6-3-1: Building an Emergency Fund, Maximizing Tax Benefits, and Securing Your Family’s Future
6 steps, 3 secrets and 1 insight to achieve financial wellness
Hi Fam!
Welcome to this brand-new avatar of our weekly newsletter.
It’s called the Wealth Wellness Weekly!
The intent behind this revamped newsletter is to provide you with practical financial insights tailored specifically for young families in India.
Going forward, each edition of this newsletter will follow a crisp format, packed with actionable advice to boost your family's financial health.
6 Steps: Creating an Emergency Fund for Your Growing Family
Assess your monthly expenses: Calculate your family's essential monthly costs, including rent, utilities, groceries, and childcare.
Set a target: Aim for 3-6 months of expenses as your emergency fund goal. For a family spending ₹50,000 monthly, target ₹1.5-3 lakhs.
Open a separate high-yield savings account: Look for accounts offering competitive interest rates, ensuring your fund grows while remaining accessible.
Start small, but consistently: Begin with 5-10% of your monthly income. Even ₹2,000-5,000 per month adds up quickly.
Automate your savings: Set up automatic transfers from your salary account to your emergency fund on payday.
Review and adjust regularly: As your family grows or expenses change, revisit your emergency fund target every 6 months and adjust accordingly.
3 Secrets: Maximizing Tax Benefits for Young Indian Families
Leverage Section 80C for child's education: Invest in Sukanya Samriddhi Yojana for daughters or tax-saving mutual funds for sons' education, claiming up to ₹1.5 lakhs deduction.
Optimize health insurance premiums: Combine family floater plans with critical illness covers, potentially saving on premiums while maximizing Section 80D benefits (up to ₹75,000 including parents).
Explore the NPS advantage: Contribute to the National Pension System for an additional ₹50,000 deduction under Section 80CCD(1B), boosting retirement savings while reducing tax liability.
1 Insight: The Hidden Cost of Delaying Investment for Your Child's Future
Many young parents in India postpone investing for their children's future, focusing solely on immediate expenses. However, this delay can significantly impact your child's financial prospects.
Consider this: Investing just ₹5,000 monthly from your child's birth until age 18 in a diversified equity mutual fund (assuming 12% annual returns) could grow to approximately ₹34 lakhs. Delay this by just 5 years, and the corpus reduces to about ₹16 lakhs – less than half!
The lesson? Time is your greatest ally in building wealth for your family. Start early, even with small amounts, to harness the power of compounding and secure a brighter future for your children.