“Money is something that you need. At the end of the day, we need to learn how to save it, how to put it in the right place, and for that, you need knowledge and understanding,” stated Pathak in an interview to CNBC-TV18. She highlighted the common scenario where women rely on male family members for financial guidance, emphasising the importance of independent financial literacy.
Shanker echoed this sentiment, stressing the significance of understanding the “power of compounding” and the characteristics of different asset classes. “It’s important for women to spend some time and understand the character of different asset classes so that then they can figure out themselves as to how to invest their money,” he said. He further advised that women should learn about how to construct a diverse portfolio.
For women who are early or mid-career and single, Shanker highlighted a multi-pronged approach. “Besides investing, it is crucial to focus on insurance, both for oneself and for parents, especially since many women today are primary caregivers,” he noted. He also advocated for goal-based investing to ensure financial stability through different career milestones.
One significant financial goal for single working women, according to Shanker, is homeownership. “Buying a house is extremely important. It gives you a lot of security,” he said. Planning for a home purchase requires budgeting for the down payment and equated monthly installments (EMIs), which should be factored into a long-term financial plan.
Addressing the perennial dilemma of whether to buy a home early or wait and build a corpus, Shanker stated that the answer is individualistic. “On an excel sheet, you could make a plan to compound your money in equities and buy a house later, but a portfolio doesn’t provide as much comfort as owning your own home,” he pointed out.
He advised leaning towards early homeownership, even if it means stretching finances slightly. “Over time, EMIs remain the same, but as your career progresses, your salary will increase, making savings easier. Real estate is also a kind of saving, and it offers tax breaks and security. If you are clear about staying in a city, buy that house as early as possible,” Shanker said.
Below are the excerpts of the discussion.
Q: What is the general advice that you’d give to women out there when it comes to money, finance?
Pathak: Money is something that you need. How much ever we say that money is materialistic, we all need the money. At the end of the day we need to learn how to save it, how to put it at the right place and for that according to me you need that knowledge, you need to have that understanding on how to save the money, where to save the money. I have friends who are not working or are single they are putting their money in gold, they are putting their money in fixed deposit, they are putting in their money in securities but somebody has to guide them there’s always an uncle or a father or a brother helping them out. Wouldn’t it be better if they can do it all by themselves or a part at least? So, have that understanding, have that knowledge to go ahead and make that investment. So, money is important and learning is too.
Q: Let’s get started with the first category- women who are single, they could be early in their careers or even mid-career. In these days’ women choose to get married a little late many a time. So, for this category of single earning women what are the first steps what are the important to do’s and don’ts?
Shanker: It is important that women spend more time understanding money especially power of compounding because you have so many options in front of you. You have a simple fixed deposit where the risk is extremely low but you get a fixed guaranteed return and then you have equities on the other side where the ride can be very volatile but you end up compounding your money faster. So, it’s important for women to spend some time and understand the character of different asset classes so that then they can figure out themselves as to how to invest their money. Of course, I can’t forget gold when it comes to women and gold has done extremely well. So how do you create a portfolio is something that they need to spend a little more time.
But other than investing I think there are a lot of other things that you need to take care of primarily insurance. Typically, what I have seen is whether it’s single working women or married, women increasingly are the ones who are taking care of their parents. So, it’s not just insurance for self but even insurance for parents, so whether it’s medical or whether it is life insurance. So, I think these two aspects are extremely critical. And then like any other person you create a budget for your aspirations and do goal-based investing because you’ll have different milestones in your career, and so you need to plan.
For a single working woman, I think buying a house is extremely important. It gives you a lot of security. So, how do you create a corpus for the down payment, and then you need to budget for the EMIs.
Q: Since you brought up the house, I have to ask you this. It’s a question that I think a lot of people are completely confounded by both men and women, when it’s about that house that you want to buy are you in the camp that believes that just buy it early if you know that you’re going to be in the city for a while and just buy it take that EMI loan because you’ll be staying in it and keeping it off or are you in the camp that would plan for it build a corpus over five to eight years and then look at making that big move on a house?
Shanker: Here it’s very individual to be honest. On an excel sheet you could make a plan saying that look I’ll compound my money in equities by putting in an SIP and buy the house later, but an SIP doesn’t or a portfolio doesn’t give you as much comfort as your own house. So I would say that go ahead and buy that house even if you stretch a little bit because over time remember the EMIs will remain the same but if you’re successful in your career, your salaries will keep going up. So, you’ll be able to save later on and real estate is also a kind of saving although all of us are biased towards equities but real estate has also done reasonably well. So, I would say that go ahead because real estate also gives you certain tax breaks and it gives you security. So, if you are clear that you want to stay in a particular city go ahead and buy that house as early as possible I would say.
Watch accompanying video for entire discussion.
