From making a budget to taking advantage of insurance, there are many ways a single mother can maximise funds.
Being a single mother could be tough and taxing in many ways. The biggest challenge a single mother may face is in terms of finances. However, experts suggest that with a proper plan in place, money matters can easily be managed. From making a budget to taking advantage of insurance, there are many ways single mothers can maximise their fund.
Here are the steps single mothers can take to become financially independent:
Make a budget
Single mothers should have a clear idea of all the cash inflows and outflows. According to Harsh Jain, co-founder and chief operating officer, Groww -- an online investment platform -- inflows include, salary, any assistance amount received, rental income from property, alimony amount if any, etc.
"Outflow account, on the other hand, is all the expenses such as loan, debt, EMI, mortgage, recurring household and lifestyle expenses," he said.
Making budget will help these women have a grip over their finances and have clear idea how much they can spend.
Build a safety net for children
It is important to build a safety net for children for any untimely mis-happening. One can allocate a certain amount of money towards a term-insurance policy.
"This might be of huge support for child’s well-being in the future. Once the source of income has been identified, it is essential to allocate a budget and create a safety net," said Archit Gupta, Founder and CEO, ClearTax.
They must have adequate life and medical insurance cover to ensure maximum financial security.
Create an emergency fund
An emergency fund can go a long way in meeting the short-term goals and be financially cushioned during sudden situations like job loss, medical emergency, etc.
"Ideally, an emergency fund is around 6 months’ worth of expenses. Keep this fund in places where it is easily accessible. Invest in liquid mutual funds as they offer higher returns than savings account and has higher withdrawal flexibility," explained Jain.
Being a single parent, it's important that one should start investing steadily for the long term to meet personal goals such as retirement, children’s higher education, buying a house, etc. According to experts, it's advisable for single mothers to invest systematically through mutual funds and build a retirement corpus. There are many other investment options available too such as PPF, NPS, fixed deposit and so on.
"Start with as low as Rs 500 and increase subsequently if there is low cash to begin with," suggested Jain of Groww.
In words of Shaily Gang, head – products, Tata Asset Management: "Choose the investment product that suits the risk profile, cash flow requirements, investment horizon and is low on costs."
A proper allocation has to be made for the personal goals, child’s health and financial needs to control the finances. Make sure to account for inflation while calculating the required corpus.
"Stay invested for long in equities and let the build-up happen. Some phases could be volatile, but don't churn in and out of the portfolio. Also, look for rolling returns to gauge consistency rather than plain point to point returns of one or two sets of periods. Keep a check that majority of the portfolio is in open ended funds or investments," she said.
According to Rahul Jain, Head, Edelweiss Personal Wealth Advisory, "It may be difficult to maintain a healthy financial plan in times of volatility. However, it is important to invest 20 percent of the total resources smartly and securely."
First Published: IST