There is something about women and money that doesn't seem to quite fit together in minds of most of us. We all generally have a tendency to stereotype people and make generalisations about a person,community, geography and gender. When it comes to finances too, we hold may notions and myths. In this article, we would be revisiting few of the long-held myths about women and money or finances. Going beyond the title, the article also attempts to look at the bigger picture behind these myths and the need for us all to change...

The myths about women and money...

Myth: Women are impulsive spenders and they spend a lot
Fact: Women are wise & careful spenders
We believe that those who purchase something on impulse do not have the self control to follow a budget and spend in an organised way. We also generalise women as more like to indulge in shopping on impulse.

The fact is women have regular spendings on small inexpensive things, mostly for utility or purpose. There is logic to assume that small impulsive spending within the overall budget means a person lacks discipline & control on financial matters. On spendings, a US Bureau of Labor Statistics report concluded that there is equal spending by both genders and the main difference is that single men spend more on electronics, entertainment, while single women spend more on apparel and services.

The clear this myth further, there are also studies that concludes that women share more feedback on 'what' and 'where' to shop within their circle. We also know that they more loyal and bank on trusted shopkeepers & portals and demonstrate eagerness to search for discounts & deals and also bargain harder than men. One interesting study found that 72% of women had reduced their retail spending in the recession compared to only 62% of men*1. All these observations and opinions point to the direction contrary to our myth...

Myth: Women are too emotional for financial decisions
Fact: Women have the 'right' emotions needed for financial decisions
Studies have found that emotions of men generally tend to be around 'greed', 'fear', 'chance' and 'certainty'. The emotions of women generally revolves around 'security' of investments, and some 'uncertainty' of their own decision as being unwise or risky. Hence, women are more likely to seek financial advice just like they are more likely to seek road directions compared to men. Men, in comparison, feel and act more confident in financial matters, whatever may be the reality! Being careful and seeking opinion is much better than being confident & not seeking advice when needed.

Myth: Women want men to manage finances while they focus non-financial household roles
Fact: Women are capable & want to participate & contribute in all household matters
This myth has roots in the ancient premise of the division of household responsibilities in a patriarchal society, which we are even today. We expect women to manage the household while men are to earn and provide for the necessities & safety of all. Well, the times have changed a lot and today more women are equally educated to their male spouses and are often also earning independently. The fact is, whether earning or not, women do have substantial responsibility for family finances. Most of the consumption decisions are driven and influenced by women. As household managers they have to handle the expenses to the budgeted money and needless to say, there is a very long list of expenses in any normal family. They are much more aware of inflation and market prices then men are.

Being more informed & educated, more women today desire to participate actively and contribute in financial matters of the family. If women can participate in financial decisions, it more likely that the outcomes would be more balanced and informed. It can also be very crucial at challenging times.

Myth: Women are not good with maths & financial skills
Fact: Women and men have equal ability to learn and apply maths & financial skills
Let me begin by recalling the most famous name in mathematics in recent history. Shakuntala Devi, was known as 'human computer' and was famous for mental calculations. She made to the The Guinness Book of World Records in 1982. The MD at International Monetary Fund (IMF) today is Christine Lagarde, a women. In India too, women hold top positions in many financial institutions like Chanda Kochhar - MD & CEO at ICICI Bank, Shikha Sharma – MD & CEO of Axis Bank, Vinita Bali – MD of Britani Industries, Naina Lal Kidwai - Group General Manager and Country Head of HSBC India, Renu Karnad – Director at HDFC, Chitra Ramkrishna – MD & CEO of National Stock Exchange (NSE), Roopa Kudva - MD and CEO and CRISIL and so on.

The list is unending and we can easily see that women hold key positions in some of the biggest names in the financial industry alone. Even in area of financial planning there is growing number of women advisers. As per the U.S. Bureau of Labor, in 2010 that over 30% of personal financial advisers were women. There are more than enough examples to dispel this myth. A study by University of California researchers, on two rural tribes (one with equal land & education & one male dominated) in India and concluded that environment, not gender, determines a person's math abilities*4. But on a different thought, we can even question the need for financial skills or maths in financial decisions. Isn't successful investing more about common sense and managing emotions rather than display of any technical expertise?

