Ladies, we need to talk. It may be 2021, but many of us still believe money and investing is men’s business.
Only Canada has a wider gender financial literacy gap than Australia, according to the latest Standard & Poor’s Global Financial Literacy Survey.
The research measures people’s understanding of risk diversification, inflation, numeracy and compounding interest.
Women are now more engaged with their money than ever, but many still leave important decisions affecting their finances to someone else.
Relationships Australia NSW chief executive Elisabeth Shaw said she was amazed at how many women still leave money matters beyond the weekly grocery budget to their partner.
“You’d think in this day and age that wouldn’t happen, but it actually is surprising how many women, when they come to separate, have very little knowledge about bank accounts and what’s in them and what their investment strategy has been,” Ms Shaw said.
“It’s really important for people in a healthy relationship to both be informed and responsible about what their assets are.
“Then if the relationship goes awry, which we hope it wouldn’t, you just are a bit more on top of what your situation is.”
Top-ranking podcaster and financial adviser Victoria Devine, who has more than 170,000 members in her Facebook community ‘She’s on the Money’, has just launched an investment platform under the brand.
She said many women have felt locked out of investment conversations for a long time because most financial commentary comes from men.
“A lot of women bury their heads in the sand about finance because it feels like a man’s world when in reality it’s not,” Ms Devine said.
In fact, women are on average better investors than men, according to UNSW research analysing 17 years’ of trading in 27 major Finnish stocks.
They spend more time researching their options than men and are better at selling overpriced stocks and buying underpriced stocks, the study found.
Ms Devine said women tend to take less investment risks than men and are more interested in educating themselves rather than outperforming friends.
“We don’t have that level of competition that men seem to have around investing,” she said.
“We are a lot more collaborative because we do want to succeed, whereas men also see it as a little bit of a flex point.”
Ms Devine said being financially independent gives you the power to leave a situation that isn’t serving you – whether that be a relationship, job or something else – at a time of your choosing.
“That power is so important for women,” she said.
“Let’s be really blunt for a second – women are going to live longer than men. Statistically we know that’s true, so at some point women are going to have to manage their finances on their own, and we can’t just rely on somebody else to manage that for us.”
So where should you start if you want to get on top of your dollars?
Here are three money tips for women to get you started.
1. Understand your budget
Ms Devine said women need to understand their incomings and outgoings so they get a clear understanding of how their money flows.
“It’s not about judging ourselves, it’s not about feeling bad; so many women shy away from this because they have a lot of guilt around their spending,” she said.
“Set up a framework that enables you to make sure that every dollar that is coming into your account is working as hard for you as you do for it – it’s going to make you so much more powerful.”
Understanding your values is an important part of having a budget, she said.
“Your spending is usually a reflection of what your values are and if it’s not, then you really need to tweak your budget because otherwise we’re not going to achieve our goals.”
2. Have access to an emergency fund
If you don’t have an emergency fund, start building one immediately, even if you’re in debt, Ms Devine said.
“Even if you’re in personal debt, an emergency fund is going to enable you to have a level of financial freedom that you didn’t have the day before,” she said.
“If something comes up unexpectedly you don’t have to go into any further debt to pay it off.”
Financial advisers often recommend setting aside between three and six months’ worth of living expenses in case you lose your job.
3. Understand your superannuation
Look at your myGov account online to easily access your superannuation information.
You can find out how much you have in your account and work out whether you are paying fees to multiple funds.
“We need to take control of that because the more super we have, the easier and more comfortable our retirement will be,” Ms Devine said.
Working out how much you are paying in fees (and earning in annual returns) is also crucial and can be done with a bit of Googling.
Paying an extra one percentage point in fees may not sound like much, but over the years it can cost you tens, if not hundreds, of thousands of dollars.
Playing around with Moneysmart’s compound interest calculator will give you a better understanding of how much a percentage point here or there could reduce your balance at retirement.