How women can manage their finances better

By Ravi Samalad |  10-03-22 | 

According to Fidelity Investments’ 2021 Women and Investing study, women investors achieve positive returns and surpass men by 40 basis points, or 0.4%, which shows that women are great long-term investors. Yet, many women feel less confident in their ability to make investment decisions. This would mean women could be taking a more conservative approach to investing by keeping a substantial portion of their savings in cash. We asked a few women advisers about what challenges women face when it comes to managing their finances and how they can overcome them. 

Create a buffer for a career break. - Prableen Bajpai, Founder, FinFix Research. 

There are many career breaks in women’s professional path as they take a step back from work life to look after their children and the elderly. Having more career breaks means more interruptions in the regular earnings stream. The average woman spends 15% of her working years outside of the workforce. And when they get back to work, they often have to settle for lesser packages. Not just women returning to work but even those with continuity in careers are paid lesser at times for the same job profile. Women in India earn approximately 19% lesser than men as per Monster Salary Index. The gap touches 20% for skilled and 30% for highly skilled occupations.

These data points suggest that women need to plan their finances better, which is often not the case. While women manage household budgets seamlessly, they are not proactive when it comes to making decisions related to more structured money management and investing.

Financial planning is imperative for women. They need to lay out their goals, check insurance requirements, and then invest accordingly. In addition, working women should set aside a separate buffer for any periods of career breaks which should cater to regular expenses as well as their investments. 

Awareness about investing is increasing. - Nisreen Mamaji, Founder, MoneyWorks Financial Services.  

Working women tend to use the money for household expenses and thus may have less savings and personal wealth. Even if they understand finances, they tend to stay away from it because they want to avoid making mistakes.

We advise women clients to make small mistakes and learn from them. Historically, men in the family have been taking major financial decisions. Sometimes, women don’t know that there is a financial planner or consultant. That said, in the last five years, the awareness about investing has increased.

There is a huge change in the working women category. They have a savings pool and are applying their knowledge to save for retirement. The problem arises if the partner is incapacitated, not working, passed away or there is a divorce. In such a case, women have to manage their finances, handle family and kids independently.

Thus, women need to be aware of the passwords, bank lockers, financial statements, financial advisers, income tax consultants, bankers, and so on. Unfortunately, non-working women may not be included in financial decisions. Thus, we insist our male clients that their spouses or women in the family need to be present while making and implementing financial planning goals. 

Start investing early. - Shifali Satsangee, Founder, Funds Ve’daa

Financial independence is about being aware of one’s finances and making prudent, wise and right investment decisions confidently. The ability of a person to affect their own financial outcomes along with being mindful, about what truly makes them happy, is financial consciousness which stems from the following building blocks: Financial willingness, financial capability and financial security. Women tend to take a backseat when it comes to the above three. Women usually tend to outlive men, and that makes it imperative for them to be financially wise.

A major challenge that women face is during the child-rearing years. During these years, it is more of a challenge to save money. The apt strategy to overcome this is to start saving/investing early as one can, before planning to have children. The 50/30/20 strategy (50% for needs, 30% for wants and 20% for savings or paying off debt) could help in becoming cognizant of their finances and disciplined.

Another challenge women often face is putting their needs last, while taking care of others. Automating their finances by creating a fund for themselves, to get future-ready for their retirement years and building an ongoing retirement savings strategy would keep women financially secure in their twilight years.

A glaring challenge is that women get lower pay packets. Women need to find the confidence to ask to be paid what they're worth. Soul-searching and asking the right questions to oneself- what are my goals and priorities, how should I plan to achieve them, would help in strategizing the way forward. 

Conservatism leads to non-inclusion of women in taking any financial decisions. For instance, women in joint families usually do not have a say in decision making. They should get financially literate, by using tools, guides and participating in making decisions confidently.

Coming to married professional women, it is important not to overlook one crucial aspect that is financial compatibility. Marriage is all about partnership and also extends to money management, combining finances and sharing financial responsibilities.

So, get to the basics: Throw your inhibitions and reveal your financial assets, debts, financial expectations to your partner, start with open communication and transparency by setting combined goals, prioritize them and reviewing them together.

Women should demand their fair share. - Shiney Sebastian, Founder, Affluenz Financial Services

Worldwide, women tend to earn less than men in the workplace and they are underrepresented at the senior levels. Women own less land and productive assets than men. According to Credit Suisse Global Wealth Report, women own between 20 % and 30 % of the $6 trillion household wealth in India vis-a-vis the global share of 40%. This also results in a gender gap in economic participation.

The pandemic has only destabilized women. It has reversed a decade of women’s entry into the workforce. This was because children being schooled at home and the excess stress of running a home and being not only the caregiver but also the teacher and replacing the household help has resulted in an exodus across layers of the workforce. This has resulted in a drop of female labour participation of 27% in 2010 to 22% in 2020.  During the lockdown, 47% of women had to endure permanent job loss.

Wealth building has been for generations been a boy’s club. Women are still finding their feet and need the patience to handle it without being judged.

Both who earn a living or don’t have a right to have their voice heard in important financial decisions including how to spend their own earnings.

To overcome these challenges, we need financial literacy that money is like food. Knowing its value and its potential to achieve life-changing goals will create more awareness and the need for it. Thus, women should demand a fair share of the pie at the negotiating table whether at home, work or the marketplace.

Women today have plethora of information to learn about investing. - Tejal Gandhi, Founder, Money Matters.

Working women too tend to depend on spouse/parent for financial decisions for their self-earned money due to lack of awareness. Some women are not comfortable dealing with numbers.

The working woman today has plethora of information available at a click of a button to become aware to take financial decisions independently.

As an adviser when we handhold the lady at each step and she sees returns/results in her goals getting fulfilled, there is a genuine interest that gets her to understand finances better and be interested to make informed decisions.

When it comes to non-working women, they are seldom involved in any financial decision-making. They are not aware and resign themselves to fate and lose interest. Many a time, they are just made to sign to save taxes without understanding the implications and understand the nuances of the investments being made in their name.

As an adviser, our role becomes more responsible to ensure that the homemaker is aware of her rights financially and is made more literate through regular communication through various sources so she is aware of the implications and slowly but surely, she can handle the basic finances.

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