Mother Day's 2023: What are the common financial pitfalls of young motherhood and how to overcome them?

Updated: 13 May 2023, 11:17 AM IST

Mothers, especially young mothers, face a unique set of financial challenges. Planning finances carefully and seeking professional financial advice can help overcome financial pitfalls. We discuss them in detail in the article below.

Becoming a mother is one of the most joyous and fulfilling experiences for women. However, with the bundle of joy comes a bundle of responsibilities, including financial planning. Often, mothers face a unique set of challenges when it comes to finances, and it is essential for them to have a solid financial plan in place.

Young mothers must manage the cost of raising a child, plan for reduced income during their career break, and ensure long-term financial stability. In this article, we delve into the financial pitfalls that young mothers face and provide some tips to overcome them.

What are some common financial obstacles young mothers face?

Young mothers often overlook the importance of financial planning, which can lead to long-term financial problems. Here are five financial pitfalls that young mothers often go through-

Underestimating the cost of raising a child

One of the most significant financial challenges that young mothers face is the cost of raising a child. From medical expenses to education costs, the expenses can add up quickly and this figure can vary depending on the location, lifestyle, and education preferences of the family. Therefore, it is crucial for young mothers to plan their finances carefully and start saving early to ensure that they can meet the financial needs of their children.

Lack of insurance

As a young mother, it is crucial to ensure that your family is financially protected in case of any unforeseen events. Therefore, having adequate insurance coverage is essential. A health insurance policy that covers maternity expenses is a must-have for young mothers.

Additionally, life insurance coverage can help provide financial stability to the family in case of the untimely death of the primary breadwinner. It is essential to choose the right insurance coverage based on your family's needs and financial situation.

Not planning for a career break

Many young mothers face a career break or reduced working hours to take care of their child. This can lead to a decrease in income and affect their long-term financial goals. Therefore, it is crucial for young mothers to plan their finances carefully and start investing early to ensure a comfortable future. They can consider investing in mutual funds or fixed deposits to generate income and meet their long-term financial goals.

Neglecting retirement planning

Retirement planning is often ignored by young mothers due to their focus on immediate financial needs. However, it is essential to start planning for retirement early to ensure financial stability in old age. Investing in retirement funds such as Public Provident Fund (PPF) or National Pension System (NPS) can help young mothers build a retirement corpus.

Not seeking professional financial advice

Young mothers may often lack financial literacy and may not be aware of the various investment options available. Therefore, seeking professional financial advice can help young mothers make informed investment decisions and avoid financial pitfalls. Financial planners can help young mothers create a customized financial plan that takes into account their unique financial situation and long-term financial goals.

How to overcome these financial adversaries?

It is crucial for young mothers to plan their finances carefully and start investing early to ensure a comfortable future. Here are some essential financial planning tips for young mothers.

Start early and be consistent

One of the best ways to secure your financial future is to start investing early and be consistent. As a young mother, you have the advantage of time on your side, so you can afford to be more aggressive with your investments.

Even small amounts invested regularly can add up to significant wealth over time, thanks to the power of compounding. Start by setting aside a fixed amount from your income every month, and invest it in a diversified portfolio of stocks, mutual funds, and other investment options.

Invest in long-term assets

Investing in long-term assets is crucial for securing your financial future as a young mother. Long-term assets like stocks and mutual funds have the potential to provide higher returns than short-term investments like fixed deposits and savings accounts.

Although long-term investments carry a higher risk, they can help you build a sizable corpus over time, which can help you meet your long-term financial goals such as your child's education and marriage.

Protect yourself with insurance

As a young mother, it's important to protect yourself and your family against unforeseen events like illness, disability, and death. Investing in insurance plans like term insurance and health insurance can help you mitigate the financial impact of such events.

Term insurance provides a high life cover at an affordable premium, which can help your family in case of your untimely demise. Health insurance can help you meet the high costs of medical treatment and hospitalization in case of illness or injury.

Diversify your portfolio

Diversifying your investment portfolio is a key strategy for reducing risk and securing your financial future. By investing in a variety of assets such as stocks, bonds, and mutual funds, you can spread your risk and minimize the impact of market volatility on your investments.

This way, if one asset class underperforms, the others can help balance out the losses and keep your overall portfolio stable.

Plan for retirement

Planning for retirement is one of the most important financial goals for young mothers. As a young mother, you have the advantage of time on your side, so you can start planning for retirement early.

Investing in retirement plans like Public Provident Fund (PPF), National Pension System (NPS), and Employee Provident Fund (EPF) can help you build a sizable corpus for your retirement. These plans also offer tax benefits, which can help you save on taxes and increase your overall returns.

Consult a financial advisor

Investing can be complex, and it's easy to make mistakes if you don't have the necessary expertise. As a young mother, it's important to consult a financial advisor who can help you navigate the financial pitfalls and make informed investment decisions.

A financial advisor can help you assess your risk profile, set realistic financial goals, and create a personalized investment plan that's tailored to your needs and preferences.

By creating an adequate budget and planning for emergencies young mothers can manage their finances effectively and achieve their long-term financial goals. It is never too early to start planning, and the sooner you start, the better off you will be in the long run.


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First Published: 13 May 2023, 11:17 AM IST