Women And Savings: Everything You Need To Know About Re-investment

Posted: August 8, 2019

Women and savings have always gone hand in hand but when it comes to reinvestments, most of us are lost. Here is everything you need to know about it. 

The word ‘Savings’ and women go hand in hand. Having watched our mothers and grandmothers save every penny, within their limited resources, maybe the concept of ‘Savings’ is imbibed in our genes.

However, gone are the days, when the cereal jars in the kitchen were the holders of a woman’s savings. The current generation of women, with their hard earned education and high pay are a well informed lot, thanks to the digital information available at the click of a button.

But in many cases, I have noticed that when it comes to savings and reinvestment of savings, many of us are clueless. Clueless, simply because this doesn’t appear on the top of our priority list. Or owing to the lack of a ‘financial mentor’, someone who advises us on a one to one basis, after knowing our financial background and commitments.

What you need to know about savings

As part of my profession, I receive queries on where to invest, how much to invest etc., Recently a couple of cases have struck me as special, since they required me to go back to the roots and explain some  key concepts on saving.

In one case, a young girl who has recently started earning had a query. She had a small amount of upto 50k in her savings account and no other savings. She reads newspaper daily and was impressed by the returns posted by mutual funds (MF). She wanted my advice on the best mutual fund to invest in for a good return.

In another case, a lady who had been saving for some time for a gold ornament had shifted her funds from a Fixed Deposit (FD) to a mutual fund, considering the high returns earned. This was in late 2017/early 2018. Now her investments have fallen in value and there is nothing she can do but wait.

It’s a well known principle that risk and reward go hand in hand and market (stock market based) investments are always subject to market risk.

Here are a few saving tips, if you are a beginner –

Instruments of safety

If you have just started saving, then, as a qualified accountant and a woman, I would recommend, first and foremost, make a fund by creating fixed deposits (FD) in any bank. The argument I hear against this investment model is the low interest rates on FDs. But all said and done, at this stage of your investment journey, safety of the hard earned money matters more than the return.

Markets are generally volatile and there is never an assurance of a definite return. What would you do if you have put all your money in equity/mutual funds and they have fallen significantly? In case, you need money urgently, whom do you turn to?

So, if you have just started saving, always look at how fast you can get the funds in case you need them (liquidity) and how much will you get in a worst case scenario (safety).  Say, I buy into a MF @ Rs. 100 per unit but the NAV on the day you need is say Rs.80, forget return, your investment has eroded to the extent of Rs.20. But, with an FD, your money is safe and always available. Especially, with the option to liquidate an FD online and get these funds immediately irrespective of it being a weekday or weekend.

When to save

Right Now! There is no time like the present. Saving regularly is a habit that’s good for your financial health. Forget the amount; it may be Rs. 500 per month to a lakh per month, what matters is that this amount has to be set apart regularly and religiously. For your investments to grow, discipline is a must.

How much to save

In Mr. Warren Buffet’s words lies an ocean of wisdom, when he says, “Do not save what is left after spending; instead spend what is left after saving.” Savings need to be planned before everything else. If following this seems difficult, start off with a very small amount to begin with.

Do not invest more than that amount, irrespective of the temptation. This is based on the concept of “Take thinking out of the equation” in “Think Straight” by Darius Foroux.

What is important here is getting into the habit. Once you see your savings become a decent amount over the next 6 months to a year, that itself will be an incentive added to the fact, that you have created a healthy habit. Remember, small drops make an ocean!

Where to save

Open an other bank account, exclusively for saving and transfer your monthly savings to that account, first thing after getting your pay. No excuses. Do this for yourself! This is like exercise or a fitness routine. A small step now will go a long way in future.

Do not take any credit card against this account, even if the bank is giving it for free. Ensure there are only deposits into this account and no withdrawals, whatsoever. Throw away the debit card, if need be.

Consider splitting the amount

Once your drops have turned to a stream and you have a decent amount in your bank account, say over a period of 1 to 2 years, then consider splitting the amount into 3 parts –

  • Retirement Fund/Long term savings (30%) – Invest this money in a PPF/NPS or other similar saving schemes with a lock in period and keep adding to it regularly.
  • Equity based investments – i.e., mutual funds, equity (share) market, etc (40%)
  • Liquid fund – would be available in the bank account, at any point of time (30%)

Equity based investments

This earmarked 40% is what you can invest in equity markets either by opening a demat account and trading directly or invest in an SIP in a mutual fund.

However, at the cost of appearing pessimistic, this is an amount which you must be mentally prepared to lose.  Not that it may happen but, if you are not prepared, every fall will create panic and worry since you are a new investor.

There is an Old Dutch saying – “the art is not in making money, but in keeping it”.

Hope this note helps you in keeping your money safe!


The above mentioned points are meant for knowledge purpose only and are not intended to provide specific advice or recommendations.

Picture credits: Pexels

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