Melanie is an engineer in her late 50s. Having earned well her whole life, she should be looking forward to a comfortable retirement. But, she’s not. In fact, she will struggle to maintain a reasonable lifestyle when she stops working, let alone take the trip of her dreams, as she has always hoped.
Sadly, Melanie is not the exception. Many women are significantly worse off than their male counterparts. Why?
Why is it that women find themselves in this position? What are the mistakes we make?
Women still earn less than men, even for doing the same jobs. The Workplace Research Programme at the University of Johannesburg suggests that South African women earn, on average, between 15% - 17% less than men.
Many women are significantly worse off than their male counterparts. Why?
Women might shy away from high-paying careers, or find themselves excluded from lucrative fields. Additionally, many women take career breaks or even give up their careers entirely to have and raise children, seriously affecting their salary bargaining-power and long-term earning potential.
The result is that women simply do not earn enough.
Avoid this mistake. Although you should never choose a career solely based how much you’ll earn, in any career, you should claim what you are worth.
Traditionally, South Africans have a poor track record of saving. Very few people save enough for their long-term needs. However, because women live longer, we need to save more than men do. An Alexander Forbes study showed that women need to save about 17% of their total gross earnings to retire well.
Since women often choose lower paying careers or make salary sacrifices in order to look after children and families, many think that their earnings are not substantial enough to save. Even well-earning women often think that their savings will be insignificant, particularly in families where male partners earn considerably more than they do.
There is also evidence that women spend a larger proportion of their earnings on their families. The Old Mutual Savings Monitor (2012) found that 72% of women financially support their families. Around 42% of households are headed by single women, while only 12% of them receive financial support from their children’s fathers. It is no wonder that women save less.
Avoid this mistake. Every woman should have her own savings. By adopting a monthly savings habit, you will gain financial knowledge and experience, and also be able to build up a surprisingly large nest egg. Even a saving of R500 per month over 30 years will be worth almost R1 million at retirement.
For many 20-year-olds, the last thing on their minds is saving for retirement. Then, just as most women start to gain traction with their careers, in their late 20s and their 30s, many choose to leave the workforce (temporarily or permanently) to focus on their family. The result is that very few women build a nest egg that can grow for long enough to see them through retirement. In investments, the length of time that you stay invested is the most important factor, so this has a big impact.
Avoid this mistake. Start saving early and continue to save throughout your life. Even if you’ve left it rather late, start now. The longer you save, the more of a retirement nest egg you can build up.
Short-term saving is a part of community life amongst some South African women. Think of the stokvels and burial societies, especially in rural communities. Sadly though, very little of these savings are for long-term needs.
Women need to invest more. Accumulating funds in a bank account is not enough. Women need to invest for the longer term.
Avoid this mistake. Consider buying shares, property, or any financial vehicle with these asset classes as the underlying investment. Investments require some knowledge, understanding, and engagement with an advisor or via self-study. You do not need to be an expert to be a successful investor, but you do need to have a basic understanding.
In my career as a financial advisor, I find that women tend to shy away from risk. There is a debate as to whether this risk-averse behaviour is linked to the way women’s brains work, is a learnt behaviour, or is the result of fewer available resources and lower financial literacy.
Whatever the reason, women miss out if they shy away from riskier investments such as shares or property, because higher risk generally leads to higher returns.
Avoid this mistake. Do not lose out on good returns because of fear. Learning more about risk and taking a long-term approach will help you to become a successful investor.
Avoid these five mistakes and you will become a financially independent and secure woman.
The views and opinions expressed in this article are those of the authors and do not necessarily represent or reflect the views of 1Life or its employees.