Here's How Women Should Manage Their Finances

The adage "Men are from Mars and women are from Venus" is true even for the financial world. 

Women usually prefer risk averse investments and are more likely to invest in instruments that yield fixed returns. They are also more biased towards savings instruments that provide them with future security and money for personal goals like child education. However, it is time that women consider their finances in a more professional and value accretive manner.

Like any responsible investor, the first step in that direction would be for women to define their goals, objectives and risk taking ability. These can vary depending upon the individual's personal and professional circumstances. Factors relating to age, marital status, life stage, parenthood and financial situation are likely to influence a woman's goals and risk taking ability.

Married women may usually have the benefit of supplementary income from the spouse and hence a higher threshold for risk. They can start off by investing in relatively safe products like Public Provident Fund (PPF), tax-free bonds, bank fixed deposits and debt mutual funds. Once she is comfortable with plain vanilla financial products she can diversify into relatively riskier and higher yielding investments options. Products like equity mutual funds, hybrid schemes and gold exchange traded funds (ETFs) through systematic investment plans (SIPs) can be explored.

Single women in early twenties are at the threshold of starting a career. Since their liabilities and responsibilities are not imminent, they can expose their investments to riskier and high yielding avenues. However, it is important to note that theirs is a single income which they have to use to support themselves as well as save for the future. Since they are independent and wholly responsible for themselves, these women should first take out adequate health insurance. 

Once this is done, they can invest in assets that offer higher risk adjusted returns. An equity mutual fund or investment in stock markets through a systematic investment plan would be ideal for such women. They can also invest in schemes like fixed maturity plans (FMPs), which give them the option to partially or wholly withdraw interest on a monthly basis. This will help them save money as well as supplement their monthly income. Such women should additionally consider investing a small portion of their savings in a real estate property which has the major benefit of providing long term security. Lastly, working women should also consider investing in tax-saving instruments.

In case of a single mother raising a child, the risk taking capability reduces significantly. At the same time, since she is independently raising a child, there is a greater need to meet expenses and save for the future. The first step should be to take out adequate health and life insurance for self as well as the child. Then the woman should consider investing in a long-term product, which can help fund the child's education in the future. Investment options like PPF, long-term debt funds and post office savings would be ideal for such an objective. Once basic long-term objectives have been taken care of, she can take a small exposure to equity markets through a systematic investment plan (SIP).

Whether single or married, all women should invest for the rainy day and save for medical exigencies and a comfortable living in old age.

The writer is fund manager, BNP Paribas MF