The importance of managing personal finance in empowering women in India

Have you ever felt unsure about what to do with your money? Trust us, you are not alone. Understanding your finances is crucial to your overall well-being and success. And if you are a woman, the importance of managing personal finance is higher because of the age-old systemic barriers still prevalent at some places. Such barriers pose a significant threat to progress, compromising your financial security. Therefore, financial literacy is the stepping-stone for women who want to be financially secure and independent.

Let us dive into the importance of managing personal finance for women and why it matters, irrespective of whether you are a stay-at-home mom or a boss lady crushing it in the boardroom.

Importance of personal finance and financial literacy for women

Financial literacy is an essential life skill for all genders. However, women have traditionally been at a disadvantage due to the lack of avenues available to them to learn about financial planning. In India, women are not always encouraged to work and be financially independent. In many cases, the men in the family, such as the father, brother, or husband, take control of the woman’s finances and, in extreme cases, even lay down the ground rules on how to spend or save the money.

However, today, women need to take control of their earnings by understanding and managing their personal finance in a prudent manner.

IDFC FIRST Power Savings Account, specially curated to cater to the needs and aspirations of women in India, helps take the right step towards their overall financial well-being.

Also read: https://www.idfcfirstbank.com/finfirst-blogs/finance/how-women-can-start-their-investment-journey

The following are a few vital reasons why financial literacy is crucial for women:

Closing the still-existent gender pay gap

Financial literacy plays a crucial role in closing the gender pay gap that still exists in some industries and workplaces. It can empower women in several ways and equip them with the knowledge and skills to negotiate higher salaries and additional benefits like insurance, cab facilities, bonuses, company shares, and more. Financial literacy offers the confidence to communicate one’s worth effectively.

When women are paid equally, and it becomes a universal practice across industries and workplaces, their high earning potential, generally, becomes better throughout their careers. It adds to higher lifetime earnings, better retirement savings, and enhanced opportunities for financial growth. Fair pay also opens doors for women in fields that men may have traditionally dominated, such as finance, construction, aviation technology, etc. Further, it ensures proper access to essentials like food, housing, and healthcare. It also offers women greater economic and political power, improved representation at work and home, and more influence in social and political decision-making.

By understanding the importance of personal finance and taking control, women can make informed financial decisions, leading to greater financial independence, security, and dignity for the rest of their lives.

Achieving financial independence in every situation

A woman may go through life-changing events and changes, such as marriage, motherhood, divorce, career sabbatical and transition, retirement, etc., affecting her financially. Proper financial knowledge can ensure that she always has a safety net to fall back on. For instance, women planning to get married or start families must understand the financial implications of these decisions and plan for wedding expenses, childcare costs, etc. They must also know their financial and legal rights as a daughter, wife, mother, and daughter-in-law.

Further, it is essential for divorced women, especially mothers, to understand their financial situation in a divorce. Unfortunate but unavoidable instances of divorce, too, can have a significantly negative impact on their finances, particularly when they are not the primary breadwinners in the family. Post-divorce, women must be involved with their finances and find a source of income, evaluate their expenses and assets, and develop a plan to manage their financial assets alone. 

Women transitioning to new careers or re-entering the workforce after a break must also understand their earning potential and develop a plan to negotiate salaries, minimise dependence on debt, and plan for their future, such as retirement.

Women need to know the importance of personal finance in old age as well, evaluate their retirement options, including pensions and other savings and investment plans, and prepare accordingly.

Importance of personal finance in building wealth for women

Recognising the importance of personal finance can help women chart out a suitable investing and saving plan for their long-term financial goals and needs. It can be instrumental in building wealth and achieving lifelong financial stability.

It is essential to understand that a woman’s wealth determines her well-being and security to a great extent. With adequate wealth, a woman can buy a house to keep her safe, access healthcare to stay healthy, protect her loved ones like ageing parents and children, offer herself and her family a dignified and comfortable life, and much more.

Wealth also enables women to be financially independent and not rely on others for financial support or decision-making. Further, it can provide a safety net during unexpected events like job loss, illness, or divorce. Women with adequate wealth can better weather these events and maintain financial stability.

Women can consider investing in different financial tools that offer compound benefits to build wealth steadily. For example, instruments like mutual funds offer the power of compounding and reinvesting profits into the market to generate higher returns over time.

Also read: https://www.idfcfirstbank.com/finfirst-blogs/finance/debunking-5-wealth-management-myths

Breaking the cycle of poverty

Financial literacy helps create a culture and habit of saving and investing among women. It constantly reminds women about the importance of personal finance management, encouraging them to save and invest for their future rather than relying solely on income from their jobs, thus ensuring financial stability.

For instance, women can use a high-interest Savings Account to park their emergency fund, which can be useful when they do not have a salary to depend on. Investments like mutual funds, stocks, bonds, fixed deposits, etc., can also be useful to bridge the recurring gap between a woman’s income and financial needs, ensuring she is always adequately protected financially.

Financial literacy can empower women to make informed decisions about budgeting, saving, investing, and managing debt effectively. Understanding the importance of personal finance and financial independence can also inspire women to start businesses and generate additional income.

Women entrepreneurs can further create jobs for others, including women, and stimulate economic growth in their communities, thereby helping break the cycle of poverty.

Encouraging equality and breaking the gender stereotypes

Women and finance are still sparingly used together because the stereotypes suggest men are better at finances. However, financial literacy in women can play an essential role in promoting equality and breaking these gender labels.

Self-sufficient women and those who realise the importance of finance may feel more confident in managing their money and making important financial decisions without needing help.

When women are financially literate, they are also more likely to make decisions that lead to improved financial outcomes, such as better salaries, higher job satisfaction, adequate investments for the future, etc. These can together help establish gender equality in a family and shrink the gender wealth gap between men and women.

Also read: https://www.idfcfirstbank.com/finfirst-blogs/savings-account/ensure-financial-discipline-with-these-5-pledges

To sum it up

The importance of personal finance cannot be undermined in today’s day and age. A woman’s financial wellbeing determines many things, such as her health, dignity, safety, and above all, her role in important political, social, and economic decisions in her family and community.

While financial independence and building wealth can be intimidating, identifying the right financial tools can help get you started. The IDFC FIRST Power Savings Account can be the perfect companion for women who wish to embark on the journey to financial freedom and self-sufficiency. This high-interest savings account can help women save for goals and unexpected financial emergencies. 

In addition to the FIRST Power Savings Account, IDFC FIRST Bank also offers several tools and a comprehensive savings and investment platform for women to understand the importance of finance and take control of their money and lives in a simplified manner. 
 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.