Looking for small investment plans that don’t burn a hole in your pocket? Here’s my list of the best small investment options for Indian mums!
There are several investment plans that aim at providing long-term benefits to working women in India. However, there aren’t many small investment options for stay-at-home moms and/or single women.
(Looking for work from home options? Read my article on websites that let you do just that! )
Moreover, only a few of us really are aware of how to become financially sound in the long-term, other than receiving pin money from our husbands every month.
But what IS pin money, you ask? According to Merriam-Webster, it is the money given by a man to his wife for her own use.
Basically, the money your husband gives you for personal expenses every month.
And what do you do with it? Well, most of us do exactly what it is intended for- personal expenses! More often than not, we spend it on personal grooming, entertainment or, most likely of all- on the kids!
Struggling with ways to save money while raising kids? Here’s a list of my top 7 surefire ways to save money while raising kids!
But what if I challenged you to SAVE that money (or some part of it) to explore small investment ideas?
TRUST ME! IT ISN’T HALF AS TOUGH AS YOU THINK!
Mr. Parth Panchal from Investees India tells us that even before we get thinking about the very many small investment ideas for mums available in India, it is IMPERATIVE to answer this question first.
WHY DO YOU WANT TO INVEST MONEY?
It could be for anything right from wanting to buy a house, to go on a foreign trip. It is vital to be clear about your investment intentions. When I started reading the bestseller One Up On Wall Street, I began to realize just how naive I was.
Mr. Panchal says, “There are two main types of investment instruments- fixed and market dependent. Both are a must for long-term wealth creation. For short term goals like investing for a holiday, one would prefer fixed income plans. Whereas, for the longer run, a blend of fixed as well as market dependent plan is advisable.”
So much jargon, eh?!
Don’t worry. People at Investees have it broken down for us!
FIXED INCOME PLAN OPTIONS FOR MUMS
By far the best investment option for moms who wish to develop a regular habit of investing. Since an RD can be opened for as low as Rs. 100/- per month, it is a surefire way to encourage monthly investment habits in stay-at-home women!
Another benefit is the tenure which can be as low as 6 months to as long as 15 years. The rate of interest ranges from 3.50% to 8.00% with the average ranging between 6.00% and 7.50%. You can easily open a Recurring Deposit account at any bank of your choice, non-banking financial institutions or at the nearest post-office. Most banks have the option to open one on their online banking portal itself. So you don’t have to worry about documentation and your physical presence to open an RD account.
You can even apply for a loan against your Recurring Deposit with no added collateral.
So, if you deposit Rs. 1000/- per month in your RD scheme for 5 years, the maturity value for the Rs. 60,000/- invested over 60 months will be approximately Rs. 72,000/-. You will have essentially made a profit to the tune of Rs. 12,000/- over a period of 5 years!
Fixed Deposits are perhaps the most trusted and conventional investment options for housewives and mums in India. Since time immemorial, mothers have invested their savings in Fixed Deposits. This could very well be due to its risk- free nature and the guarantee of a standard rate of interest. While the interest rates on FD’s have seen a significant decline over the years, it still remains one of the top small investment choices for Indian mums.
With the minimum investment amount starting from as low as Rs. 1000/- offered by a few banks, the average rate of interest on Fixed Deposits ranges between 5.00% and 8.50% with an additional 0.5% for Senior Citizens. The minimum lock-in period for a Fixed Deposit is as low as 3 months with a maximum limit of 10 years.
Fixed Deposits gain an edge over Recurring Deposits in the various interest options available- Cumulative as well as Non-Cumulative. If one opts for the non-cumulative method then they can choose to have the interest amount credited to their bank account monthly, quarterly or yearly.
An investment of Rs. 10,000/- at the rate of interest of 6.50% for a period of 5 years will yield approximately Rs. 13,804/-. You will be able to make a profit of Rs. 3,804/- this way!