Looking at the bigger picture: State of women in India
Despite rapid economic growth, women have not been able to play a larger role in the Indian economy and the inequalities & prejudices remain as deep as ever. The 2011 United Nations Gender Inequality Index (GII), which considered factors like labour force participation, reproductive health and education, ranked India a depressing 134th out of 187 countries, behind countries like Saudi Arabia, Iran and Iraq.

There are strong cultural prejudices in India for women empowerment and financial independence. Women in India have always worked but there is undervalued. However, things have started changing and today more girls are getting higher education and we can see more women working in cities away from home. The government of India has also worked towards women rights and empowerment through various programmes & legislations.

Need for change in us:
The women in our lives are very special – mother, sister, daughter and wife. Unfortunately, these special persons do not often enjoy the same importance & participation in decision making, be it financial or otherwise. We all need to get out of our stereotyped image of women and work towards their financial literacy, empowerment and freedom. We need to shed our prejudices, and bust our myths. By opening our minds, we will not only bring a change in our lives but a change in the entire family, community and also for the entire country. Women are half of India's demographic dividend. If they are given the financial independence and the respect they deserve, it could boost the growth engines of our country.

We all talk about it, know about it but rarely do we find anyone who is all set and ready for a peaceful and happy retirement. Retirement planning is one goal which is often at the bottom of our priority list. We often make excuses to avoid it. In this article, we will see the most common excuses made by people around us to avoid saving / planning for retirement.

1. It's too soon

This is an excuse which is often given by those who are in their 20s and 30s. At this stage of life, they are primarily concerned about creating assets and enjoying life. For them, 'retirement' is very far away to even start thinking. However, the reality is that the sooner you plan, the better chance you have for having a retirement you want. When it comes to retirement planning, it is frankly, never too soon.

2. It's too late

Retirement planning is a broad subject and is applicable to everyone. Even if you are near retirement or have already retired, it does not make any difference. The planning piece will surely take into consideration your existing age and status to make appropriate plans. Retirement planning is not just limited to saving for retirement but is also concerned with your post retirement planning.

3. My family will care for me

Do we really want to become as dependents on our family / children? No matter how faithful and caring your family members, especially children, are; you should let them worry about their own lives and their own children. Social and family structures are changing today and often children do not stay with parents. It would be strongly advised to not think of yourself living at the mercy of others.

4. I do not have enough money

No one ever has enough money. The important thing here is to make a start. Every rupee will count towards your retirement kitty. Initiating the process will mean that you are serious about retirement planning and you will be more likely to increase your savings in future.

5. I am in a bad financial situation

In a situation where you feel that your finances are in a mess, we would recommend that you get in touch with your financial advisor / planner. You need to sort out your mess and find ways to clear all debts / liabilities first. This though may also be a case of exaggeration. You need to really check if you are truly in trouble or choosing to believe so, so as to avoid saving.

6. I am not aware of retirement planning

This is another excuse people often make. However today, seldom can anyone claim that the awareness was absent. We must be at least aware that we may have to live about 20-30 years of our lives without regular income – post retirement. This simple knowledge is good enough to evoke a sense of urgency and the importance of retirement planning.

7. My advisor did not ask me about it

Those who make this excuse must be asked – do you never put forward any question or requirement to your advisor? Have you ever asked your advisor to plan for your life goals? Are you serious about getting the right advice from your advisor? A good advisor will always ensure that he/she discusses and plans for all your life goals with you. However, the onus of ensuring that your advisor covers all your needs and does not miss anything lies on you.

Why is retirement planning 'important' and 'urgent'?

Among all your life goals, retirement planning is perhaps the most critical life goal. It is much more important than children education or marriage goals. Once secured admission, your child can always find education loans. With an evolving society, traditional marriage expenses may not be applicable today. Also earning children can always save something for their own marriages. Also marriage is something which can be planned or delayed for few years if required. Hence, the only key goal left out is retirement which cannot be compromised.

