When I started working at 23, I spent most, ok well, all my money on rent, travel, and food. I didn’t have much money to spare, to give saving or investment a thought. With time, and a couple of new jobs later, I was finally earning enough to cover my living expenses and still be left with some spare money. I let it sit idle in the bank. I was paying a sizeable tax as a newbie and was kind of okay with it because I still was left with cash to spend! Yay!! Over time the tax value increased in proportion to my salary and it began to hurt me. It was then that I was forced to think of investing, with the sole purpose of saving tax.
As most girls my age I was clueless and depended on my father for choosing a saving plan for me. And as most middle-class conventional father’s my father chose the classic LIC as an investment option, primarily because it was safe. This is an experience that every, if not every, the six-seven out of ten for sure, working girls in the country has had. I am sure many are nodding your heads by now.
Mind you, this post is not about the best instruments to invest in, and I am no financial wizard by any means. I am just a woman who has learned the toughest financial lesson in life, the hardest way.
Women, in general, depend on their fathers, brothers, and husbands to steer their financial decisions. They allow full control of the gears, without making any attempt to learn, oversee, or be engaged in the process. It is not the trust that I am concerned with, but the naivety. In the case of earning women, her earnings are a part of the common pool which is handled by the man of the house, sometimes even without her consent. While in the case of home-makers, they are given just about enough money to cover home expenses. In both scenarios, their opinion is seldom taken into account when making significant investments, purchases or lending. It is the call of the man of the house, and this seems to be pretty acceptable to women.
What is financial literacy
Financial literacy and awareness are not about being selfish or not sharing your resources, rather it is about taking informed decisions and most importantly being part of the decision-making process. Financial literacy is “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.”
Okay, take moment to answer the questions below:
- Do you have details of all bank accounts you or your spouse own individually or jointly?
- Do you know for sure how much your spouse earns, including gross and net salary, bonuses, incentives, retirement plans, and ESOPs?
- Are you aware of EMIs or other payouts every month? Do you know the tenure of the loan?
- Have you discussed with your spouse how much you will need post-retirement to maintain your current lifestyle and do you know how you are going to cater for it?
- What does your monthly financial portfolio look like?
In simpler words, can you list your family’s assets and liabilities portfolio?
If the answers to most questions are in the negative, then you are in for a rude shock, sooner or later. You need to buck up, and buck up pretty fast!
Sadly, most women fail at this. So why are women not financially aware and empowered? Why aren’t women aware of their financial portfolios? Why are they economically independent for not involved? What’s stopping them?
Why are women shy to take charge of their finances?
- Women typically are not the primary breadwinners in the family. Their contribution is seen as a good to have additional income. They also see themselves as a supporting player in the equation. In the case of non-working women, it is worse. They view themselves only as an emotional and social partner, and not as a financial stakeholder in the relationship.
- Well, for most women, they view money matters and gender specific. They have a notion that dealing with money is “unfeminine”. They assume overall responsibility for the well-being of the children and spouse and general upkeep of the home but take a step back when it comes to financial decision making.
- Their early initiation into the financial decision-making process is faulty. The issue begins early on and assumes larger proportion after marriage. Early on in their lives, women depend on their brothers, fathers or financial advisors to manage their funds, and later on their husbands. Women fear to raise questions that can hurt the sentiments of their fund manager and disturb the status quo, and if they do, it is taken as a lack of trust and faith in the relationship.
Why is it important for women to be financially literate and responsible?
- Due to their genetic and biological setting women are more susceptible to lifestyle and hereditary health risks such as cervical and breast cancer Such illness can financially drain the family savings and even push the family into debt. It also has a high opportunity cost, in terms of loss of pay, or worse still loss of job, if the woman is working. It is wise to take unforeseen health contingencies into consideration and plan proactively to invest and build a fund that can come handy in case of illness.
- Pregnancy and motherhood may impact a woman’s financial stability if she chooses to or is forced to, take a sabbatical, prolong her leave, opt out of the career, or look for a low paying/part-time alternative to be able to balance career and family. This could leave them emotionally and financially strained for years.
- With changing times and gender equations women may choose to never marry or divorced or separated and in such a case will be responsible for their own financial stability.
- In a social set up most women are expected to care for and serve their husband’s family post marriage. However, in a time when many women are working, they are equally responsible for caring for their aged parents. To be able to do so without causing additional burden to the spouse, they must plan ahead in time and make the necessary financial investment.
- Women may need to continue their education to acquire additional new skills to sustain their positions in a competitive market. Such skills may entail a high cost. Planning ahead and creating a fund for the same is a good idea.
- In the event of death of the spouse many women are left devastated not knowing where to begin, what to look for, what to do to claim her rightful dues.
- Due to better healthcare and genetic strength women, in general, outlive their spouses. In such an event, the woman if naïve is left dependent on her children or relatives to take care of her. They may also be victims of fraud and cheating.
How can women be financially literate, engaged and aware
With shifting social and family structures, women must take ownership of their well-being and a huge part of this is guaranteed by being financially literate and stable. Many of the financial decisions women make could have a long-standing impact in later years.
- Start small: It is important to make a beginning albeit small. In the initial years, the pay may not be much but earmarking a small part of it as a saving or investment can add up to a sizeable amount in a decade. Consider a systematic investment plan.
- Early financial autonomy: As parents, it is important to teach our girls the importance of taking financial decisions. Allowing her to take small financial decisions while in high school and college goes a long way to instill confidence in her, and by the time she starts earning, she has a lot more clarity to manage her finances.
- Discuss finances: Don’t be shy to ask questions and discuss important financial matters with your spouse. Raise an objection when you are sidelined in important matters. Being a patient listener and keen observer. Make an attempt to learn and understand issues on which your understanding in limited.
- Maintain a list of assets and liabilities: At any given point of time, you must have an accurate idea of your family’s assets and liabilities. Be aware of loans and debt and ask questions when a shift happens without your knowledge.
- Nominee: Be clear about who the nominee is in bank accounts and insurance policies. Be insistent on updating your name as the nominee in bank papers, official documents, and insurance policies.
- Maturity: Keep a note of fixed deposits and insurance policies and their maturity dates and amounts. Plan important investments around such returns.
- Have an investment mix that matches your life stage: Women, in general, have a smaller appetite for risk and choose traditional low-yielding instruments of investment. In the process, they settle for low to moderate returns in the long run. However, women could have a shorter work life compared to men and must plan well for their retirement years, which are longer than men. Hence it is important to have an investment mix that matches your stage and lead to a corpus fund that is enough to cater for old age.
- Insurance: Take time to understand and take sufficient insurance coverage for yourself. A good life, term, and medical insurance can come handy in times of financial need for self as well as family.
- Plan for known milestones: Planning ahead for children’s education and marriage, retirement and medical expenses is a good way to be prepared for a future that is certain. You can invest in policies that will mature around the time to help you fulfill your specific goals. Investment-oriented policies offer benefits of protection, savings, good returns and tax benefits. Whether widowed, divorced, or a single mother, you will be responsible for child support. Life insurance offers a steady income to cover existing and future expenses of the child, in the case of the mother’s demise.
So, are you ready to take the financial reins into your hands?