Introduction of Banking and Finance for Mothers

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Introduction of Banking and Finance for Mothers

The word mother evokes great reverence and positive emotions due to her leading role in bringing up a child, not only just as their loving child but also as a responsible and informed citizen. In the course raising a child, the mother teaches many valuable financial lessons to the child in the form of counting money, spending it wisely, the importance of saving money, among others. A mother having better understanding of the basics of modern finance and banking can take better care of their finances, along with imparting bettering financial educations to her child. Against this backdrop, introducing mothers to some new-age financial concepts and practices could go a long way in ensuring financial security and prosperity for them and a better financial education for their children.

The coming paragraphs would shed light on the importance of finance and banking in the life of a mother and some investments schemes or instruments.

The following are some of key reasons why mothers should have a decent understanding of modern age financial and banking knowledge.

  • Gaining confidence through financial independence and security
  • Meeting the rising cost of living
  • Earning good returns on the investment
  • Mothers knowledge influences their children

There are scores of instruments or schemes in which investments can be made depending on the risk appetite and expected rate of return. Some of the easy to understand and common investment instruments are discussed below.

Bank fixed deposit (FD)

A bank fixed deposit (FD), also known as term deposit, is a safe choice for investing in India. The rate of return under this investment option is low, which, currently, lies in the range of 6.5%-7.5%. Its maturity duration, generally, varies from 30 days to 5 years. For those who have low risk appetite and look for a smaller maturity period, it can be considered as one of safest investment options.

Mutual Funds:

Investing in mutual funds, especially ELSS schemes, can be a good option as it offers the average annual return ranging between 10% and 15%. Although investment in mutual funds comes with moderate to high risk, it offers flexibility in term of investment. The lump sum route is a single payment mode, whereas under the SIP mode a fixed amount is invested at a regular intervals of time which can be daily, monthly, quarterly or semi-annually.

The Public Provident Fund (PPF):

It is one product a lot of people turn to. Since the PPF has a long tenure of 15 years, the impact of compounding of tax-free interest is huge, especially in the later years. Further, since the interest earned and the principal invested is backed by sovereign guarantee, it makes it a safe investment. Read more about PPF. It offers the average annual return of around 8%. Investment under this scheme is very flexible.

Stocks or shares:

Stocks also known as shares or equity. There is no fixed rate of return on stocks. It depends on the performance of the company. If the company does well, you may receive periodic dividends i.e. profit on shares. If the company does poorly, the shares price may fall, and you could lose some or all of the invested money. There is no concept of maturity period in stocks. People can buy and sell stocks as per their choice. It’s a little complicated affair as the knowledge of market is required here in order to earn good return. Stocks are risky mode of investment, especially in a short run.

Commodities and Precious Metals

Commodities comprise gold, silver and other basic goods. Commodities don’t offer a fixed rate of return. Return on commodities depend on the market conditions. In recent years, the return on gold and silver hasn’t been great. Considering this, investing in golds and silver isn’t a great idea.

There are other important investment instruments like insurance, government bonds etc. Mothers can consider one or more instruments to make investments based on their understanding and comfort with the instrument(s), risk appetite and medium to long term plans.

In a nutshell, every mother should widen her horizons and strive to acquire financial and banking knowledge. She must channelize her ways of financial independence through right investments. A little familiarity with mobile & desktop and basics of investment schemes or instruments can make the investment process – which usually seems cumbersome and intimidating — fun and exciting.

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