Statistics worldwide show that only 12 per cent women take responsibility for planning and investment of their money.
If you are a man, you probably need to encourage your wife to pay attention to money matters.
Why, you ask? Because two of of you taking responsibility for your household finances is better than one.
Wondering if it is too late now?
It is never too early-or too late-to take control of your financial future. However, just like losing weight or giving up smoking, it's something you really have to do for yourself. The rewards, of course, are considerable.
Remember how your grandmothers were experts at saving and always had some money stashed away in some corner of the house to face any contingency? In the same way, women always have an inherent streak of savings and try to be prepared for contingencies.
Therefore, it is a good idea to gain grandmother's wisdom and carry on this tradition using the advantages that technology provides.
While following any financial option however simple or sophisticated it is, you need to understand some fundamentals while investing:
The 1st fundamental is the Power of Compounding
Analysts say 'Compounding is the eighth wonder of the world.'
Let us first understand, what is Compounding?
Compounding
Compounding just means that the money you make off an investment can be reinvested to make even more money than your initial investment.
In short, compounding is a process that allows interest to earn interest upon itself.
How does compounding work?
Base Amount
+ Earnings
= New base amount
+ Earnings
= New base amount
+ Earnings
= Value over time
What is Power of Compounding?
Power of compounding is a simple concept that means the longer and the more you invest, the higher the potential reward on your money, since your money compounds over time.
Study the following example.
For Rs. 1000 invested p.m. @7% p.a. till the age of 60:
Value At The Age Of 60
25
420,000
18,11,561
30
360,720
12,27,087
35
300,000
8,14,797
40
240,000
5,23,965
If you start investing Rs.1000 at the age of 25, you will be able to save Rs.420000, and that value at age 60 is Rs.18,11561, which is more than four times the corpus invested.
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However, if you start saving at the age of 35, you will be able to save only Rs.300000 (25% less) and the value of the amount invested at age 60 will be Rs.8,14,797, which is less than three times the initial amount invested.
Even in a 10 year gap there is a huge difference in the value of the funds saved and interest earned. That is the power of compounding, where your money earns money and multiplies only over a period of time.
The 2nd principle of Investing is Asset Allocation.
Asset allocation means diversifying your money among different types of investment vehicles, such as stocks, bonds and money market instruments.
The goal is to help reduce risk and enhance returns.
Establishing a well-diversified portfolio may allow you to avoid the risks associated with putting all your eggs in one basket.
Asset allocation is the key to wealth creation.
Having understood what these two concepts are, you can keep your focus when investing in any financial option.
Remember, think forward and built the compounding factor to give that extra returns. After all, it is a kick to pick up a nice dress you would have longed for but were not able to buy, with the extra money you get.
About the author, Tejal Gandhi: With 18 years of experience in the banking and financial services industry, Tejal shares her experience as a Finance Expert and a Woman Entrepreneur.
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