It is crucial to have a financial safety net, particularly for unexpected health issues, so that we can take care of ourselves when we need it the most, says Radhika Gupta, MD & CEO, Edelweiss AMC.
In an interview with MintGenie, Gupta said how conversations regarding savings, the concept of prices, and delayed gratification can be introduced at an early stage.
Edited Excerpts:
Q. What is the most important financial lesson that you would like to impart as a mother to your child?
Money is hard-earned, and it’s important to express gratitude for the money you have, even before investing it. The fact that we grew up in a more prosperous India and that my child has grown up in a more affluent family than his parents and grandparents did, is a result of immense hard work. The money he possesses and the privileges he enjoys should be used wisely. Privilege represents an opportunity, and it is his responsibility to make the best of those opportunities.
Q. At what life stage of the child, do you think mothers must start discussing savings and investments with their wards?
The conversation about saving money and understanding its value should ideally start early, possibly as early as three or four years old (I'm a young mother, after all). From there, the discussion about investing can gradually develop. Conversations regarding savings, the concept of prices, and delayed gratification can be introduced at an early stage, allowing for a quick and meaningful understanding. This is precisely what I hope to achieve with my child.
Q. Be it homemakers or working women, why should women focus on buying insurance for themselves?
Every individual should have basic life insurance coverage, such as a term plan, as well as adequate health insurance. Whether it is provided by an employer or not, these insurance policies are essential. Life is inherently unpredictable, especially when it comes to health. Medical costs are continuously rising, and one never knows when an emergency might arise, requiring a substantial amount of savings.
It is crucial to have a financial safety net, particularly for unexpected health issues, so that we can take care of ourselves when we need it the most. Whether you are a homemaker or a working woman, it is important to ensure you have life insurance through a simple term plan, as well as sufficient health coverage. You can choose to maintain a savings pool or rely on coverage provided by an insurer or private insurers.
Q. What financial gifts would you like to gift yourself as a mother this year?
I have gifted my son a set of systematic investment plans (SIPs), as I have mentioned multiple times. He currently has a SIP in a large and midcap index fund, and we are considering adding a small-cap fund and an international fund for him.
As a mother, I don't need to give myself financial gifts. However, we bought and completed our house last year, and we have invested money in its interior. Having a lovely home has been a significant gift for us as a family, especially since we moved in when my son was just four months old. The fact that he can grow up in our own preferred space is a precious gift to us. Beyond that, I don't really need anything else.
Q. Do you advocate mothers working on a separate retirement corpus to secure their future?
I believe every individual, whether a mother or not, should have a retirement corpus. We often underestimate the impact of inflation and how our lifestyle tends to improve over time. Once we experience an improved lifestyle, it becomes challenging to downgrade.
Retirement planning is of utmost importance. In the past, individuals working in government jobs would have pensions and similar benefits. However, with the rising cost of living and increasing lifestyle expectations, it is crucial to start building our own retirement corpus. It is advisable to begin this process early because starting to plan for retirement in your 50s can prove to be significantly more challenging. Taking action sooner rather than later is the wiser approach.
Q. More people are now writing wills to remove discrepancies regarding the nomination. Do you think today’s mothers should also pen their wills?
As a family, it is essential to have a will in place, and it is an error not to have one. While we may focus on investments and maintaining good financial hygiene, we often neglect the importance of having our nominations and wills in order. Unfortunately, during the COVID-19 pandemic, we witnessed numerous cases where an unfortunate event occurred to one family member, leaving the rest of the family struggling to access crucial information. This should never happen.
Therefore, it is vital to have nominations and wills in place, ensuring that your wishes are known and preventing any potential conflicts among your children or family members.
By taking care of these administrative aspects, we can avoid such discord, which is all too common in many situations. So, as a responsible mother, parent, and family, it is crucial to prioritize these measures and ensure that these important aspects are addressed.
Q. Which investment instruments do you think would serve best to today’s mothers?
I firmly believe that the effectiveness of financial instruments should not be determined by gender roles, but rather by their performance and suitability in achieving financial goals. Investing should be centred around utilizing funds to meet various purposes.
Equity mutual funds are excellent instruments for long-term wealth creation. If you have a regular income, you can consider investing through SIPs. I always encourage women, especially those with a salary, to allocate a certain amount, even as little as ₹1000, from their earnings towards a SIP.
For shorter-term capital needs, hybrid funds are highly effective, particularly for periods like three years. While there may not be an investment instrument specifically designed for mothers, I believe that mutual funds can assist in resolving financial issues and cater to a range of purposes that money can address.
