How traditional finance management methods by women continue to be relevant now

Women in India have had a complicated relationship with money since time immemorial. Societal norms have and continue to weigh in on the gamut of money management in most families. It is common for the men of the household to have the final say in major decisions pertaining to money and traditionally women have been relegated to the task of maintaining a strict budget.

With more women joining the workforce and becoming financially independent, a welcome change is underway. The fairer sex is playing a more active role with respect to investment decisions even though that juncture where women do not have to walk that extra mile for being taken seriously in money matters is eons away. As the role of women in shaping the finances of the household continues to evolve, it is important to know that the traditional money management tactics employed by women has also catalysed the remodeling of women’s relationship with money because those methods continue to be relevant even today.

The foundation stones of financial discipline

Sudha Roy (name changed), who recently made a foray into the field of social work believes that her mother’s attitude towards money has helped her avoid the common pitfalls that many young professionals tend to make when the taste of financial independence is still fresh. “My mother was a housewife and my father used to give her a certain sum every month for running the household and for her personal expenses. When I would make demands for something that caught my fancy she would ask me to wait till the next month so that she could maneuver through the strict budget to accommodate that extra expense. She would make me promise that if I were to get what I wanted, I had to do a particular household chore every day for the whole month. This inculcated in me a sense of respect for money and even though I am independent now, I follow the mechanism of ‘earning my indulgences.’

The financial discipline displayed by the older generations of women can be a great starting point for honing the attitudes of the younger generation towards money management in the right direction. Parvati Iyer, chief investment officer at Femwealth.com, an online investment management platform says, “Traditionally women have been responsible for managing all expenses in the household. This meant walking the tight rope between the monthly needs and the wants of the family. A detailed monthly budget was prepared to manage this. This activity ensured that a high degree of financial discipline was maintained. Looking back, it continues to surprise the younger generation as to, how so much could be accomplished in such a finite budget. But in fact, the secret was the efficient allocation and monitoring of monthly finances.”

Making every penny count

For Roy, another important lesson that she picked from her mother which has helped her in maintaining the health of her finances is the importance of keeping a track of loose change and the smallest of expenses. She says, “As unbelievable as it may sound, I still keep a piggy bank in which I keep depositing all the loose change. When I would run short of cash, I would get all the coins exchanged for cash at a nearby grocery store and sometimes, the amount would be enough to cover my recreational expenses over the weekend. It is easy to imagine how much one can save this way by keeping a tab of loose change.”

Iyer explains that depositing spare change in one place is the modern day equivalent of money saved is money earned. “By tidying up change habitually, a sizeable amount could be accumulated over time. This is a great lesson in modern day money management because that that extra money lying around in multiple bank account be collected and invested. In some communities it was common to put away money in old rice jars. Usually, this would be money is left from a purchase that cost less than what was budgeted or money remaining at the end of the month – a kind of a savings tool.”

Embarking the journey of investments

Deepak Chhabria, CEO of Axiom Financial Service says, “Indian women don’t need lessons in savings. They have always been smart savers and in many instances of financial emergencies, it is the women in the family who have come to the rescue. Women have always done an outstanding job at managing household savings. What is needed now is for them to bring that deftness to the arena of investments.”

The saving tactics that have been adopted by women through the generations also have a trickle-down effect on the investment choices of women in the current age. “Investments in bank fixed deposits, small savings schemes and gold have been more popular with women. With gold the advantage is that it is highly liquid and can be converted into cash even in the remote parts of the country on any given day. It is also easily accepted as security against raising short term loans to tide over liquidity requirements. Bank deposits are considered safe and suitable for risk-averse investors, who are in the low tax bracket. In addition, bank branches are easily accessible and located across the country and small savings schemes offer the advantage of higher interest rates.” Such investment choices made by the women in the family can not only serve the purpose of portfolio diversification but they can also act as a shield when high-risk investments perform badly, Chhabria says.

Key Takeaways

• Being vigilant of your cash outflows is an important lesson which we can all glean from the women in the family. Unless you know where your money is going, you will not be able to pull the plug in any unnecessary expenses.

• Given that most women belonging to the older generation were not financially independent and they had to rely on their spouses for every small need, impulsive buying was never a problem for them. Having a chat with the women in your family to learn a trick or two on suppressing that itching can be beneficial.

• Monitor your savings and investments with the same diligence with which women have been known to track and maintain budgets and savings. Discipline is imperative for your financial health.

This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.