Pritha Sarkar, 36, an entrepreneur from Kolkata, has been investing in gold from her early days of professional life. She firmly believes that it does not matter how much you earn, it is all about how much you end up saving so that you can cope up with any emergency. Being a single working woman, she has always focused on emergency funding. “I always calculate how much my monthly expenses are and I keep a backup of at least 12-18 months’ expenses, as emergency funding,” says Sarkar.
As an entrepreneur, she has witnessed losses, until there was a big profit. “I am single and don’t have much burden as there is no responsibility. However, I think we should have proper financial planning in place so that we have a backup all the time,” adds Sarkar.
Saving is a priority for Tanvi Shirgaonkar as well. The 25-year-old Mumbai-based senior analyst with TCS has studied Commerce and has been interested in understanding various modes of investments and savings since her school days. “My parents inculcated the habit of saving in me since I was young. So, after I got this job through campus placement five years ago, I started saving and also invested some money in fixed deposits (FDs) from the very beginning, as it seemed a safer option,” says Shirgaonkar.
The latest National Family Health Survey (NFHS) data, released by the government recently, shows that the literacy rate among urban women is 83 per cent, and there is a growing number of independent working women. The data also shows that there are now 1,020 women for every 1,000 men. This is for the first time that the number of women per thousand men has crossed 1,000. Moreover, the number of women with an independent bank account has also gone up by more than 25 per cent in 2021 as compared to 2016. This is an indication of more women taking charge of their financial lives.
“Single women will have a little more pressure in terms of managing finances. The number of single women is growing. Many are choosing to remain unmarried and this confidence comes with financial independence,” says Priyanka Bhatia, co-founder, Women On Wealth, a financial training firm for women.
Financial independence needs a firm foundation in financial planning, and here are three things to keep in mind to ensure that you follow the right process.
1. Create A Back-Up For Emergencies
While single women may have fewer family commitments, it may also be that there is no safety net to fall back upon. Therefore, it is important to plan and prepare beforehand to be able to handle any emergency. “The first thing that comes to my mind while thinking of an emergency is a medical situation. So, I have taken health insurance covers not only for myself but also for both my parents. I also maintain a separate bank account in which I save an amount monthly. I never touch it. It is like an emergency fund for me,” says Shirgaonkar. Financial planners advise keeping a backup for a few months’ expenses in an emergency fund.
“Typically, I would suggest keeping a minimum of six to 12 months’ salary as a buffer based on your job profile. The investments could be in short-term bank deposits, sweep FD account, short-term liquid/cash funds and equity arbitrage funds. Choose a product that you can understand, is safe, easy to encash and tax-efficient,” says Sachin Parekh, a financial planner associated with Save N Protect Financial Planners (SNPFP), a financial planning firm in Mumbai.
Sarkar has also maintained health insurance since the very beginning of her career. “The family structure of a single woman is an important consideration, among other aspects, when building a suitable emergency fund. Just as building an emergency fund is a necessity, it’s absolutely critical to assess who needs to have access to the fund should the woman be in a medical or other emergency situation. One should create a contingency plan giving importance to liquidity and accessibility,” adds Arijit Sen, a Sebi-registered investment advisor and co-founder, Merrymind. in, a financial planning firm.
2. Follow A Suitable Investment Strategy
The investment pattern may vary across various age groups. Earlier, investing in FDs was the preferred choice for many, but gradually women are choosing other investment options. “If you are below 40 years, I would suggest a mix of equity and debt products, with a higher percentage of allocation in equity-based assets. Typically, a 70:30 or 80:20 (ratio). Equity will help in building a bigger corpus and debt will provide safety. Some allocation to debt, in addition to providing safety, helps when markets crash and give the investor an opportunity to enter equity at bargain levels,” says Parekh.
Sarkar, who till now chose FDs, plans to invest in the stock market and monthly income scheme (MIS). Shirgaonkar prefers investing in mutual funds and the stock market, as the returns from FDs are very low these days.
3. Invest For Retirement
Retirement planning is a subjective process. Beyond age, an important driving factor is a person’s life scenario. “The approach taken by, say, a 40-year-old widow may not be similar to that of a 40-year-old unmarried woman. Unique challenges may crop up during various life stages of single women. One must plan for expenses related to, say, hobbies or travel, after retiring from work-life for good mental health and to stay engaged,” adds Sen.
While both Sarkar and Shirgaonkar have started investing in Public Provident Fund (PPF) as a part of retirement planning, there are more options.
“Retirement planning consists of two broad phases—accumulation and withdrawal/distribution. During the accumulation phase, a regular or monthly investment is the best way to go about it. Monthly contributions with additional lumpsum investments, when you receive incentives/bonus, will help in achieving the required corpus faster,” says Parekh. He suggests opting for auto-systematic investment plan (auto-SIP) top-up plans as a way to increase monthly contributions.
Single working women have the independence as well as the responsibility of taking care of themselves and their loved ones. A few prudent financial planning steps can ensure both.