as possible – so that one is not burdened with loans at a later stage in life.

Evaluate your portfolio at regular intervals and seek professional advice – so that any necessary realignment can be made in a timely manner. Always maintain an emergency fund which can be parked in fixed deposit in a bank account for quick and easy access.

Make sure that you pay your credit card dues on time, so that you don’t need to pay a very high interest on the overdues.
As a mother, it is your duty to inculcate in your children the value of money and the importance of saving and investing wisely.
Your children need to be taught the significance of financial planning from a young age so that they are adept at handling their finances when they are adults. They will finally do what they see their parents do and therefore it is important to create that role model for them in terms of financial prudence.

This is the best Mother’s Day gift you can give them – and yourself – so you can proudly proclaim that your young ones are truly and financially well educated!

Have a wonderful Mother’s Day with your children this year and celebrate it with them by gifting them the foundation of financial education which will be a gift forever.

(The author is Chief Investment Officer, IndiaFirst Life)

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)


(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)