The Savings Series: How a single mother manages her money

Motherhood pushes buttons you didn’t even know existed – one little sole-piercing Lego block at a time. Having a baby might be the best thing to happen to you, but it also means learning how to function on two hours of shut-eye, decoding lesson plans more complex than secret services’ encrypted messages, and devising strategies of your own to sneak in some veggies into the little monsters’ dabbas. This life-altering experience could very well be dubbed the Endurance Olympics. And if you’re a single mother, you manage to do all of this and more by yourself.

Juggling the home and kids while being the sole breadwinner is not easy, and managing finances often takes a back seat when catering to immediate wants and needs. However, financial security can take away a major chunk of the burden a single mother shoulders on a daily basis. As part of our ongoing Savings Series, we spoke to Binoli Dodhiwala — co-founder and CEO financial firm, The Money Managers and a single mom herself — who shared with us simple ways to keep a check on your assets.

How to start saving as a single mother

Prep before you begin

Start with stashing away some money for rainy days. “You should always have an emergency corpus in place and it should be readily available. Most people begin by investing in properties, but they should also invest a certain amount in mutual funds or fixed deposits. By doing this, you make sure that your money is readily available when you need it,” suggests Dodhiwala. The second step is to have adequate health insurance coverage.

And finally, set up a will which clearly states the name of the guardian who will take charge of the child’s finances if the parent were to pass away. “If the child is a minor then he or she cannot take charge of the finances immediately. Identifying a guardian is imperative. This secures your child’s future and makes sure your finances aren’t misused,” explains Dodhiwala.

Segregate finances and set goals

It is extremely important to have separate accounts for you and your child. Investments made for your children should be in their name. This keeps you from accidentally withdrawing money from their share.

Also, identify future milestones that you might need to save for, then divide them into long-term and short-term goals. “My kid is seven, which means that there is a lot of time for college or higher studies, so the long-term goals I have set will be equity-oriented mutual funds,” says Dodhiwala. “With a long-term goal, I can afford to take the risk. An equity-related mutual fund also gives you higher returns in the long run,” she adds.

A short term plan would include expenses such as yearly school fees, your house help’s salary, day care and other day-to-day costs. Dodhiwala suggests you look to liquid mutual funds for short term goals – “With this approach you wouldn’t have to worry because this money is always available, irrespective of market fluctuations. Arbitrage or debt mutual funds don’t fluctuate, and help you meet your short term goals.”

Teach your children about handling finances

Educating your kids about savings and investments is extremely important. “They need to start learning, and what better time than now,” says Dodhiwala. Start by opening a kid’s bank account for them, these are super easy to operate. Give them full charge of their account, and walk them through each step. Explain basic concepts to them by using an interactive approach or simple examples. “I give my daughter pocket money every month, and tell her that if she doesn’t use the pocket money immediately, a week later, it will increase by Rs 10. That’s how I try and teach her about interest,” explains Dodhiwala. Once kids take charge of their own finances, they automatically start spending sparingly and understand the importance of saving.

Identify a reliable financial advisor

Most people don’t have the time to research, especially if you are a single mother juggling a million tasks. The fear of losing money often leads to doing nothing at all. So, approaching a financial advisor is the best bet. This saves you from all your relatives’ unsolicited advice, and from making wrong decisions.

What’s the best way to identify a trustworthy financial advisor? “Ask people you trust for references. If that doesn’t help then look for well qualified advisors with legitimate expertise,” says Dodhiwala. “Ask them (financial advisors) if they have invested in the plans they have recommended to you. You can also ask them how much money they are making off this suggestion. The field is quite transparent, and in most cases, the commissions are disclosed,” she adds.

Tweak your day-to-day spending habits

Dodhiwala spoke about one very easy change that goes a long way – “Change the way you spend.” What people usually do is spend first and then invest, Dodhiwala wants you to reverse this pattern. “The day you get your salary or money from somewhere, put aside the amount you want to invest immediately. Use the remaining money for expenditures. Prioritise investments,” she advises.

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