Parent organisation


How a single mother can protect her and her child's future

In a society that is relatively hard on women, being a single parent puts them in a tougher position. Her manifold roles of mother, homemaker and breadwinner—are difficult to juggle, even as she faces social pressures. The situation is more difficult beyond the metropolises.

Financial stability for the single mother and her child is vital. Several traditional families do not provide for the daughter after her marriage, with property earmarked for the males. This adds to the financial and material pressures on the mother.

Over various spans of time, the single mother needs to cater to the immediate needs of her child and herself—housing, food, clothing, health and education. Besides, she needs to create assets for the future, like when higher education could strain finances.

A single mother has to plan her life and finances just as any other family. A budget will help plan the finances for the month. As with all families, some months will have bunched up expenses. The beginning of the academic year brings with it expenses on fees, uniforms and books. Seasonal clothing for monsoons, winter and summer are additional expenses, unavoidable for a growing child. Medical expenses on common colds, allergies and fever might be small, but add up sufficiently to upset a tight budget. A contingency fund, at least six months' expenses placed in an ultra short-term debt mutual fund, can fill in some gaps, and a budget for the year can take care of the seasonal bumps in expenses.

Planning for life goals would be a little different for a young single mother than for a larger family. While the basic rules of saving a part of monthly income before spending is essential and must be followed religiously, the asset allocation needs to be skewed towards safety, even at the cost of returns. Hence debt investments, such as public provident fund, bonds and debt mutual funds would constitute 60 per cent to 75 per cent of investments, with the rest being in equities through SIPs. This is in spite of equities being able to provide superior returns over debt, especially over the long term. Equities are also more tax efficient. The allocation to equity would, therefore, be the money invested for retirement. Debt investments, with staggered maturity, would have to take care of bumpy fund requirements up to retirement, or at least till the child completes education.

Normal risks to any person or family also apply to a single mother and her child. Some of them can, and must be insured. Family floater medical cover for illnesses, personal accident insurance for financial cover in case of accidental damage to the person in domestic or external accidents are not negotiable. Life insurance to cover the child’s living and education costs in the event of the mother’s loss of life is also essential. This is ideally taken as term life cover to maximise the sum assured at a relatively low premium. Protection of the child and her interests in all circumstances is paramount. A will to protect the child’s rights to the mother’s assets is best prepared early.

A woman has the natural ability to absorb stress, protect and provide for her family, possibly better than a man. Combined with a sensible financial plan, carefully implemented, with the protection of insurance and a will would take her to a relatively secure position to safeguard her child and herself.

Rego is CEO and founder of Right Horizons, an end-to-end investment advisory and wealth management firm.

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The Week

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