Women’s Finance Management

Table of Contents

How Traditional Finance Management Methods by Women are relevant now

Women in India have had a complicated relationship with money since time immemorial. Societal norms have and continue to weigh in on the gamut of money management in most families. It is common for the men of the household to have the final say in major decisions pertaining to money and traditionally women have been relegated to the task of maintaining a strict budget.

With more women joining the workforce and becoming financially independent, a welcome change is underway. The fairer sex is playing a more active role with respect to investment decisions even though that juncture where women do not have to walk that extra mile for being taken seriously in money matters is eons away. As the role of women in shaping the finances of the household continues to evolve, it is important to know that the traditional money management tactics employed by women has also catalysed the remodeling of women’s relationship with money because those methods continue to be relevant even today.

The Foundation Stones of Financial Discipline

My mother was a housewife and my father used to give her a certain sum every month for running the household and for her personal expenses. When I would make demands for something that caught my fancy she would ask me to wait till the next month so that she could maneuver through the strict budget to accommodate that extra expense. She would make me promise that if I were to get what I wanted, I had to do a particular household chore every day for the whole month. This inculcated in me a sense of respect for money and even though I am independent now, I follow the mechanism of ‘earning my indulgences.’

The financial discipline displayed by the older generations of women can be a great starting point for honing the attitudes of the younger generation towards money management in the right direction. Traditionally women have been responsible for managing all expenses in the household. This meant walking the tight rope between the monthly needs and the wants of the family. A detailed monthly budget was prepared to manage this. This activity ensured that a high degree of financial discipline was maintained. Looking back, it continues to surprise the younger generation as to, how so much could be accomplished in such a finite budget. But in fact, the secret was the efficient allocation and monitoring of monthly finances.

Making every Penny Count

As unbelievable as it may sound, I still keep a piggy bank in which I keep depositing all the loose change. When I would run short of cash, I would get all the coins exchanged for cash at a nearby grocery store and sometimes, the amount would be enough to cover my recreational expenses over the weekend. It is easy to imagine how much one can save this way by keeping a tab of loose change.

By tidying up change habitually, a sizeable amount could be accumulated over time. This is a great lesson in modern day money management because that that extra money lying around in multiple bank account be collected and invested. In some communities it was common to put away money in old rice jars. Usually, this would be money is left from a purchase that cost less than what was budgeted or money remaining at the end of the month – a kind of a savings tool.

Embarking the Journey of Investments

Indian women don’t need lessons in savings. They have always been smart savers and in many instances of financial emergencies, it is the women in the family who have come to the rescue. Women have always done an outstanding job at managing household savings. What is needed now is for them to bring that deftness to the arena of investments.

The saving tactics that have been adopted by women through the generations also have a trickle-down effect on the investment choices of women in the current age. Investments in bank fixed deposits; small savings schemes and gold have been more popular with women. With gold the advantage is that it is highly liquid and can be converted into cash even in the remote parts of the country on any given day. It is also easily accepted as security against raising short term loans to tide over liquidity requirements. Bank deposits are considered safe and suitable for risk-averse investors, who are in the low tax bracket. In addition, bank branches are easily accessible and located across the country and small savings schemes offer the advantage of higher interest rates. Such investment choices made by the women in the family can not only serve the purpose of portfolio diversification but they can also act as a shield when high-risk investments perform badly.

7 Ways Women can take Control of Their Money

1. Consider Investing your Money

Saving money is a sensible thing to do, but it may not always be the most suitable option when it comes to building wealth over the long-term as the value of your savings could be affected by inflation. We talk about inflation when the cost of goods and services rise over time. Things get more expensive and if your income doesn’t grow as fast as inflation, you’ll be losing some purchasing power. 

2. Start with Budgeting

Women have been managing household finances for the longest time. She has always taken the call on how much to spend on necessities and how much splurge. Also, within that limited amount, she has managed to save. By nature, women are pro at budgeting. So, start with it – something that you know best. 

A woman who has a regular income should allocate her finances in a 50-30-20 ratio. About 50 percent of the money should be spent on basic necessities and home expenses. About 30 percent should go toward self-care and leisure activities. And, 20 percent of your income should be invested. These numbers, however, might vary as per your priorities. 

3. Manage your own Money

It may seem slightly tedious, but learn to manage your own money. It may seem natural to pass on money decisions to one’s father or brother or husband, especially in Indian society. Do not do this. There are resources online where you can learn the basics of money management. Do not give up power to anyone else. You can definitely consult family members, but make your own decisions and maintain a separate bank account.

4. Save more than you Spend

Saving more money than you spend is an essential way to improve your financial situation over time. A good rule-of-thumb is to save at least 10% of your net income each year.

5. Make a plan to repay Debt

This is crucial if you want to be debt-free. Whether it is a home loan, car loan, or business loan, figure out how you can repay it at the earliest. You can set aside an amount every month in addition to the EMIs you pay. For example, if your house EMI is Rs 50,000, try to put aside another Rs 10,000 a month. In a year you would have saved Rs 1, 20,000, plus some interest if you invested the same. You can use this amount to prepay the house loan, shaving almost three months off your repayment plan.

6. Don’t make Assumptions or Generalizations

Don’t assume that all women are spenders, or that all women are conservative investors. Don’t mistake silence for lack of influence. As an example, in Japan, women usually manage the family’s finances.

7. Make a Retirement Plan

Invest in a plan that will take care of all your needs. Do not rely on anyone – no, not even your children. It’s great if they help, but build a safety net if they don’t. Do not give away your home or precious belongings to your kids just yet; you can always leave it to them in your will. Invest in a monthly income plan and build a corpus for your retirement phase. This will ensure you have an income every month, say 40 years from now, and will be financially independent.