These are basically Fixed Deposits but for post-offices. Term Deposits have a lock-in period from 1 to 5 years and the interest rates depend on this duration. However, the average ranges between 6.90% to 7.70%. These deposits provide comparatively higher returns than Fixed Deposits.
If you were to invest Rs. 1,00,000/- for a 5 year lock-in period, the approximate maturity value would be around Rs. 1,45,000/-. That is quite some saving, I’d say.
The next ones the most underrated (and also my personal favorite!)
MULTIPLE SAVINGS ACCOUNTS
Recently, both my besties and I have decided to open a joint savings account. Each month, all three of us will deposit a certain amount and when we have saved enough, we will go on holiday!
You might think that opening multiple savings account and maintaining each is a difficult task- NOPE! Having multiple savings accounts actually helps track individual goals. What’s more? It even helps in reducing misspending money. So, it’s a great idea to open separate savings accounts for each individual goal.
MARKET RISK INVESTMENT PLANS FOR MUMS
If your plan is to create wealth by investing over a considerable period of time, you can consider the following options:
(Don’t worry! Simply because these investments come with a market risk doesn’t mean mums can’t handle it. These small investment options for Indian mums are created keeping in mind everyone- including women. )
These are long term investment vehicles managed by fund experts and are expected to grow steadily over time. There are three types of mutual funds
Equity– high risk, high return
Debt funds– low risk, fixed income funds
Hybrid funds– a mix of debt and equity funds
If you have a lump sum amount to invest, say the money you won at the kitty last month, then mutual funds are the best investment option in order to grow wealth.
However, there are a few downsides to investing in mutual funds like high processing fees, poor trade execution. It is even taxable under capital gains tax.
SYSTEMATIC INVESTMENT PLANS (SIP)
These are basically recurring deposits but in mutual funds. Just like your traditional Recurring Deposit, this is the easiest option for you to develop habits of regular investment as it requires you to invest an amount at specific intervals. It is also the best option for those who want to begin investing and don’t know where to start. An investment in SIP can begin with as low as Rs. 100/- .
SIP works on the compounding interest basis, which is magic in terms of returns, says Mr. Panchal.
“So, if you want to make Rs. 1 crore, start investing Rs. 5000/- per month in SIPs at the age of 25. If we were to assume the interest rate to be 12.00%, then the maturity amount by the time you reach 60 years of age will be Rs. 3,25,00000/- for a lifetime investment of Rs. 21,00,000/-.”
SYSTEMATIC INVESTMENT PLANS WITH INSURANCE
With a minimum lock-in period of 3 years, most fund houses in India have come up with SIP’s that offer life insurance cover. However, Panchal advises that one must opt for mutual funds based on financial objectives rather than be lured by the life insurance offer itself.
A Rs. 2500/- per month Systematic Investment Plan with life coverage will yield Rs. 3,00,000/- from the first day itself.
Ever since the government decided to stop giving out defined pensions to any of its employees joining after 1st January 2004, National Pension Scheme (NPS) has been on a rise. There are several investment instruments that provide a lifetime pension cover to the investor and even the spouse.
Any person between the ages of 18 and 60 years old can participate in the National Pension Scheme including Non- Resident Indians. The only condition is that one needs to comply with the KYC norms.
Mr. Panchal states “If you wish to receive Rs. 2,00,000/- as your annual retirement benefit then you need to invest the same amount for 7 years. You can then avail benefits for life from the 15th year onwards. “
However, it is imperative to note that NPS does come with a fair share of downsides. One is the rigidity around withdrawals and the other one is the taxability of the corpus amount upon maturity.
PRO TIP: DIVERSIFY YOUR PORTFOLIO
While these are the most accessible investment options for stay-at-home mums and single women, it is important for you to realize that there is no such thing as a risk-free investment!
With this in mind, you can minimize your risk by dividing your holdings between several investment options and avail the services of a financial advisory like Investees India.
Disclaimer: All investments are speculative in nature and can involve substantial risk of loss. The ideas stated here are the personal opinion of the author and in no way indicate exclusive expertise in financial planning.