A family’s financial security should not depend entirely on one person’s income. Yet, for a large number of households, that is still the reality.
A 2016 survey found that in 60 percent of income-earning households in India, only one family member was earning. Nearly a decade later, there is little reason to believe that the situation has changed dramatically.
In a typical family with two adults and two children, if only one adult earns, the entire financial responsibility rests on that person. But the consequences of this arrangement are often felt most by the non-earning adult — the homemaker.
A homemaker may have little exposure to financial planning, savings and investments. With no independent income, they may also have limited freedom to spend or invest money. Over time, this can lead to a disconnect from the family’s financial affairs.
The term ‘homemaker’ is gender-neutral. It can refer to either a woman or a man. The traditional idea of the man earning while the woman manages the home no longer reflects many modern families.
The earning member therefore has an important role to play in ensuring that the homemaker is financially involved and empowered.
If you are the sole earning member of the family, follow these two steps:
Transfer the amount required for the family’s monthly expenses to the homemaker’s bank account.
In addition to this amount, transfer another 10 percent of the monthly household expenses to the same account.
The earning member may have a better understanding of the family’s overall finances and may usually be the person making major purchases. But transferring the household budget to the homemaker’s account gives them direct responsibility for managing the family’s expenses.
They will have to pay bills, buy household essentials and manage day-to-day spending. This brings them into the family’s financial decision-making process.
It can also make them more financially aware and responsible. They may become better at distinguishing between wants and needs, controlling unnecessary spending and keeping expenses within the household budget.
Most importantly, they will know exactly how much money is available and can plan their purchases accordingly.
This is an equally important step. Suppose the family’s monthly expenses are ₹50,000. The earning member should transfer ₹5,000 — 10 percent of the monthly expenses — separately to the homemaker.
This money should be available for the homemaker to use at their discretion.
Once the earning member has transferred the household expenses and the additional 10 percent, the homemaker should take two steps:
Invest the additional 10 percent immediately.
Ensure that the earning spouse has adequate insurance cover.
The additional amount should not be allowed to disappear into routine expenses. It can become a pathway to financial independence.
For example, if the earning member transfers ₹5,000 every month and the amount is invested for 30 years, earning an average return of 12 percent a year, the investment could grow to around ₹1.76 crore.
The actual return will vary depending on the investment and market conditions, but the example demonstrates the power of disciplined, long-term investing.
At first glance, ensuring insurance for the earning spouse may not seem like the homemaker’s responsibility. But consider the family’s financial structure.
When a family depends on a single income, it effectively runs on a single financial engine. If that engine stops, the entire family can be left struggling.
If the earning spouse does not have adequate term insurance, the homemaker should ensure that an appropriate policy is taken.
There is a compelling reason for this.
I recently spoke to a woman whose husband had died prematurely. The loss was irreplaceable, but her husband had taken adequate term insurance and had paid the premiums regularly.
After his death, she received a substantial amount from the policy. As someone without a job or independent income, that financial support gave her much-needed breathing space. She was looking for employment, and the insurance payout gave her the financial cushion she needed until she could find a job.
That is why adequate term insurance for the earning spouse is essential, particularly when the family depends on a single income.
The four steps discussed here are simple:
For the earning member
Transfer the monthly household expenses to the homemaker’s account.
Transfer an additional 10 percent of monthly expenses.
For the homemaker
Invest the additional 10 percent.
Ensure adequate term insurance for the earning spouse.
These measures can help bring every family member into the household’s financial system.
Financial matters should not remain the responsibility or knowledge of just one person. When all family members understand the household’s finances, savings and investments can become a collective priority.
That is the foundation of true financial inclusion within a family.
(The author is an investment adviser and research analyst. Website: www.balamoney.com)