Ladies, here's how to manage your money

In the first half of Moneylife Foundation's fourth annual Women's Day event (supported by DSP BlackRock's Winvestor Initiative), Mumbai-based financial planner Sujata Kabraji provided our audience with a step-by-step process, tailor-made for women, to financial success. Sharing many mistakes that she herself made early on and the bad decisions of her clients, Ms Kabraji provided practical solutions to the mistakes women so often make while investing their hard-earned money.

Moneylife Foundation’s 4th annual Women’s Day event (supported by DSP BlackRock's Winvestor Initiative) began with a lecture by Ms Sujata Kabraji on the ‘10 Financial Mistakes that Women Make and How to Avoid Them!’. Using her years of experience as a stock broker and financial planner, Ms Kabraji made matters clear to all those in the audience, no matter how financially inept. With her fun slides and honest advice, she managed to make a dull subject very interesting. Here’s what she said.

I’m young and I wanna have fun!

Ms Kabraji started her lecture by advising young women to think about what better use they could use their money instead of splurging on shopping and entertainment. She said, “In my early 30s, I used to go out with my friends about three times a week. It would cost me around Rs2800. I’m not here to tell you what you shouldn’t do, but if someone had told me what I would have earned if I had put aside that money at least some of the weeks, it would have an impact on my life.” Ms Kabraji said that it may be good to note what you’re spending on each week and then cross out the things you really need.

I’m smart, I have life insurance!

A lot of people believe that life insurance is for investment, not protection. However, insurance agents promote investment-oriented insurance policies, as these give them more commissions. Ms Kabraji says, “You only need to remember one type of insurance policy – term insurance. I would also advise you to only buy insurance if you have dependents. I think it’s good to ponder over whether you actually need insurance. A lot of us buy term insurance simply because it gives us tax benefits.”

Health can eat into your wealth

Health insurance is important. Unlike life insurance, all of us need health insurance. This goes for those covered by corporate plans, too. Ms Kabraji says, “A friend of mine, Sheetal, was insured by her company for Rs5 lakh. Her parents were also insured for Rs3 lakh. Then her company went through a rough patch and she was offered voluntary retirement. She took it and start a small business from home. When she then went to take her own medical cover, she was asked to do her medical. She was diagnosed with diabetes. Now, her policy doesn’t cover diabetes-related diseases and is costing her an arm and a leg.” Ms Kabraji, therefore, advised participants to buy health insurance early on.

Honey, tell me where to sign

Too many women sign wherever their husbands ask them to, no matter what the documents. This includes wills, property, cheques, and other important documents. Ms Kabraji said, “A dear friend of mine was left penniless and husbandless after her spouse left for a younger woman, after not bothering to look at what she was signing.”

Dip your toe into the water, girl!

Women are often frightened of investing in anything but gold. Ms Kabraji advised participants to look at inflation-adjusted returns. She said, “Gold gives poor returns after inflation. Comparatively, equity delivers much better returns and is a way to beat inflation.” Ms Kabraji said that volatility is unavoidable if you want to grow your money.

Tax slab? I prefer chocolate slabs!

Ms Kabraji said that just because you’re saving money doesn’t mean you’re not making a mistake. She says, “A client of mine, when she was under 30, had saved over a crore. She had a high-paying job. She would also save her money. But she would only put in fixed deposits. Last year, she was earning 10% a year. But this would’ve made the tax department very happy. On Rs1 crore, she would have been paying Rs3 lakh to the tax department. When she came to me for help, I just moved her money to a product with a lower tax liability.”

Make sure you have the money to party on!

A lot of women think first about their husband and children, but forget that statistically they’re more likely to live longer than their husbands. She says, “You need to remember that you may live until well after everyone else is gone. A friend of mine spent all her money on her kids, without thinking about herself. When she quit her job, she had just Rs35 lakh, which she got as lump-sum on retirement. Surely, this won’t be enough for the next 30 years. Had she been smart about her money early on, she may not have been in the situation she is currently in.”