Here are the reasons why it is very important and urgent.

1. Lack of social security in India forcing everyone to save for retirement

2. Question of living at least 15-20 years without income in old age, with potential health issues & expenses

3. Need to be self dependent for all expenses – for self respect and freedom

4. Can't rely on family members or children for sure

5. Retirement planning is one of the most neglected life goals – other goals get higher preference

6. The amount of savings needed is huge compared to any other goal, especially at later ages

7. You and your spouse deserve a good, peaceful, happy life in your golden ages

Conclusion:

Retirement planning deserves your immediate attention. If you have been delaying retirement planning or making excuses to avoid it, we would suggest that you do so at your own peril. Retirement planning is the most important thing that you need to do for yourself. You deserve a life of comfort and care without worries after spending a lifetime working hard and living for others. Rest of the things will happen at their own pace but retirement is something more personal which only you have to think about.

More often than not any surplus money left in savings bank account either gets spent on discretionary expenses or may be because of tiny amount, we do not give much attention to utilizing that surplus, left in savings bank account in a more efficient manner. As experts say, it is equally important for money to work for us as hard as we work to earn it. But investors have very little clue about finding an alternative to savings bank account to deploy that surplus.

Financial planners also emphasize on the importance of maintaining emergency funds. Securing your insurance portfolio and creating contingency fund are the two basic pillars of financial planning process. As any contingency fund is created for any unknown emergency, which we do not know when and how will strike, we can not commit that fund to any long term investment purpose. Leaving that money idle in savings bank account also does not serve any purpose.

So what exactly is the alternative to savings bank account, which can be as liquid and safe as bank account and yet prove more financially prudent ? The answer is liquid funds.

As the name suggests, this is the category of mutual funds, which offers highest level of safety and liquidity. The basic objective of liquid fund is to provide highest level of liquidity to investors so that entry and exit from this fund do not cost anything to investors.

Lets Try to Understand the Concept of Liquid Funds:
As individual investors we come across two scenarios at the end of every month. Either we end up having surplus money lying idle in bank account, which is left from monthly income after providing for all expenses, which is unintentional excess money or we consciously attempt to put aside or save some money to create contingency fund. In both the cases, if we leave this amount in bank account invariably we end up spending that amount on any discretionary expense or if we keep large amount idle in bank account that may not sound prudent financial decision. Sometimes you get lumpsum amount or unexpected largesse like winning a contest or selling any real estate or any other asset or receiving large sum of money in inheritance. It invariably takes few weeks to decide on how to deploy this large amount. Liquid funds can play an important role here. Liquid funds can work as an alternative to your bank account in all such cases.

Liquid funds invest in corporate deposits, inter bank call money market or any other debt instrument with less than 91 days maturity period. As it invests in very short term debt instruments, there is no interest rate risk involved.

Ease of Investing:

• As the name suggests, this category of funds are the most liquid in nature.
• Investors can enter or exit without any charges, as there is no entry and exit load.
• Redemption gets processed in 24 hours time.
• Better tax efficient returns.

Ease of Transactions:
As the basic objective of investing in this category of fund is parking additional savings, which may be required in any emergency. So ease of operation/transaction is another important factor for investors. With NJ Demat account platform you can hold units in demat format and transact online using multiple platforms of online transactions, investing through debit card as well as opt for call and transact facility. This allows investors error free, quick transactions where both investment and redemption can be done at the click of a button.

Liquid Funds/Money Market funds help you utilize your savings in a better way. With changing times it's time to look beyond traditional products as modern times require acceptance of new solutions to your old needs.

All of us have big dreams like going on a annual foreign holiday, buying a large house in a posh locality, sending our child to the best school / college and retiring in comfort at the age of 50 and we work hard and save harder toachieve them. Irrespective of our financial status in life, certain basic goals like child's education and marriage, purchase of house and our own retirement are non-negotiable and unavoidable. The sooner we plan and save for these goals, the better is the utilization of the power of compounding in our favour.

