Women need to master the art of investing

Women are known to be natural savers, especially Indian. Most of us have heard stories of how our mothers or grandmothers used to struggle to save from the limited resources at their disposal. Today with more women working and earning their own money, women need to learn how to invest in order to multiply their wealth, say experts. Ahead of International Women's Day, DNA Money spoke with women financial advisors to understand how women today deal with money and what they need to do when planning their finances.

How women approach financial planning

Traditionally, managing the family's finances was considered the husband's job, even if the wife was earning. But these days both partners are involved in the process, even where the wife may not be earning. Deepali Sen, founder partner of Srujan Financial Advisers, says, "Men today are willing to involve their wives while planning the family's investments, etc. Often the wife may ask only 10% of the questions while meeting with the advisor. But I have seen that in instances where the wife is involved and participates actively, the family puts into action the financial plans that are drawn up. And working women are more involved because they have their own bank accounts and incomes."

There is still a fair segment of women who believe that handling finances are complicated and is best left to the men in their families. But this attitude is changing, largely due to financial literacy initiatives by corporates, says Kiran Telang, co-founder & director, Dhanayush Capital Advisors.

"One difference between the way men and women approach finances is that women focus on goals, while men focus on returns. Sometimes this is good as it helps to balance the financial and investment plan between the two spouses,'' says Telang.

Another common trend is that the husband's income is used for essential or primary goals like the house and children's education, while the women's income is seen as a supplementary income, to be used for a second home, or a smaller retirement fund, etc. This usually happens if the husband's income is higher. But if income levels are equal, then both partners do share the goals, says Mimi Partha Sarathy, founder and MD, Sinhasi Consultants.

There are also cases where the wife is earning more than the husband, but refuses to contribute an equitable share to the family's investment, merely because tradition says that it is the man's job to manage money.

"I had a case where the couple was keen to settle their home loan, but the wife refused to contribute a higher share to the investment, despite having a high salary,'' says Sen. This would delay the goal the family hopes to achieve and put undue pressure on their finances.

As more women are working and earning their own income, today, women are willing to put aside money for an international holiday for themselves or for their personal health emergencies, Sen adds.

Choosing the right asset class

It is due to this change in attitude that women tend to worry more about the volatility in their investments, especially market-linked investments like mutual funds. "Traditionally, women have focused on guaranteed returns such as endowment plans and fixed deposits. Anybody who starts off with fixed income products and then moves to equities is bound to get apprehensive when they see market related volatility. But women are now beginning to understand that it is important to invest in equities for the long term (at least five years), and have patience. This comes more easily to men, as they have done it for longer,'' points out Partha Sarathy.

Agreeing that women tend to more conservative when it comes to investing, Sen cites another case where a woman, despite being a high earner, was wary to take risks and invest in equity-related investment. She preferred to invest in tax-free bonds that gave low returns.

Today there are several women-specific financial products such as credit cards, bank deposits, insurance, etc, but these are largely marketing gimmicks and women must evaluate their needs with the product features before selecting them, says Telang.

For instance, some credit cards may target women by offering higher benefits for grocery shopping or there may be insurance for women-specific ailments. But one must check if there is an additional benefit before buying them.

Given that women tend to have more breaks in their career when they have children or due to health issues – of self and family members, it is a better idea for women to have higher insurance, Sen adds.

"We see younger women taking an interest in finances today, because they have higher salaries at a younger age. After spending for their upkeep and personal expenses, they have surplus money to invest. And those with children are concerned about job losses and as these issues are becoming more common now,'' says Telang.

Precautions to take

To ensure that the family's financial plan is not derailed in case of any the eventuality, it is important for the couple to share all financial details with each other. Even details related to bank account like password, account number and insurance policy number, etc. "Take care of the paperwork, collate all your files and documents and track them,'' says Telang.

Even if your bank accounts are separate, ensure they are operated by either/or survivor, have a nominee for all your assets and a guardian for your children, adds

MONEY TIPS

• When women are actively involved in the financial planning, there are higher chances that family will meet its financial targets
   
• If wife has higher income she must contribute an equitable amount towards the family’s investments to ensure that goals are achieved within the timeframe
   
• Don’t shy away from market-linked investments like equities as it is the only way to create wealth
   
• Both spouses must share investment details, bank account and insurance details, with each other