Investing for Married Couples

An article dealing with how newly married couples should invest their money.

This column deals with the monetary ways and means for young married couples to handle their new life.

According to psychologists and marriage counselors, the most serious conflicts for nearly 70% of newly-weds in the first year of marriage are over money. This statistic highlights the importance of financial planning for a happy married life.

Broadly, financial planning for young married couples can be divided into two categories - planning for unpredictable situations and planning for predictable needs. The former entails preparing for contingencies (accident, illness, disability or death), protecting your current financial position, while the second category involves planning predictable needs like a car, a home or retirement.

So how best can one plan for investment to flow into both categories? With marriage come responsibilities and so married couples want to adopt the financial planning approach. I would advice them to invest his surplus money in the following areas-life insurance, medical insurance, pension plans, tax saving instruments and systematic investment planning. Let’s see if this is the best sort of financial planning for the newly married couples in the new financial year.

Life insurance:

It would be a good idea to buy protection in the form of term insurance in the early years, and then move towards more savings-oriented products. Another good option would be to buy the kind of policies that enable the couple to increase their contribution along with their income. Apart from protection, they would also get tax benefits.

Medical insurance:

Health insurance is a must, and they should take it now because if they take it at a younger age, the benefits that accrue over a period of time would be much more.

Most importantly, they could buy a policy that includes maternity expenses, which are enormous with present costs of health facilities. They could also consider buying health cover with family members, which could entitle them to discounts on premium ranging from 5-10%. It is best to buy a minimal health cover when you are in your early 30s and keep adding to it every two years. Besides, medical insurance would entitle them to tax deduction.

Pension plans:

Most life insurance companies offer plans that helps in providing pension at retirement.

Tax savings instruments:

What could be better than investing in a government-backed fund that provides decent returns with safety and liquidity?

Systematic Investment Plans:

Systematic Investment Plans, or SIPs as they are popularly called, would allow them to contribute a small amount every month to mutual funds to help build an investment corpus. Although they might want to take risks and put their money into equities, it would pay to be conservative at his juncture-when they are starting off.

Their SIP should ideally consist of debt funds and monthly income plans (MIPs) of mutual funds with a 60:40 ratio. As the income level and savings rise over the years, they can opt for SIP in an equity fund. This corpus will help them meet their medium-term (5-10) years goals like buying their own apartment, upgrading their car to a luxury car, and even help them meet the initial cost of parenting.

And finally, they should keep the credit card in the wallet for as long as they can. Their savings will increase beyond doubt.