I was recently quoted in Economic Times WEALTH (24-30 June 2024) in the Q&A section where a panel of experts answers readers’ questions related to various aspects of their personal finances.
The exact question and the answer –
Here is the text version of the query and the reply –
Q – I am a 40-year-old woman with 9-year-old twin daughters, working in a sales job for a family firm with an annual income of Rs 5 lakh. I have Rs 40 lakh in shares managed by my father, two unit-linked life insurance policies worth Rs 10 lakh, and SIP investments of Rs 12,000 per month for myself and Rs 5,000 per month for each daughter over the past three years. Additionally, I have Sukanya Samriddhi accounts for my daughters, contributing Rs 2,500 per month each for the last three years. Please advise on additional investment areas to secure our future.
A – You already maintain a fairly high savings rate (of more than 60%) and that bodes well for future. On an annual income of about Rs 5 lakh, you are able to save up almost Rs 3.24 lakh via mutual fund SIPs (Rs 22,000 x 12) and contributions to Sukanya Samriddhi Account (Rs 2500 x 2 x 12).
The details of short-term savings like in FDs, etc., is not known. That said, you should first look at having an emergency fund which is sufficient for at least 6 months’ worth of your monthly expenses. If you have some FDs, then they can also act as an emergency / medical contingency fund and as an ongoing liquidity reserve. While renewing, please divide the FDs into several smaller FDs so that you don’t have to break one large FD in case of small requirements. But if you don’t, then it is strongly advised to begin working towards it. A simple bank RD can be used to accumulate this over time.
From what you have told, seemingly your 2 major goals would be both daughter’s higher education and to save for your retirement. It is noted that you also have Rs 40 lakh in direct shares (managed by your father) and Rs 10 lakh in ULIPs. And with regard to the thought about securing your future, you are already saving towards these goals via these existing assets plus monthly contributions to mutual funds and Sukanya accounts and that too maintaining a high savings rate. That said, as your income increases, try to increase your monthly investments every year. Also, if you get any annual bonus/incentives, then you can also channelize a part of it towards your savings if you don’t need it for other expenses or family requirements.
You have not provided details of which fund/schemes you are investing a total of Rs 22,000 monthly via SIP. But there may not be a need for more than 2-3 funds. Having schemes from Largecap Index funds, Flexicap/Large&Midcap funds and Aggressive Hybrid funds would be sufficient.
If the ULIP you have is the only life insurance cover you have then a Rs 10 lakh policy will not offer adequate life cover. I suggest you purchase a term life insurance immediately first. Being relatively young, you can still get a large cover for relatively small annual premium.
Also, you have not mentioned about any health covers. Even if you have your employer provided health insurance, then try and get a health insurance of your own. A starting amount can be Rs 10-15 lakh at least based on premium affordability.