Single, Working and Have Surplus Savings

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28 FEBRUARY, 2023

I am salaried, 30 years old, and unmarried. I want to save for travel, parents’ health and to buy a property. What should I do with my surplus savings and where should I start?

This is an increasingly common question that we get from our customers. As women are getting financially independent, they are getting married later in life, putting their careers first and marriage following that; travelling more and sometimes choosing not to get married at all. They also take up the role of caring for their parents in their old age.

With financial independence, comes financial responsibility. The top four priorities for working single women are buying a home, parents’ health, travel and retirement. Mutual funds can help the women of today meet this goal. Let’s see how this can be made possible.

Buying a house: You want to buy a house in five years’ time. A bank will require a minimum of 20% of the cost of the house to be paid as down payment. Let’s assume that a house will cost you Rs. 1 crore. This means you will need an initial down payment of Rs. 20 lakh. You can start investing in a large-cap mutual fund which are relatively less risky. These funds historically have given a stable rate of return, averaging 10%–11% a year. To reach a corpus of Rs. 20 lakhs plus in five years, you will need to invest ~Rs. 25,000/- per month, assuming a rate of growth of 10%.

Parents’ health: As parents get older, it gets more difficult to get medical insurance for them. You need to have surplus cash in hand to take care of any unforeseen circumstances which may also not be covered by insurance. A good option is to invest in balanced funds that give a return of ~9% p.a. on an average. An investment of Rs. 5,000/- every month for five years would give you a corpus of Rs. 3.8 lakhs. If you are looking at a corpus of Rs. 20 lakhs, you will need to invest Rs. 26,000/- per month.

Travel: If you want to treat yourself to a two-week Europe trip in two years’ time, you are looking at a minimum budget of Rs. 1.5 lakhs. Take a look at debt funds that give returns of 6.5% a year. If you invest Rs. 5,900/- monthly, you’ll just about make your Eurotrip dream come true. Debt funds are perfect instruments for a horizon of 1–3 years. They give better returns than fixed tenure instruments and provide liquidity as well.

Retirement: Retirement funds are not to be touched until, well, retirement. Since you are only 30, and will presumably work until the age of 60, you can be a little aggressive for the first 15-18 years of funding your retirement. You can start by investing in multi-cap and mid-cap funds that have historically given a superior rate of return. An investment of Rs. 15,800/- every month can build a corpus of almost Rs. 1.7 crores in 18 years, assuming a rate of return of 15%*. You can then switch the money to a large-cap mutual fund for 12 years. You have to keep one thing in mind: Plan to switch your money from mutual funds to fixed tenure instruments three years before you have to meet your long-term goals. It will ensure that your money doesn’t face any untoward market fluctuations.

* SIP in Kotak recommended multi-cap and mid-cap funds over the last 10 years, have generated a return of ~14.95% as on 28th Feb 2023.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Single, working and have surplus savings. What do I do?

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