Ugh! Paperwork

Both men and women have the tendency to avoid what requires even a little bit of paperwork. When paperwork is avoided, a lot of problems can crop up. Ms Kabraji says, “If we don’t do the paperwork, we’re bound to find ourselves in bad situations. There are bad and good stories related to avoiding paperwork. Let me tell you a happy one. A friend of mine had three cupboards full of papers that belonged to her parents. She didn’t go through them. When she did, though, she found that there were Tata shares worth crores just lying in the cupboard.”

Will? What’s that?

It’s easy to disregard what is yet to come. So we constantly postpone making a will. But this is far from the right decision. Ms Kabraji says, “My parents did a wise thing by telling their two  daughters and a son how the family wealth would be split while they were alive. We were told to raise our objections while they were alive, not after. Making a will may not be prevent problems later on, but it does at least put your foot in the door.” Sujata Kabraji then went on to explain which relatives the Indian Succession laws let come after your money.

Numbers make me cross-eyed

It’s easy to be confused by numbers, but there’s no point running away from these calculations. Ms Kabraji said, “I am a statistics major, but I can’t do any mental math. I need a calculator. The solution is not avoiding the complications of a financial product. All you need to do is ask the right questions.”

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    Are women inherently more risk-averse than men?

    That is the conventional wisdom and could be wrong. Financial literacy, or the lack of it, is one of the reasons why women tend to be more risk-averse than men, according to new research which debunks the biological theory. If the right financial education was imparted to more women at school and college levels, the differences in gender gap in risk-tolerance disappears. This is why Moneylife Foundation is holding a seminar on financial literacy for women on the International Women’s Day (supported by DSP BlackRock's Winvestor Initiative) in Mumbai today

    A new breed of research studies has revealed that women may not be as risk-averse as once thought and take more or less the same risk as men, if both are financially literate. The reason and preconceived notion that women are more risk-averse than men lie in one thing—financial literacy. For a variety of reasons, women tend to be less financially literate than men. That is reason they may be inclines to take lesser risks (which can sometimes be a good thing or a harmful thing, depending on the circumstances). If women are exposed to correct financial ideas as educated as their male counterparts, the differences in risk-taking narrows down or disappears.

    A paper by Juan-Camilo Cárdenas, Anna Dreber, Emma von Essen and Eva Ranehilld titled, “Gender differences in competitiveness and risk taking: Comparing children in Colombia and Sweden” stated: “We find that boys and girls are equally competitive in all tasks and all measures in Colombia. Unlike the consistent results in Colombia, the results in Sweden are mixed, with some indication of girls being more competitive than boys in some tasks in terms of performance change, whereas boys are more likely to choose to compete in general.” In other words, there was nearly no difference in risk-taking between the genders.

    The current notion is that women are risk-averse which pundits and scientists attribute to biology. One seminal research paper, “Boys Will Be Boys: Gender, Overconfidence, And Common Stock Investment” by Brad Barber and Terrance Odean, that appeared in the Quarterly Journal of Economics, states that men are more overconfident than women, trade more than women and this results in lower returns. Barber and Odean found that men traded the stocks in their accounts 45% more than women did. This excessive portfolio turnover reduced their net returns by 2.65 percentage points, compared to the 1.72 percentage points women dinged their accounts by trading. Single men were even worse offenders, trading 67% more than single women. This indicated that biological differences were important in understanding women’s attitude to risk.

    Similarly, a Vanguard study involving 2.7 million personal investors concluded that during the recent financial crisis, men were more likely than women to sell shares of stocks at all-time lows, leading to bigger losses among male traders. It also meant fewer gains when some of the stock values began to rise again. These two studies show that women are more conservative than men. But it doesn’t state the reason why they are conservative. But it now appears that there is nothing biological about it. Women devote a lot of time to childcare and housework and are not exposed to the right financial concepts. It was found out that once women were financially literate, they took more or less the same risk as men, and were more confident of taking such risks.

