Ask an Adviser – Closing the gap from women & finance

March 8th 2021 | Categories: Ask An Adviser | | Tags: women's finance |

Over the past several decades, women have made strides in education, the workforce and family roles. With more and more women pursuing higher education, the doors to greater work opportunities are being opened. Women are also playing a larger role in family decision-making, with many women opting to work full-time, part-time or remain at home with their children. However, when it comes to finances there may be room for improvement with a gender gap still lingering. While many have heard of the gender pay gap, the gender financial literacy gap and the gender retirement gap are two current trends in which the financial services industry can make a real difference. Financial Advisers have the ability, if not the responsibly, to have meaningful conversations with their clients (both male and female) and put strategies in place to bring about peace of mind and a sense of direction. Fast Facts:

• Australia’s national gender pay gap is 13.4%, meaning on average women working full-time earn $242.20 less than men per week (1)
• One in two (48%) of Australian women are financially literate, meaning 52% of the female population is lacking understanding of financial literacy (2)
• In Australia, the median superannuation balances for women at retirement (aged 60-64) are 21.6% lower than those for men (3)

To discuss this issue, we are joined by Financial Advisers Serenette Crombie, Carol Herrmann, Gretel Chiswell, Taylor Peiris and Mina Cao. Our Advisers’ are sincerely passionate about helping people achieve their best possible life. Moreover, they want women to feel financially empowered by building their financial literacy, having open and honest conversations about money, and becoming more involved in household finances.  

If you would like to discuss your options and how you might manage them from a financial perspective, please get in touch.

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  Here is the summary of our Q&A with our [female] Advisers:  

1. What does it mean to be financially independent?

The definition of independent is ‘someone or something that is free from the influence or control of another. (4) By extension, we define financial independence as feeling in control of your money and future. It’s understanding what you want out of life, making a plan to reach that point and then carrying out your plan.

“Being financially independent allows us to make decisions without influence and control from others,” Mina explains.

Financial independence will look different for everyone. Moreover, it will look different for you at all the various stages of your life. For example, right now it might mean choosing to pay down your debts. In a few years, it might mean buying a house. Ten years from now, it might mean being able to travel when you retire. Take some time to envision what financial independence might look like for you, and remember, you are in control. In addition to having control over what you choose to do with your money, and what your future may look like, it’s important to become financially secure. Financial security encompasses the ability to have income stable enough to cover your expenses, emergencies, and goals. Financially secure individuals must be able to support a standard of living, now and in the future, and money should not be the cause of regular undue stress. You can read more about what it means to be financially secure here

2. Why is financial independence important?

While being financially independent is an important milestone for everyone. Financial independence is something that hasn’t always been achievable for women. Before the mid-nineteenth century, women in Australia couldn’t open a bank account without their husband’s consent. Moreover, they couldn’t take out loans or have their own savings, which prevented many from joining the workforce. (5) While some significant milestones have led to many women gaining influence and control over their finances, distressing events such as abuse, divorce, or outliving your partner can often leave women feeling vulnerable and unprepared.

“Being raised by a single mother, I got to experience financial struggle first-hand. I haven’t always come from a family of money and have always been taught to value its importance,” Taylor shares.

While it’s impossible to predict what will happen in life or avoid these upsetting circumstances, you can prepare for unexpected events by building your financial literacy and enhancing your financial independence and financial security. It’s important to know with certainty that you will be looked after financially should the unthinkable occur. Moreover, feeling in control of your money and future could benefit your wellbeing. No matter what financial independence looks like to you, the rewards of achieving it are more than just monetary. The psychological benefits of financial independence and security include relief from financial anxiety, freedom to dream beyond the day-to-day, increased fulfilment, a sense of resilience and higher self-esteem. (6)

“[Financial independence] is important as it builds self-esteem and shows you what is possible … making small changes to your financial life today could have a huge impact on your future,” Carol says.

3. How can women achieve financial independence?

Build financial literacyKnowledge is power. Information is liberating. Education is the premise of progress, in every society, in every family. – Kofi Annan As they say, knowledge is power. Whether you are single, in a relationship or have your own family, it’s important to educate yourself on the basics of personal finance. After all, how can you expect to ride a bike without first learning how to move the pedals. The same is true for finance, every step you take on your journey to financial independence will require you to make decisions, some of which will be difficult or confusing. That’s why getting educated on the basics of personal finance might be one of the smartest things you can do.

“Building financial literacy is a great first step whether that is reading books or listening to podcasts. There is so many out there now,” Serenette says.

