There is nothing pleasant about the end of a marriage. Apart from the emotional trauma and bitterness that you will undergo, you are also forced to rethink all the plans that you would have had for your child’s future apart from your own. This week, we will look at how divorced moms can best save for their children, and for themselves.
Ask for help
Irrespective of whether you’re thinking about divorce, undergoing divorce proceedings or are fresh out of a divorce, you’re in an extremely vulnerable state because of the emotional toll that the process can take on you. Therefore, it’s extremely important that you take the help of someone you can trust, like a parent or a sibling, to give you an objective and honest view of your financial situation. You should also consider taking the help of a professional finance planner if you feel like you require additional help.
Maintenance and Alimony
Maintenance and Alimony in India involves and depends on various legal complexities, like the act under which you were married. The Hindu Marriage Act, for example, allows both husband and wife to be eligible for maintenance whereas under the Special Marriage Act, only the wife is eligible for maintenance.
Maintenance and Alimony vary from case to case, so it is best that you seek the counsel of a lawyer who specializes in divorce. Depending on your case, you may get a lump sum payment or a monthly maintenance.
If you get a lump sum amount, you should look to split the amount and invest the same in income bearing investments like interest carrying deposits, and regular income Mutual Funds as soon as you can. This way, the money is always within reach, and you can then invest the same in a bigger asset like real estate for example, once you have fully comprehended your financial situation and out of emotional pressure.
Buy a life insurance policy
A morbid but essential requirement of a single parent is buying a life insurance policy that will guarantee your legal heirs a sum of money in case of your death. These policies aren’t as expensive as Insurance Policies that also double up as investments, so they will not eat into your other savings plans. A cursory search on the internet reveals that a Rs. 1 Crore life cover for a 30-year-old woman (who doesn’t smoke) costs an average of Rs. 15,000 in premiums, per year, which is only a little over Rs 1200 a month. Life insurance is a safety net that your children cannot do without.
Invest in a ‘Child Plan’ and mutual funds for your child’s education
A Child Plan is a kind of insurance policy where you will pay a monthly premium for a specified term at the end of which your child will get a guaranteed amount. These are usually long-term plans where the maturity amount is released when the child reaches a certain age (usually 18). Under the average child plan, an investment of Rs 10,000 a month, for example, for a 10-year-old child, will guarantee an amount close to Rs 17 lakh when the child reaches the age of 18.
Another investment that you should consider for your child’s education is equity mutual funds, because they offer the best growth over long investment periods and the time outlay also mitigates their risk factor. Both equity mutual funds and child plans offer tax benefits as well – equity mutual fund investments and child plan premiums are tax deductible under section 80C and the redemption of mutual fund units (that have been held for more than 1 year) and the maturity amount received from child plans are tax-free as well.
Being a mother is easily among the hardest jobs in the world, and being a newly single mom, doubly so. Don’t let anyone bully you into believing that focusing on money or finances makes you a heartless person, either. Your focus on money is to ensure that you and your child have a secure future and a genuine shot at happiness that you both so deserve.
Rupee Rani is a weekly column on finance for women. Write to us with your queries at rupeerani@thenewsminute.com.