Friday, Jul 01, 2022

All You Need To Know Regarding Financial Independence For Homemakers, Children

With some planning and determination, even those who don’t have an independent income, such as homemakers and children, can become financially independent. The key is to start, even if it is a small start.

Financial independence is something that each one of us deserves and must strive for it. To me, financial independence implies matching earnings and expenses with some committed savings on a regular basis, to achieve self-set goals. The process requires strategic planning and determination. 

Why Financial Independence?

1. Brings self-confidence and self-respect: There is a popular saying that money makes the mare go. Money may not be the ultimate goal, but without adequate funds, life is not easy for anyone. If one is able to plan, save and invest for future needs, one will not need to depend on anyone else. You will be able to meet some self-set goals and dreams.

2. Social security: A definite financial resource in one’s kitty may prove helpful to tide over emergencies. Start with whatever little you may have; it will grow with time. Having required funds will help meet any unexpected expenses, or even help near and dear ones in need.

How To Go About It? 

Saving as a matter of habit: It is imperative to save, however little it may be. The earlier you start, the better. Saving and investing appropriately helps meet regularly as well as sudden expenses. But it goes a step further; you can afford a reasonable post-retirement life. 

No loan, no liability: The best thing under normal circumstances is to avoid any type of loan or a long-term liability, to the extent possible. However, in present times, because of the easy availability of loans aided by EMI, it is easy to get loans. Therefore, take a loan but in a disciplined manner.  Taking a loan for things that are not essential, should be avoided. Similarly, with credit cards, balanced usage ensures that you enjoy the benefits without falling into debt. Used wisely, these products can accentuate one’s savings.

No idle money: Except an emergency fund, all available surplus money should be channelised into desired avenues, say, mutual funds, Public Provident Fund (PPF), equities, gold, fixed deposits, etc. Money should not remain idle.

Small can become big: Often, we discard or neglect saving, saying our saving is too small to plan with. But small amounts can become a big resource. So, don’t wait; just start. Channelise your savings on a regular basis with whatever little available amount.

Ensuring Financial Independence For Homemakers

Many people, including homemakers, will ask how this is possible for a person who does not have an assured earning. It is not only possible but is also one’s right. 

Non-earning homemakers get funds for household expenses, some pocket money and gifts from family or friends. All surplus funds, without affecting the family budget or expenses, should be deposited in a financial instrument; of course, after keeping some cash in hand for routine needs.

Here are some steps one could follow: 

Maintain a piggy bank to deposit change, smaller currency notes or whatever is left from daily expenses. You’ll be surprised to find that in a few months, a reasonable amount has been collected. Have a separate bank account where you can deposit your savings as also gifts that you may receive. 

One can also follow more assured ways of wealth creation, such as mutual funds [via lump sum investments or Systematic Investment Plan (SIP)], recurring deposit (RD) in banks or post offices, some fixed deposit, and even investing in equities in the stock market depending upon your aptitude, conviction and understanding. 

One may start a SIP in a mutual fund with as small an amount as Rs 500 per month, but the more the merrier. 

Financial Independence For Kids

The question of financial independence for kids depends on various factors such as the household’s income, child’s age, whether both parents are working, place of residence, etc. The approach may vary widely from individual to individual, but I believe that as far as possible, parents should avoid giving pocket money to kids, except for some basic needs or as and when required. 

For children who are old enough to handle money and get pocket money, their spending should be monitored. They should also be prompted to save spare money in a piggy bank or a bank account. This way, they might better understand the value of money and cultivate the habit of saving as an early step towards financial independence in the future.

The author is a former employee of the Government of India and has worked in the agriculture sector.

DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.