Financial freedom goes feminine

The number of double-income households has been rising steadily over the years. As second wage-earners, women now contribute significantly to the family income. As they become increasingly financially independent, more and more working women realise that it is important for them to plan and manage their finances smartly and prudently. Whether a homemaker or employed, a woman, experts say, has specific needs and concerns when it comes to financial planning.

Choosing the right investment plan, therefore, depends on factors like age, employment status and, most importantly, risk appetite. Tomorrow being Women’s Day, DNA Bank & Risk presents a few financial planning avenues for women:

Insurance
A working woman has an insurable interest or economic value as some people may be financially dependent on her. Hence, the risk which she is exposed to is significant. Both life and non-life insurance companies offer several women-specific products and are eager to woo them with various add-on features.

“A strong demand from a particular segment of women encouraged insurance companies to launch women-specific products,” says Renuka Kanvinde, senior manager-health administration team, Bajaj Allianz General Insurance. 

Agrees Elizabeth Venkataraman, senior vice-president, marketing, Kotak Life Insurance. “Demand is steadily increasing as awareness of women-centric financial products grows. Over the last three years, we have seen 70:30 mix between male and female lives insured as far as total business is concerned.” (An aside: Elizabeth herself has invested in a basic term plan and an investment plan; but, she says, every woman must also have a child plan that can build a corpus for the child’s future.)

Also, life insurance products like pure protection and endowment plans for women are cheaper since they have lower mortality risk compared to men, and many products offer women-centric features and riders. Most of the products cover certain time periods during which women’s income may be affected (sabbatical, maternity leave, miscarriage, etc). Health insurance as well as life policies provide coverage on women-specific illnesses such as cervical and breast cancer, and some specific risks such as multi-trauma and burns.

Experts say it is necessary for both working women and homemakers to have a health cover ranging between Rs3 lakh and Rs5 lakh, depending on each person’s financial capacity.

A recent report by HDFC Life reveals that about 96% of the urban employed women believe that life insurance is an important risk cover. And 78% of them are aware about insurance among all other financial instruments.

Low-risk instruments
“Women generally are conservative in their investment strategies. They are also concerned about protection of their capital while making investments to achieve certain financial goals. One should look into the individual financial needs and select avenues accordingly,” says Suresh Sadagopan who runs Ladder7 financial advisory.

Considering their regular savings habit and specific financial goals, bank fixed-deposits (FDs), National Savings Certificate (NSC) and Public Provident Fund (PPF) are some of the investment avenues that they can look for.

The HDFC Life report says that most of the employed women are looking for investments which are best suited for child’s education, health expenses and equated monthly instalments (EMI).

Bank FDs give them a sense of security as it yields a fixed rate of interest at maturity.

NSC is a long-term savings instrument with investment tenure of six years. It offers a high 8% interest compounded half-yearly. Post maturity, interest will be paid for a maximum period of 24 months at the rate applicable to individual savings account.

PPF is a savings-cum-tax-saving instrument suited for women who look for regular savings. It also serves as a retirement planning tool. The minimum deposit required in a PPF account is Rs500 in a financial year while maximum deposit limit is Rs70,000. The number of maximum deposits is 12 in a financial year.

Gold is one of the most preferred investment options by working women irrespective of their employment status. Chit fund companies agree to contribute a specific amount as instalment for a certain number of months.

As per the risk appetite and financial goals, women can opt for investments in equities and mutual funds. Considering Indian women’s preference for conventional investments like FDs and NSCs rather than, say, art, oil, property, systematic investment plans (SIPs) might suit them better. An SIP is a method of investing in mutual funds wherein a fixed amount will be invested at regular intervals of time, irrespective of market conditions.

“Indian women who are employed rely more on social networks like friends and relatives for formulating their financial plans. Taking advice from a professional advisor may help the Indian working woman in achieving a more comprehensive plan,” says Sanjay Tripathy, executive vice-president marketing and direct channels, HDFC Life Insurance.