    However, we are witnessing a shift in this, as more and more women take charge of investment decision making, with more confidence than ever. This is because of financial literacy and not because of biology. Indeed, the finance field in India is full of very successful women.

    ICICI Bank, India's second largest bank after State Bank of India, is headed by a woman, Chanda Kochhar. ICICI nurtured a number of women namely: Chanda Kochhar, Shikha Sharma, Renuka Ramnath—who have today reached the top. One of most prominent among them is Kochhar, who joined the bank as a management trainee in 1984 and rose through the ranks to become the managing director and chief executive officer. Of the overall 40,000 employees at ICICI, over a quarter are women.

    Shikha Sharma went on to become the managing director and CEO at Axis Bank, one of India’s largest private banks. HDFC, India's largest housing finance group, has Renu Sud Karnad as its managing director; Kalpana Morparia heads the Indian arm of global financial leviathan JPMorgan Chase & Co; Meera Sanyal is the country executive for Royal Bank of Scotland and; Manisha Girotra was the managing director of Union Bank of Switzerland's India operations.

    At the end of the day, it is financial knowledge that counts. If the right financial education was imparted to more women at school and college levels, the differences in gender gap in risk-tolerance disappears. This is why Moneylife Foundation is holding a seminar on financial literacy for women on the International Women’s Day (supported by DSP BlackRock's Winvestor Initiative)  in Mumbai today.

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    P M Ravindran

    8 years ago

    First of all, a confession- I invested almost 20% of my terminal benefits on retirement in stocks and within one year closed the business after downloading all my stocks at a loss of 20%! My wife continues to trade in stocks and almost all the terms I hear her use is Greek and Latin to me!

    But forget stocks, I have been unable to comprehend this much talked about discrimination against women. There are differences between men and women as much as there are between men and men and women and women. But yes, men in general tend to be physically a wee bit stronger than women. But then, understanding that nature has its own checks and balances, I have also been wondering how nature would have compensated women for this. Any guess, anybody?


    8 years ago

    Being Risk averse is one thing, but most women manage their household budgets(Money) better than any man could or would.
    This has been going on from ages as finally the man gave the money to his wife for running the day to day expenses, even though they were financially semi-literate. As the article goes on to say they now take the same risks as men when they are financially literate, will that help them in managing the family's monthly Budget?

    Nilesh KAMERKAR

    8 years ago

    Women take & manage the biggest risk of all . . . leaving the doting father’s house for an impossible to predict future.


    Sucheta Dalal

    In Reply to Nilesh KAMERKAR 8 years ago

    What an extraordinarily perceptive comment. I agree entirely and i have thought about it a million times.

    I wonder if middle class women or rich women even think about it. They go by the risk assessment done by their parents - in an arranged marriage. Or dont give it a thought in a love marriage.

    For the poor - it is a real tragedy. They dont know it most of the time, but marriage usually means endless drudgery, responsibility, beatings and worse.

    There was so much you said in that one sentence!

    Why women have poor access to justice and how to change it

    At the 4th annual Women’s Day event (supported by DSP BlackRock's Winvestor Initiative), Moneylife Foundation honoured two amazing women, Meena Seshu of SANGRAM and Jyothi Mhapsekar of Stree Mukti Sanghatnana, for their contributions to society. This was followed by a speech by another great achiever, Justice Sujata Manohar, who discussed the reasons why the justice delivery system is so poor and the ways it can be changed

    The second half of Moneylife Foundation’s 4th annual Women’s Day event (supported by DSP BlackRock's Winvestor Initiative) began with felicitations to two very important Maharashtra-based activists, Jyothi Mhapsekhar of Stree Mukti Sanghatana and Meena Seshu of SANGRAM. The mementos to both activists were presented by Justice Sujata Manohar, who soon after delivered her keynote address.

