Wealthy Wednesdays: Investment tips and policies for single mothers and widows
Yash Prasad, Head of Sales and CMO guides you through the various plans and policies.
Financial security of the family is always a concern for most people and this is more so for a single parent, because they do not have any other support. Hence for single mothers/widows it is very important to plan early.
The primary concern of parents, and especially single mothers, is giving their child a secure future. A mother always seeks to give her child the best. While noone can replace a mother, one should plan and prepare to make the child financially secure till he/she becomes economically independent, in case of any untoward incident.
It is therefore important for single mothers, who are earning, to purchase a life insurance term plan for themselves. The cover should be enough to be able to support the child till he is 25 years old or more. There are several term plans in the market which offer the benefit as monthly payouts. This kind of a structure may be more suitable than a lump-sum benefit. This will guarantee the child`s financial security if his/her mother is not alive.
Once the risk of loss of life has been secured, then the mother can invest her savings for two major needs— her child`s education and her retirement.
As far as educational funds are concerned, the choice of investment should be based on the child’s age and one’s risk profile. Saving for the education of a child is time-specific. So the products offered by most insurance companies are quite suitable. In several other products besides insurance, if the parent is no more, then the contribution stops. However in child-plans offered by insurance companies, there is an in-built premium waiver benefit, which ensures that if the parent is no more, the insurance company pays the rest of the premium and the child receives the benefit, which the parent had planned for it. One must look for premium waiver benefit while purchasing such plans.
While the choice of the product should be based on the risk profile, however, a major portion of the investment should be in traditional insurance products where long-term returns are stable.
For retirement savings, she can consider various financial products like mutual funds, PPF, NPS and pension plans by insurance companies during the accumulation phase (when the person is earning). Regular savings would build considerable wealth by the retirement date. After retirement, some part of the accumulated savings can be invested into life annuities offered by insurance company so that a stable flow of income is available throughout her life.