Why Should You Involve Your Wife in Financial Planning

Societies across countries have steadily become modern over the years however it shall take a few decades to absorb the "Ki & Ka" style of living. "Ki & Ka" is a movie where a young Indian married couple have their roles reversed; "Ki" the wife is the only earning member of the house while "Ka" the husband manages the daily household chores. Usually the wife, even if she is the sole earning member of the house does not get involved in the personal financial matters of the family. Most of the time it is because they do not wish to get bothered with the details; not that they are not bothered about the financial well being of the family. Stated below are the two basic reasons why it’s important for a wife to be involved in planning the finances of the family.

In case of sudden misfortune death / temporary or permanent disability of the husband:

This is the most important reason why wife should be involved in the personal financial decisions of the family. In this situation the wife should have basic knowledge of where and how much, the husband has saved and invested the family money. Just to get a proper picture of this, one could look at the unclaimed amounts lying with insurance companies, shares, post office, corporate and inoperative bank accounts is र 37,300 crore; if we add this unclaimed amount lying with employees provident fund organization (EPFO) this amount goes upto र 64,000 Crores.

Moreover the females have a higher life expectancy in comparison to the males and to top that up usually the wife is a couple of years younger to the husband, on account of this usually the wife outlives the husband. To prepare your wife for these days one should involve ones wife in the process of financial planning and investments.

A proper record of the following should be kept to increase your spouse’s understanding of personal financials:

• Details of Bank Accounts  

  - The bank name, branches and account numbers where the husband has saved family money, in the names of the various family members. This could also include the internet banking ID and password, debit card number, pass book and cheque books etc.

• Life insurance & General Insurance policy details: 

  As on December 31, 2015, Life Insurance Corporation (LIC) of India has र 4,426.72 Crores of unclaimed money now transferred to investors’ education fund. This is because either the policy holders have not continued the policies till full term or forgotten completely after taking it or maybe his family or wife having poor or no knowledge of such cover being purchased by the husband. In case of any medical emergency in the family the wife should know where the Mediclaim insurance policies, the cashless medical insurance card, etc are kept. She should either know the agent’s name and number or the emergency contact call centre number of the medical insurance provider to get the list of empanelled hospitals for the cashless facility.

Over and above this she should also know the details of motor insurance policy, personal accident policy and home insurance. For all these policies a proper record consisting of the policy number, sum insured, premium paid and to be paid, premium payment due date should be kept just to make sure that these policies do not lapse for non-payment on premium on time.

• Pension and other retirement emoluments: 

  With employees steadily changing from the idea of working in one or two organization for their whole career to a career where one switches jobs from one organization to another in every couple of years for better package or for a higher designation; the importance of Unique identification number (UIN) just being introduced by the government of India to bring swiftness and transparency in the pension and employees provident fund accounts has increased. This UIN system shall gradually decrease the amount lying unclaimed with the EPFO.

• Investment particulars: 

  Mutual fund folio numbers, Demat & Trading account numbers, under the name of all the family members should also be known to your better half. The internet trading identification details and passwords for these should be kept in proper safekeeping knowledge of the couple. The amount and the date of monthly / quarterly / annual investment made in each one of such investments should be know.

• Loan information: 

  Details of loan taken for purchase of house, land, motor vehicle and consumer durables should be in the knowledge of the wife; for as in case of any mishap the wife sees to it that the equated monthly instalments (EMIs) are paid out on time and there is no penalty / seizure of assets for such non payment. She should also be informed about any mortgage insurance her husband has taken which could be utilized to take off the burden from her head for such payments.

To make your wife financially more responsible

Financial planning is a team work. Take for example, a couple as a set of two batsmen standing on the crease playing for the same team. Both allow each other to keep the runs ticking on the score board. The one not facing the ball does not run unless indicated by the other batsman who is facing the ball. Therefore, if both the batsmen do not play in this co-ordination, the chances are that the team will loose the match. Similarly, the couple should behave like batsmen when playing ‘the financial planning’ game. Stated below are reasons why should a wife be financially more responsible.

• Discretionary spending: 

  If the wife is a working woman and either thinks that the money earned by her is just meant for her discretionary spending and the money should be kept in a single account or this is a combined asset and all such sums should be kept in a "joint" type of account then she is mistaken. The right and the more modern approach would be to use the middle path by keeping the money in "anyone or survivor" type of account; this way both would have access over each other accounts and would have their own amounts of discretionary spend. However if the wife is a compulsive shopper, the husband should open a "joint" instead of an "anyone or survivor" type of account to keep a check on your wife’s spending habits. Nevertheless the husband should remember that in case of emergency joint accounts do create a problem from withdrawal of funds.

• Debt management:  

  If the wife thinks that the loan taken by her husband is not her responsibility, then she should think twice. Just as the wife would receive all the assets of the husband after his demise; the wife would also be responsible to pay off the family debt (unless there is a mortgage insurance or a term plan to take care of such mishaps). A negative credit score of the husband could impact that of the wife.

• Investment appetite: 

  Usually the women of the house are risk averse while the men take risk. If the wife believes that taking no risk and investing in fixed return instruments shall pay off in the long run while the husband is a risk taker; then the couple should differentiate their long term goals from the short term goals. For the short term goals the wife should be given the discretion to invest in safer instruments while the husband could invest a portion of their saving in riskier assets for long term goal planning. If your wife thinks of the financial health of the family but does not like to get involved in planning the family’s budget, the long and short term financial goal planning, then one could make things interesting by including financial goal like purchase of jewellery, foreign vacation or buying a big car etc.

Conclusion

Women in India have touched the skies especially in the finance and banking sector with the likes of Naina Lal Kidwai - Group General Manager and Country Head of HSBC India, Chanda Kochhar - Managing Director & Chief Executive Officer (CEO) of ICICI Bank, Shikha Sharma - MD & CEO of Axis Bank and Arundhoti Bhattacharya - Chairperson of State Bank of India heading leading global bank, leading private sector bank and India’s largest nationalised bank respectively. However with this, we do not see the increase in the percentage of working women taking their own personal finance decisions. Usually working women depend on the male members of their family to take care of their finances and investments. It’s not that women are not capable of handling their own money or they do not understand finance; it’s because women, specially married women, think it’s just another burden on their shoulder over and above the one at office, home, or children etc.

What husbands need to do is to make things simpler and motivating for their wives. Usually near term goals seem rather achievable in contrast to the distant ones. Therefore long goals should be divided into many short term ones which can be decided mutually and reviewed regularly.

Only if both husband and wife work as a team then only a house is converted to a home and thus a financial plan into reality. Besides husband needs to prepare his wife to handle any crisis like situation. One would not like his wife to be dependent / deceived by somebody on any financial issues in his absence.