A great place to start is the Invest Blue Knowledge Centre, where you can access useful tools and resources to help you get a better understanding of how financial planning can help you achieve your best possible life.   Have open and honest conversations We all know communication is key. The act of communicating will not only help to meet your needs of financial independence, but it may also help you to connect with your partner and share out some of the financial responsibility.

“Having those frank conversations about how we each view money will help build better foundations and hopefully avoid secrets about money and spending (or even debt!),” Serenette explains.

To get started, share your financial journey and financial experiences, discuss how you view money and why you view it that way. It could be that your partner is unaware of your desire to feel financially empowered through managing the household budget or that you haven’t shared with them your concerns around being able to cope financially should something happen to them. Talking about money with your partner doesn’t always come easily, especially when you’re discussing the serious stuff. But it’s important for you and your partner to both be across your finances should something happen to either one of you. You can do this by understanding your family’s net worth (including assets and debts), and make sure you have full access to your family’s accounts and investments. It’s also a good idea to discuss life insurance policies and wills with your partner. If you do find yourself separating from your partner The Separation Guide can help take the stress away from this situation. They support and advocate for couples to find a way through separation without forcing each other into the courts, potentially saving them both from additional scrutiny and cost. Our article your financial life after separation provides some tips on what to consider when separating.   You may be interested in these related articles:

• My partner is a spender – managing joint finances
• What’s your money type
• A guide to personal insurance

Get involved While building financial literacy and having open and honest conversations about money are extremely important. Perhaps even more important, is getting involved in the household finances. It’s one thing to study a topic, and even to discuss it, but putting it into practice is another matter entirely.

“Take interest and ensure you are involved in the finances so that you have an understanding and power of the household budget. Don’t leave it to one person, keep all parties involved and accountable,” Gretel says.

A good place to start is taking control of the household budget. While you shouldn’t be expected to take on all financial responsibilities within your household long-term, it’s important that you learn how to navigate these bills and expenses. Start by creating a budget. By understanding what you spend now, you can provide yourself with some clarity. You are then able to make informed decisions about what needs to happen next. In a nutshell, your budget should consist of what you earn, what you need to spend and what you want to spend. It’s also a good idea to include savings and debt repayments in your budget. If you’re new to budgeting, the 50-30-20 rule can be a good place to start. The rule says that 50% of your net income must be spent on needs and obligations such as rent and utilities. The remaining half should then be split between 20% savings and debt repayments and 30% to your wants or discretionary items. There are also a large variety of free budget planners available online, including spreadsheets, apps, and online calculators. You can understand where you are spending your money and create your own customer budget using our Lifestyle Expense Calculator. You can read more about budgeting here.See a Financial Adviser Our final tip to becoming financially independent (and financially secure), although it may be the first step on your journey to feeling financially empowered, is seeking out the professional advice of a trusted Financial Adviser. It could be that you need help with understanding financial concepts, prioritising and quantifying your goals, or building a plan that will make you feel comfortable and confident with your future. Whatever the reason, engaging with a Financial Adviser is a good place to start.

“A good way of achieving financial independence and security if you have no experience is by engaging with a Financial Adviser who can help you to achieve your best possible life, by prioritising goals, quantifying them, and building a strategy of how to get there,” Carol explains.

The outcome of working with an Adviser should generate feelings of confidence, clarity, excitement, and relief. An Adviser should be able to help you understand your situation and what your future will look like. You can read more about what to look for when choosing a Financial Adviser here.   So how can we close the gender retirement gap and empower women to take control of their finances? The solution lies in being proactive about your finances – which can make a huge difference to your quality of life today and into the future. You can do this by building your financial literacy, having open and honest conversations about money, getting involved in household finances, and seeking out the professional advice of a trusted Financial Adviser. Personal finances can be tricky, and putting this knowledge into practice is even more challenging – so don’t forget to give yourself props along the way!   Invest Blue happily offers complimentary initial consultations, so why not have a chat with one of our Financial Advisers to see if they’re the right fit for you.

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What you need to knowThis information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.1. https://www.wgea.gov.au/publications/australias-gender-pay-gap-statistics#calculating2. https://www.financialcapability.gov.au/files/financial-literacy-in-australia-insights-from-hilda-data.pdf3. https://www.wgea.gov.au/publications/gender-workplace-statistics-at-a-glance-2020#women-in-leadership4. https://www.yourdictionary.com/independent5. https://www.greater.com.au/about/blog/2019/03/a-history-of-women-and-money6. https://hermoney.com/connect/confessionals/5-psychological-benefits-of-financial-freedom/