As women surge ahead in their professional lives, they are increasingly taking their rightful places in decision-making roles at workplaces. At the same time, setting their personal finances in shape need equal attention. This planning is not to be taken lightly or passed on to spouses or parents.
Saving and investing wisely, taking insurance, maintaining asset allocation, keeping debt low and manageable, and directing financial instruments towards specific life goals—these are the financial planning steps that are common for both genders.
However, some parts in the financial planning process need more thought in the case of women. Here’ s more.
Enhancing emergency funds
Typically, having six months to one year’s expenses as a contingency fund is suggested for all investors. However, in the case of women, there may be added dimensions. For example, let’s say you take a maternity break that extends beyond the usual six months allowed by most employers. Since most companies stop paying salaries after the six-month period, women need to bolster their emergency funds by another six to 12 months’ expenses. You will need to factor in costs of any nanny you hire, additional domestic help and child-related expenses (vaccinations, childcare products, etc.) in your contingency fund calculation.
Another situation that is common is women taking career breaks when children reach higher classes and are close to writing their class 10 or class 12 board exams. If you foresee such a situation arising in your family, you must plan to have contingency funds of a size that spans the period of your break and a bit more for the time you will require to get into a job again. Let it be planned break as the corpus required for sailing through such a break would be high and would require a reasonable period of accumulation.
It would be ideal if you can keep your regular investment commitments going with your large emergency fund. But if that is not possible, you must completely avoid tapping into your investments and savings accumulated before the time your break started. In all cases, emergency funds must be separate from your investments for other goals.
Factoring longer lifespans than men
You may be saving jointly with your spouse for a relaxed and peaceful retirement. . If you are single or have perception of money that is different from that of your spouse, you may also be saving independently. .
Irrespective of the way you save, there is one critical factor to note when you save for retirement—women tend live longer than men. A Harvard study says that, worldwide, women live for seven years more than men on an average.
Another aspect to note is if you have considerable age difference with your spouse, say five or more years. Taking the Harvard study into account, you will need to factor in a lifespan of 12 additional years for your retirement corpus calculation.
Even if you are single or plan on early retirement, you will need to plan for a longer life expectancy, especially as medical infrastructure improves substantially over the decades. So, if a male plans for a lifespan of 75-80 years, you may have to calculate a corpus that runs till you attain 85 or 90 years of age.
Specific insurance riders
Women have to consider some add-ons or riders in health insurance.
Ensure that you have maternity cover from your regular health insurance policy. Health insurers offer ₹15,000 to as much as ₹2 lakh for pre and post-natal care as part of maternity benefits. If your employer offers health insurance, take it, as group cover has maternity benefits to the tune of ₹50,000 to ₹60,000. If you and your spouse have group insurance, you can cover a major or entire maternity costs along with your private insurance.
Staying with health insurance, taking a critical illness rider with your regular health cover is a good option. For women, riders covering breast, ovarian and cervical cancers are critical given the generally high prevalence of such ailments.
Again, on insurance, term covers are essential not just for working women, even housewives need them. When we measure the enormous time and effort a housewife puts in to take care of her family, the actual costs saved are enormous. So, in the unfortunateevent of the demise of the housewife, if any other person or persons have to be employed to take care of the family’s needs, a term cover becomes relevant. Even otherwise, when the insurance cover for a stay-at-home mom becomes handy to help raise a dependent child in her absence. HDFC Life, ICICI Prudential, Bajaj Allianz and Tata AIA among a others offer term covers even for housewives.
Taking advantage of special financial products
Many banks offer home loans at 5 to 10 basis points lower interest rates when a woman is the first applicant. This lower interest cost can lead to substantial savings over the long-term. Therefore, women must be added as main applicants in case of joint loans.
Some financial institutions offer higher rates of interest for women on deposits. Shriram Finance, for example, offers 10 basis points higher interest in deposits exclusively for women.
While a discount in loans or a higher rate in deposits do not mean you should rush for them. But in case they make sense as a part of your overall financial plan and asset allocation, taking a good deal would work well.