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Dear Mums, it is time you hold the reign!

“My mother had a great deal of trouble with me, but I think she enjoyed it.” – Mark Twain

Such is motherhood – an epitome of love, dedication and care. Historically, India has been a patriarchal society – where men earn and take care of all finances and women handle an equally challenging task of running the home and taking care of the kids. Driven by her innate maternal instinct, a mother often plays a more direct role in shaping the foundation of her children’s value system and setting the direction for their beliefs and aspirations.

In the last few years, there has been a noticeable and encouraging shift in this direction – with fathers playing an increasingly important role in the upbringing of the children and women sharing the onus to earn the livelihood for the family. Times are changing, and sooner than we think!

But as mothers broaden their ambit of responsibilities, there is a remarkable scope for them to contribute to the financial planning of the family, more so to that of her children. Financial planning still remains the husband’s task and we rarely come across women approaching us to create an “education fund” for example – be it because of limited knowledge or limited interest.

This Mother’s Day, as we celebrate motherhood, we salute all the astounding mothers out there. At the same time, we invite all mothers to take upon themselves, the responsibility to secure a bright future for their children, through diligent financial planning. While the husbands must be doing an excellent job at planning the finances of the family, this mother’s day “Gift an SIP” to your child – an expression of love, manifested uniquely and responsibly!

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Start small but start early

The other day, my mother asked me to teach her cycling. I went speechless for a few minutes, until she spoke up – “I taught you cycling when you were three. Why can you not spend time teaching me now?” I wish I could tell her, “Mom, I was three and you are Sixty – Two!!” But nonetheless, we took an attempt. And what happened next – Umm, another story, another day!

But thank to almighty, she did not come up with a similar argument for money. Imagine my situation had she said “I started building your college fund even before you were born. Why can you not give me an equally hefty amount to retire peacefully?” Phew!

Not sure if I can give her a large enough fund for her retirement, but I surely don’t want to be saying that to my kids. Certainly, there are some things which are better started early in life!

I could not be more convinced when I did some math to understand the benefits of starting to invest early. Assume that today is your 25th birthday and you start investing Rs. 5,000 every month. I get inspired by your decision and start investing the same amount every month. And hey, Happy Birthday to us! I turn 35 today!

Years continue to pass and we continue to invest Rs. 5,000 every month. At the age of 60 I decide to retire and that is when I feel that it is time I make use of the wealth I have created for so long. So I login to my investment account and whoa… what do I see? At an average annual return of 14%, I created wealth amounting to Rs. 1.3 Cr. Satisfaction redefined.

But 10 years later, when you turned 60, that is when I realized what regret truly feels like. At the same average annual return of 14%, you had created a wealth pool of Rs. 5.6 Cr.!!

Perplexing! How was that even possible? 4 times the amount of wealth I created?

Yes my friend, that is the impact a difference of 10 years can make. While a simple mathematic calculation will present to you this fact, the logic behind this is in the “Power of Compounding”.

“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it” – Albert Einstein

Wondering how it works? Assume that my investment of Rs. 5000 in the first month grows to Rs. 5,050 by the second month. So, in the second month, I am actually investing Rs. 10,050 (5,050 from previous month and a fresh 5,000 for the current month).

The above example presents some very critical learnings.

In the prime of our youth, we have a tendency to be a little generous as far as our spending habits are concerned. If we avoid reckless expenses and shift a defined amount towards monthly investments, the benefits will be visible once the invested amount matures.

Secondly, early on in life, it is relatively easy to park a part of our salary in good investment instruments every month. Such small investments, when accumulated over time, will give us the financial security we have always needed in our lives.

How do we help?

At CAGRfunds, we help you start investing through SIPs. No matter how small you want to start, we help you create wealth in the long run.

To know more whatsapp us on +91 97693 56440

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5 things you should do at the start of every financial year

Rebalance and diversify Your Portfolio

Do you park all your surplus funds in Fixed Deposits? Or are you someone who is an avid believer of investing in stocks? The risk associated with investing in a single instrument is fairly large. Diversification across asset classes is essential to ensure we do not suffer a major setback during years of softer performance. Roughly, 100 less our age should be our ideal equity exposure. And remember to count your PF as part of debt exposure.

 Salary increment? Increase SIP amounts

To keep pace with the rising expenditures, it is essential to invest more in our SIPs (Systematic Investment Plans). It will not only keep a check on our rising expenditures but also prove to be a reliable source of money in the long run. So top up your ongoing SIPs with a portion of your increment.

Start an SIP now, if you haven’t already

The concept of building a corpus bit by bit is something we all learn in our childhood – Flashback, the good old “Gullak” days! But as we grow up, we tend to get busy with other supposedly more important things. It is time we get to the basics and bring that habit back in practice. SIPs are a great way to build wealth over the long run. They not only inculcate discipline in our investment habits but also cater to a range of our medium to long term goals. So what are you waiting for? Start small but start now.

Open NPS Account

The National Pension Scheme (NPS) is a government initiative to reduce the taxable income of an individual. While we all look for ways to plan our tax, starting an NPS account will help us to reduce our tax by up to INR 15,000 annually (If you are in 30% tax bracket). Now that is some healthy saving!

Get Health Insurance

With an increasing workload on an individual, there is a tendency to avoid health issues. And if we haven’t got our health insured, things can get really complicated in case of emergencies. At the start of this financial year, let’s make health our priority and get a health insurance. It will not only cover any medical contingencies but also give us tax benefits under Section 80C of the Income Tax Act.