5 Essential Steps to a Woman’s Financial Literacy
The woman of today is increasingly aware and financially savvy. The fact that we have women taking the lead and contributing to the economic growth of their family and Indian society means that we are looking at an age where women need to be more financially aware. Today, more and more companies are bringing out women-specific financial products, especially credit instruments like loans, Mortgages, and Credit Cards.
Here is a look at five essential steps to a women’s financial literacy.
First thing first, start to learn about saving! The basic rule of thumb is one should start saving at least a quarter of what they earn. The savings should start through a Public Provident Fund account. So much has been written about a PPF account that anything more would only be reiterating the obvious. Yes, it is a long-term commitment! A PPF has a long lock-in period. But PPF offers the best possible savings deal as compared to any other saving option, bar none!
Remember that it is the best tax saving option where nothing is taxed, no contribution, no interest, no withdrawal, nothing is taxed. If you max out your PPF contribution in the first seven years, you can see that you will be getting more interest in your account than what you are contributing every year. PPF shows you the real power of compounding interest.
Secondly, start a retirement plan. The government of India has begun Atal Pension Yojana for all citizens. This scheme will provide you a pension of up to INR 5000 from the day you turn 60 till death depending upon your monthly contribution. Contribution can start at 18 years of age when the contribution is 210 Rs per month, and you can enter the scheme as late as 39 years when contribution is 1319 Rs per month. The earliest you can start, the better, and GoI will return INR 8.5 Lakh corpus amount to nominee.
APY, however, will not be enough. A number of insurance companies offer retirement plans. Most of these are very simple and come with guaranteed pensions. When coupled with Atal Pension Yojana, these retirement plans can be very useful. There is another excellent way to save for your retirement. National Pension System is the primary retirement scheme of the government of India. You can open a retirement plan with NPS and can choose how your contributions are managed. You can choose from different third-party fund managers and select your investment ratio depending upon your age.
Third, know about insurance. Every woman in India needs to get at least two types of coverage- life insurance and medical insurance. Let us discuss both of these one-by-one.
Everyone must get medical insurance. Good medical insurance is offered by almost all IRDA approved general insurance companies. Medical insurance is your main line of protection in case of any health issue, injury, or illness. Your medical insurance will provide you money to ensure that you can get the best doctors, hospitals, medicines, and medical care if any of the health problems arise.
Life insurance is the second kind of coverage that you must avail of. Life insurance is offered explicitly by IRDA approved public and private sector life insurance companies. As is understandable, life insurance covers your life and provides a safety net to your family in case the unthinkable happens to you. Yet life insurance also works are a personal saving and tax-saving vehicle. Your contributions to life insurance premium are tax-deductible under section 80C.
For pure insurance cover, you can get Term Life plans, but most insurance companies also provide money back plans, which will return your premium amount after the cover period ends along with some interest and bonuses. This means you can use the money for other needs on the maturity of the plan.
The fourth step in financial literacy that every woman must know is about Credit Cards. Unlike the common perception, Credit Cards are an excellent tool for financial learning, management, and Credit Score building towards the largest financial decision of them all, Home Loan. Getting a Credit Card is not as difficult as it used to be some time back. If you are earning a decent salary, you can easily get a basic Credit Card. Remember that there is only one trick to make Credit Cards work for you – always pay your balance in full at the end of your credit cycle.
You can start by getting a basic credit card and doing your online shopping with that card. Many banks offer women-specific Credit Cards, but it is better to start with Co-Branded Credit Cards with online merchants. This way, you will be able to make the best of the rewards points on offer and build up your spending and credit score to getting women exclusive premium credit cards like HDFC Solitaire Credit Card and even super-premium credit cards like American Express Platinum and Diners Club Black!
The final and most important aspect of financial literacy is Home Loans. These are the biggest debt commitment that most women are afraid to make but must make. You may have to do it alone, or you may have to do it with your significant other, but Home Loans are a must if you want to buy the biggest asset of them all, your dream house.
A number of banks and NBFCs offer special schemes for female home buyers, and the government also charges less amount for registration of property when purchased by a female alone as compared to male or a joint application. As said earlier, if you have made good use of credit, you would have built up a good Credit Score in about 5 years to be able to get some of the best Home Loan offers.
Always understand that you, as a woman, must make the best decision in your personal interest and that of your family. Financial literacy leads to financial freedom as you are empowered to put up your money to the best use by yourself.
Also Read: 5 Best Home Loans for Women Borrowers
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