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.
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