There are many ways a housewife saves money in a typical Indian household, but this money largely remains stashed into vaults without being invested for capital growth. If good investment planning and a little bit of financial discipline is followed this money can generate huge return.

Look after the pennies and the pounds will look after themselves—so goes an old English saying. But ever wondered where this could fit perfectly? The answer is easy: our households.

The fact that even small sums of money can add up over time is perhaps best understood by a typical Indian housewife. However, what she perhaps doesn’t know is how to invest this small kitty in the best possible way.

There are many ways a housewife gets money—often in cash, as gift from elders on family get-togethers or on occasions of festivals. Another familiar practice in many Indian households is that housewives take small amounts of money from their husband’s wallet without his knowledge—not for her personal use but as a saving to supplement her husband's income and also as a support in a rainy day. This is how housewives, who don’t have any income source, save money.

Let money work for you

But while no one doubts the prudence of keeping small sums of money as a buffer, it would be a good deal made better if she invested this money in a proper and profitable way.

Financial planners believe the amount of money saved by a housewife can grow immensely and come in handy in the event of an emergency. For this, however, she has to let this money work for her, and this can happen if right financial instruments are chosen.

Housewives tend to postpone investing because they often think a large amount of money would be needed to get started. However, experts say they can start investing even with small amounts instead of waiting for a windfall of cash. For instance, for a housewife who is a budding investor, can start with as amount as small as Rs 500, say experts.

Suresh Sadagopan, Founder, Ladder7 Financial Advisories, says, “If she simply wants to spend the saved money for her personal consumption or meeting petty expenses, then she can opt for opening a bank deposit. She can also spend this money in planning a surprise trip to a tourist destination for the entire family once a year. However, if she wants to invest this money to grow overtime to meet her children’s education expenses, she can invest this money into mutual funds and equities. Further, she can also open a PPF account in her child/children’s name and deposit the amount regularly into it for a secured and regular income after a certain period of time.”

Experts also add that since a housewife doesn’t have any income tax liability, she has more flexibility in picking up right investment products in tune with her financial goals.

Take informed decision

However, while picking the investment instruments, she should have some knowledge of the product she is investing in. If she is naive about finances, she must take advice of an expert or someone who has knowledge about different investment products. Otherwise, the investment could go haywire, experts say.

According to K Ramalingam, Director and Chief Financial Planner, Holistic Investment Planners, Chennai, a housewife can invest the money saved in the following ways.

First, she needs to work on creating an emergency reserve. This can be equivalent of three- to six-month expenses. This money can be parked in liquid funds or floating rate funds. Then, he says, she needs to take a mediclaim policy for herself and other family members.

As a third step, she needs to take an online term insurance policy for the breadwinner of the family. She should not fall prey for the heavy front-loaded Ulips. She needs to focus on term insurance. Online term insurance is cheaper by 60 per cent than the offline/agent-provided version.

As a next step, she could go for seeking an insurance cover for the property if the family has got any, says Ramalingam. “If the family has got any property, it needs to be insured against any natural perils like flood and earthquake. Though the possibility of these perils happening to your property seems to be very remote, if it happens you will be financially ruined,” he says.

And, after doing all the above things, Ramalingam says the housewife can consider starting an systematic investment plan or SIP in mutual fund or can contribute regularly in PPF for long term financial goals.

Start with small amount

Housewives could also look to park their savings in sweep-in accounts or recurring deposit schemes in banks, say financial planners. The assumption here is that the money she gets is not huge. Radhey Sharma, Chief Financial Planner, TheWealthWisher Financial Planners, says, “With a sweep-in account, she can have the money over a defined limit, say Rs 1,000, swept away into larger interest earnings deposits. If she needs money urgently, she can pull this out at any time, so it is very liquid.”

Over a period of time, she can keep parking the money in sweep-in accounts. Once it builds up to a substantial amount, she can look to lock the larger amount in a long term FD to earn more interest, he says.

Recurring deposits are another way of ensuring savings growth over time, advises Sharma. In recurring deposit schemes in banks, one can invest from Rs 100 to Rs 1,000 every month for a period of up to five years. The interest will be ranging from 6 to 10 per cent per annum depending on the tenure.

Gold could be another way of investing the savings, advises Sharma. Well-known jewelers offer monthly investment options starting from Rs 500 and multiples. These are for a period of 12 months and, at the end of the year, gold worth the total amount, plus some bonus, is given. Some of them buy back the gold from investors at current market rates, he says. Gold exchange traded funds (ETF) could be another option, he says. “Hoarding physical gold can be quite cumbersome. An alternative is gold ETF where fund houses buy a big amount of gold and trade the units on the stock exchange. There is no entry or exit charge, but brokerage is charged by the fund. The minimum investment is one unit of the fund.”

However, gold ETFs require a demat account. Lastly, he adds, she can even think of investing some amount in mutual fund Systematic Investment Plans (SIPs). Several mutual fund companies offer SIPs for as low as Rs 500 per month. Depending on what she is saving for i.e. how far away her goal is, she can invest in either equity diversified mutual funds or MIPs.