How to fund retirement of your domestic help

–Even small amounts of money saved on a monthly basis and invested wisely over a period of time can create a large enough corpus over a period of time even if one earns a low amount.

Let us understand it through an example of a domestic worker who earns Rs 5000 a month for doing all your household work. But instead of taking money on monthly basis, they keep that money with you and asks you to keep it safe, which generally, domestic helpers do this in order to fulfil their certain financial goals by accumulating that amount. However, do you think, is it the right way to create wealth for them Just keeping the money idle is not the best way. The money should be invested for it to grow enough to beat inflation over a period of time.

Here are some steps you may follow to help your domestic help to grow their money and help them create a corpus for retirement:

Understand their financial condition: First, you should know the age of your domestic help. Say, it is 30 years and he or she wants to retire after next 30 years. Currently, s/he could earn around Rs 25000 a month (S/he is a part-time worker earning Rs 5000 on an average from 5 places). However, this earnings may not be stable for him/her. This may sound a normal thing and a common story of most of the families having a maid at their home. However, what makes a difference is – the approach – the way you can help those giving guidance to make money instead of giving just a small monthly take home.

Know their financial goals: Once you get to know the age and financial condition simultaneously, asses their risk profile and while talking to them understand the kind of goals they want to fulfil. For example, child's education goal and her own retirement goal, which ideally should be kept on the priority basis for anyone while planning their financial goal.

Formalise the strategy: A general rule says that one should ideally save and invest around 15-20% of their monthly salary, which in this particular case comes to around Rs 5000 a month. After giving them guidance and investment awareness, thereafter, you should take a decision and tell them to invest their money in instead of keeping it with the owner itself.

How to implement:

=> Open a bank account: This is the first step towards investing. Remember, for making an investment, one should have a bank account.

=> Credit the salary in the bank account: It's very easy to transfer payments from one bank to another using digital transaction platforms like UPI, Net-banking (IMPS, NEFT, RTGS), e-wallets, etc. Instead of giving money in cash, transfer the same in their bank account.

=> Provide proper guidance: Once you are done with the process, guide them about how money gets transferred, how they can view their money either through updating passbooks, viewing mini statement via debit card, or using net banking, etc.

=> Get her KYC done: Before making investments it is important to get one's KYC done, else one cannot make investments in mutual funds even if they are holding a bank account. KYC can be done with any of the KRA agency (CDSL, NDML, CAMS, Karvy, etc.).

=> Help in choosing investment instrument: Select an open-ended equity scheme as per the risk profiling you did earlier, then make her invest for a long-term. Take help of an adviser while making a selection. And, it hardly matter for one to be an active investor, even being a passive investor and investing money for a longer term through a disciplined approach, one can make money over a period of time and come out of the blues. Guide them about how systematic investment plan works on a monthly basis and finally, give them an idea of about their future earnings.

Help them review their investments

Unfortunately, the domestic helper may not serve you for long, but that does not mean that they should stop their investment once you part ways Suppose, if she served you for only 10 years and then in such case, their investments could have grown up to Rs 15 lakh by investing just Rs 5000 a month (assuming a return of 15%). Henceforth, even if you are not there, help them in reviewing their funds. Also, she can take help from an adviser and continue the investment unless and until they achieve their child's education goal and which could at least take another 20 years of them making investments. And, if they do so, by investing the same amount, they could roughly make around Rs 3 Crore (assuming the same average return of 15%). Hence, in such a way one could hopefully be able to fulfil their child's education goal and retirement goal successfully!