Smart money tips for women

A friend of mine is a young mother. She tells me that, when she meets up with the mothers of her son's friends, the conversation is predominantly about husbands (how they are never at home, the hours they work, the amount they travel), recipes, in-laws or television serials.

My other friend, single, tells me that when she catches up with her friends, the conversation revolves around men (and the lack of good guys available), movies and office gossip.

I am not casting aspersions on all you women out there or even demeaning those who indulge in such conversations. All I want to say is that often, with women, there is a general disinterest towards finance as a topic of discussion or financial investing as a subject.

I am not saying all women shun this topic. Neither am I saying all men are well versed in the subject. In fact, some studies show women actually make better investors than men. 

One cannot really differentiate between men and women when it comes to making investment. A good fund applies to both sexes. As does a bad stock.

However, women are more prone to taking sabbaticals from work than men due to responsibilities like raising a family or taking care of their parents. If their husbands get frequent postings, they shift along with them and are forced to take such breaks.

As a result, they are more likely to opt out of a full time job or retire earlier than their male colleagues.

Hence, it is necessary that they get serious about saving and investing the moment they start earning.

Here are four simple tips that women must keep in mind.

1. Become financially responsible

Often, women tend to think their husbands will provide for them after they get married. That may well be the case. But, in this day and age, women too need to take financial responsibility.

The moment you get a job, start saving and investing.

To begin with, opt for a tax-saving instrument that offers total safety. Here, you save tax and get a good return.

Open a Public Provident Fund account. Try and put in as much as possible. If you cannot put in the maximum amount of Rs 70,000 per annum, at least put in what you can. Try and increase this amount every year. This will give you 8% interest per annum and will result in a fair amount of money saved over the years.

The moment you accumulate a small amount of savings, put it in a National Savings Certificate. This too will give you 8% interest, but it will be locked only for six years as against the PPF's 15 year lock-in period.

2. Get adventurous

A financial planner was telling me about a young couple who came to him.

The man had lost his father when he was very young; his mother struggled to bring them up and put them through college. He has no qualms investing in the market and taking huge risks with his money because he knows that, come what may, he will survive.

The lady, on the other hand, said her father lost his job -- he was working in the mills in Mumbai -- when she was just a little girl. She wanted to be extra careful with the money because she was never sure what would happen in the future.

Typically, when it comes to investing, women tend to be more conservative and less aggressive than men. So, most women who invest consider fixed return investments like PPF, NSC, bonds and fixed deposits but few venture into stocks.

You must consider investing in shares simply because they are the best investment to beat inflation; they give better returns than any other fixed return investment.

Moreover, the best time to start investing in shares is when you are young, because you have time on your side to ride the ups and downs of the market.

If you are not keen on directly entering the stock market, try investing in a diversified equity mutual fund.

3. Get disciplined

Investing is a discipline. You must go at it with regularity rather than periodicity.

Take PPF for example. Don't attempt to put in all the Rs 70,000 at one go. You can make a maximum of 12 deposits in your PPF account in a financial year. So try and put in some amount every month or once every two months. Or even once a quarter. You will end up saving more like this. So even if you cannot put in a huge amount at one go, attempt to do so regularly.

Adopt the same strategy for your stock market investments too.

If you do invest in a diversified equity fund, put in fixed amounts every month into this fund. This is referred to as a Systematic Investment Plan. Let's say you decide to put in Rs 1,000 every month in a SIP. Every month, this amount will be directly debited from your bank account into your fund.

If the Net Asset Value is Rs 10 in one month, you will get 100 units. If the NAV is Rs 15, you will get 66.67 units. Over time, this evens out. When the NAV is high you get fewer units; when it is low, you get more units.

You can do so even with a recurring bank deposit.

If you make it a habit to put aside a fixed amount of money (however small) every month, it will do wonders to your bank balance. Let's say you put Rs 1,000 aside for your PPF and another Rs 1,000 towards your mutual fund SIP and another Rs 1,000 in a recurring deposit. You have a forced savings of Rs 36,000 every year (Rs 3,000 every month x 12 months). Of course, as this principal amount earns a return, it will accumulate further.

4. Get started

Investing favours those who have time on their side. Let's say you invest Rs 36,000 every year and this amount earns 8% per annum. At the end of 20 years, you would end up with Rs 17,79,225 in your kitty.

But, if you invest only for 15 years, you will get 10,55,674. A five year delay will set you back by more than Rs 7,00,000. 

So don't wait for tomorrow. Or next month. Start now. Even if the amounts are relatively small, just start.

In case you find yourself not saving, list down all the areas that eat into your wallet. Is it shopping, pubbing or eating out? Calculate how much you spend every month on this and cut it down by just a small percent. Let's say you spend Rs 2,000 on eating out every month. Cut it down to Rs 1,500. Every month, put this extra Rs 500 in a recurring deposit.

Got the message? Start small but start right away.