For the salaried employee, the 15 years of his life starting from 35 years going up to 50 years is the best phase of his life as he is at the peak of his career and income. If we apply the 80/20 rule here, then 80% of his lifetime investments in done in this phase of his life. Therefore, he needs to be prudent while allocating his money and not go overboard on any particular investment.

Let us examine some of life's critical goals in order of importance:

PROTECTING YOUR LOVED ONES :
This is the single most important goal. As our lifestyles get more hectic and stressful, it is important for the earning member(s) of the family to be protected against any unfortunate events. Buying a term insurance plan is the best available option to protect your loved ones. Today, a Rs. 1 crore cover for a 30 year old non-smoking male for a 30 year term costs approx. Rs. 8,000 p.a. The same cover for a female will cost approx. Rs. 7,000 p.a.

PROTECTING YOUR HEALTH :
As countries get more developed and our cities more urbanized, people have developed sedentary lifestyles with greater rates of obesity and consume more processed foods, alcoholic beverages and tobacco. The result is lifestyle related diseases like Alzheimer's, cancer, diabetes, heart disease, stroke, depression etc. are on the increase and account for majority of deaths in metros and cities. While this has resulted in a range of medical institutions and professionals on call to help people with these diseases, the costs of availing these services is escalating on a daily basis and is on the verge of becoming unaffordable for an average middle class person. Therefore, buying a health insurance policy either on a individual or family basis is critical to cover the family against any future health related emergencies. Today, a Rs. 4 lacs health cover for a 30 year old married person covering spouse and child will cost approx. Rs. 7,000 – 9,000 p.a.

PROTECTING YOUR OLD AGE :
According to a recent study titled "The Future of Retirement" published by Bloomberg which covered 20 highly developed and rapidly developing nations, India has the highest percentage of men 60 years or older in the labour force at 55%. Similarly, India also has the highest percent of elderly living in households with their adult children at 82.8%. The second highest is China at 64%. India is also among the top 10 countries in terms of percentage of elderly living in poverty at 21.8%. Retirement planning is clearly the most overlooked and avoided subject in any conversation among 30 year old salaried individuals. But as responsible and mature individuals, we have to take ownership of the fact that one day our salaries will stop and we will have to depend on our investments to fund our daily expenses. The sooner we accept this fact and start planning for our retirement, the more peaceful and stress free will be our retired lives. The cost of delaying retirement planning is best explained in the following example:

Even though Rakesh and Rajesh invest more money than Rajeev, their final retirement corpus is significantly lesser compared to Rajeev. This is the benefit of starting early and allowing the power of compounding to work in your favour.

CHILD'S EDUCATION :
The greatest gift that a parent can give the child is good and quality education. It is one of the toughest goals to plan for due to the competitive environment and high costs involved. Planning for your child's education involves determining when the child will be ready for higher education which is usually at the age of 21 or 22 years, followed by estimating the cost of the higher education today and on the target date when the child is 21 years. Cost of higher education has been increasing at approx. 10% p.a. Once we know the future cost of higher education, we need to work backwards to calculate how much to save on a monthly / quarterly basis and and in what investment avenues. Equities is the preferred investment for goals where the time horizon is more than 5 years.

BUYING A HOUSE :
For the average salaried person, this is a big budget goal due to the high prices of houses pan India. Home loans help to bridge the gap between the person's current savings and the cost of the house. Ideally, a house should be bought in the early part of a person's career as it typically takes 15 – 20 years to pay off the home loan. It is important to create a corpus which is approx. 20% of the cost of the house as this is the down payment that has to be provided by the home buyer. The rest of the amount will be funded by the bank. Balanced and income funds can be good investment options for creating the corpus for the down payment.

We need to classify all our goals into 3 buckets, namely short term, medium term and long term. Investments made for short term goals need to be more liquid in nature and less volatile as compared to investments made for medium and long term goals. A ready reckoner is given below to help you plan your investments in a systematic manner:

Whatever be our goals or dreams in life, it is important that we write them down, classify them as either short, medium or long term and accordingly select the appropriate investment options to help fulfill those goals.

"A goal that is not planned is a wish; a dream that is not chased is a fantasy." - Dr. Steve Maraboli