Young mothers UP your Financial Quotient – Part 1

As a young mother, you are perhaps juggling many roles. All you know for sure  though is that you want to do your best to ensure a bright future of your child and ensure a comfortable life for yourself. This means, improving your financial quotient by getting a better hold on your finances.

A woman’s instincts as a protector enhances with motherhood as she puts her child ahead of her own needs:    

•  Better financial control is not to lose sight of your own financial future as a new mom but tweaking your financial plan with clear financial goals in sight.
The good news  is that as a young mother, you have age on your side which you can use to your advantage.

•  The first step thus, is to assess your current state of finances and start a new budget with childcare needs in mind.

•  Once you have a budget in place, chalk out a financial plan that takes into consideration financial ambitions at various life stages such as school fees, college/higher education and even your own long term goals such as retirement.

• You can begin investing in small amounts through the SIP route of mutual funds for each of these goals.

• While long term goals are important to keep in sight, life can take an unexpected turn anytime. The priority thus, is to have a Term Plan(Insurance) and build an emergency fund simultaneously. 

A new mom can begin investing early in equities through the mutual fund route to use age to her advantage

•  Equities have the potential to deliver the best inflation adjusted returns over the long term as compared to any other asset class (like debt, gold or real estate)

•  Thus, the earlier you begin the greater are your chances of creating wealth that can then meet your long term goals.

•  The good news is you don’t have to put a lump-sum right away to meet such goals. You can use the systematic investment plan (SIP) route and begin with an investment of as low as Rs 500.

•  Starting early has another advantage – You will have the time to rectify investment mistakes if any

But, what about the risk associated with equities?

•  Equities may be subject to some volatility in short term, but over the long term, they are rewarding as they have the potential to offer high returns.

•  The key is therefore to remain invested in equities with a firm focus on long term goals and not react to short term volatility.

•  Besides, when you invest in equities through the SIP route you get the advantage of rupee cost averaging

•  This means you buy a higher number of MF units when markets are low and a lower number when markets are high.

•  This in-built mechanism of SIPs protects you against volatility as well.

•   Thus young and new mothers hardly have to worry about risk in equities when they intend to remain invested for the long term