Wendy Foley, Financial Planner at GIB Financial Services
In a world where gender equality increasingly takes centre stage in debates and discussions around the world and across industries, it is disheartening to see there is still gender disparity when it comes to financial security.
It is of great concern that women lag men when it comes to investing. Research shows that women are less likely to invest (or invest as much as they need to) as a direct result of the gender wage gap and in some instances the Cinderella complex which is explained as the unconscious desire to be taken care of by our partner.
The topic of investing can be intimidating. Complex financial terms, market volatility and varying opinions from friends and family can make anyone shy away from investing, however, investing is central when it comes to building wealth.
The gender lag leads to an investment gap which over a longer period (10 years and more) means that men could have more investment funds available to them to lead their preferred lifestyle compared to women.
Understanding the unique challenges that women face when it comes to financial wellbeing and learning how investing works are key to being able to make smart investment decisions and to become confident investors, however, this is impacted by several factors:
- South Africa has various pieces of legislation aimed at preventing gender discrimination in the workplace. Yet, the country has a stagnant median gender pay gap of between 23% and 35%. According to the International Labour Organisation (ILO), the average global gap is about 20%. Thanks to the wage gap, women have less money, which is especially disconcerting when you consider they live longer than men and generally have higher healthcare costs and need to save more to invest more as a percentage of salary to achieve parity with male counterparts.
- In South Africa, around 38% of households are headed by women. Female-headed households are approximately 40% poorer than those headed by men. (Statistics courtesy of ILO).
Investing money is an enabler, whether it be for holidays, studies or living your dream life now and during retirement. Yet this can’t be one-sided and it’s critical for women to build their own wealth. That means investing early and regularly—and not just for retirement. When women don’t understand investment risk, they do less with their money. They keep it in savings accounts which has risks of its own, as it earns low interest returns which depreciates and is unable to preserve purchasing power over time due to inflation. That means you’re essentially losing money when you aren’t actively growing your savings.
Inflation, which can be described as the general increase in the cost of goods over time, eroding the buying power of your money. Consider this; in 1983 a Wimpy burger cost R2.70 yet the same item today costs R60.00. Yet money invested into the stock market can beat inflation and substantially grow capital over time.
Financial equality leads to financial independence. The best way to protect yourself against financial struggles in retirement is to save aggressively and invest effectively while you’re still working to have a nest egg that can support you. Investors, men and women alike, should have approximately six months’ worth of earnings in cash or a money market fund to serve as a cushion for emergencies, such as car repairs, home repairs or medical costs for example. What’s more, it’s important for women to be able to walk away from situations that are not working for them – whether that’s a bad job or a bad relationship but to do this, they need financial power to make decisions that enable and empower them to do so.
There are several sound investment options available. Invest into a retirement fund, such as a retirement annuity, pension or provident fund. To enable you to get a tax deduction on an investment into a retirement fund, you can invest up to 27.5% of your annual taxable earnings into the fund. Invest money into a long-term investment (10 years plus) to achieve maximum capital growth – this should be invested into South African and global equities (shares).
Investing money is not something to be taken lightly or without expert knowledge. Most women don’t think they know enough about investing to properly grow their savings so they either wait to start investing until they feel they’re more financially stable or they do the easy thing and keep it in a bank savings account. Yet the reality is that there are so many tools and resources that make it easy to start investing with as little as your pocket change. We recommend that potential investors consult with an accredited Certified Financial Planner to assist them on their investment journey.