    In her acceptance speech, Ms Mhapsekhar, who works to empower ragpickers, urged citizens to consider their while doing something as simple as throwing away their garbage. She said, “A simple thing like sorting garbage at source would help thousands of ragpickers who struggle to make a living. These women work in very difficult circumstances. While there was a proposal to fine those who don’t sort their garbage, I would say that offenders should be instead taken to the garbage dump to see what life is like sorting out 10,000 tonnes of garbage.”

    Ms Seshu, in her acceptance speech, discussed the mission of SANGRAM, which is working to give equal rights to sex workers. She said, “SANGRAM, after years of working with sex workers, men who have sex with men, and transgender people, have created a bill of rights. The reason we did this is that middle-class and wealthy people of India don’t know how to treat sex workers. What the people of India need to accept is that people can exist how they want to exist.”

    After the felicitations to Ms Mhapsekhar and Ms Seshu, Justice Sujata Manohar delivered the keynote address on ‘The Case for Delivering Better Justice to Women: A view from the Judge’s Chair’. Justice Manohar began her speech by discussing what the problems in the justice system are. She said, “The first problem with the Indian justice system is that the laws can’t be properly understood. We need laws that take into account the needs of society. Once this is done, they need to be implemented. There are several other things we need. Just punishing wrongdoers, giving jail-time isn’t enough. We need community service provisions, we need compensatory provisions.”

    Justice Manohar also spoke about the differences in the various laws that have been implemented. She said, “Definitions of words in laws in our country vary according to their purpose. This is not done. Take, for example, the age of consent.  Sexual relations with a girl below 16 is rape, but under Protection of Children from Sexual Offences Act, a child is defined as a person under 18. Under Juvenile Justice Act and marriage laws, there are still different ages.”

    The problem is not always with our laws, Justice Manohar explained, as she criticised sections of society for discriminating against women. She said, “The Constitution promised equality, but forgot about the absence of a tolerant society. Our society is unwilling to accept different viewpoints. Fundamental freedoms, particularly of expression, should include the women’s right to wear what she likes. Yet some say this should not outrage the modesty of a man. We need to realise that we don’t have the right to take the law into our own hands.”

    Despite being modern in many respects, most states in our country have a completely unacceptable male to female ratio. Justice Manohar says, “We have several customs that deny equal respect to women. There is such a disparity in the sex ratio in Punjab that people there purchase girls from the north east to service entire families of men. So it’s given rise to slavery. Also, the demand for dowry is growing, not reducing. The law has had no impact. Society does not want the elimination of dowry.”

    Dowry has not been eliminated, but Justice Manohar hopes that domestic-violence-related laws have some impact on the current state of things. She said, “We must be careful that domestic violence doesn’t go the same way dowry has. But it doesn’t look as if it will so far. The act is supposed to provide protection officers, but this has not been set up properly. So we just need just laws, we need the machinery to work. We need someone to supervise. Also, our attitude to it needs to change. How often do we tell a woman to suffer in silence when her man beats her?”

    Justice Manohar ended her speech discussing the need to update laws. She said, “Laws related to illegal trafficking is badly in need of amendment. It focusses on the women, rather than those controlling the trade. Similarly, marital rape is still not accepted by government. Even Nepal, which has verbatim the same penal code, has interpreted the law to include marital rape. But our government hasn’t done so.”

    The session ended with a lively discussion between the members of the audience and Jyoti Mhapsekar, Meena Seshu and Justice Sujata Manohar. Several important topics, including inflexible adoption laws and lack of government initiative in finding missing persons, were discussed.

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    8 years ago


    P M Ravindran

    8 years ago

    When I opted for voluntary retirement from the army in 1998 I had thought of taking up law as a second career. But as luck would have it, I had an application pending with the court of wards for permission to mortgage the property on which a house was being constructed and a loan had been availed from HDFC. Believe you me, I had to withdraw the application, thanks to the woman judge who was to take the call on that application. Till date I am wondering who it was who cheated me- the judge or the advocate! Anyhow, I simply gave up my plans to pursue a course and career in law!

    Vaibhav Dhoka

    8 years ago

    May this day is extended to month and then to Year round so as to br Equal in all sense.

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