Women and finances

2012-08-11 12:19

Things that hold women back, writes Samantha Matthew

It has been statistically proven that women spend no more money than men.

In fact, the difference doesn’t lie in the amount that is spent, rather, just in what it is spent on.

One area where women are falling behind is when it comes to saving for retirement.

Despite the fact that women tend to live longer, are likely to take more breaks from the workplace to raise families and, in general, still tend to earn less – the study shows that, overall, women tend not to plan enough for the future.

A recent study conducted in the US supports this claim.

Even though women have been managing household financial matters for years, it seems that the general trend is that, on average, they tend to be less involved when making investment decisions than men.

1. Lack of confidence

Research shows one of the primary reasons women may fall behind when it comes to financial planning is simply that they lack the confidence when it comes to making financial choices.

One of the core factors identified as contributing to this lack of confidence is that women, historically, are less likely to be socialised in financial matters than men.

Where men may start dabbling in investments and thinking about their savings from a young age, it often takes a big event or goal to encourage women to invest and save.

It seems that cultural messages and antiquated belief systems have managed to create these “psychological” barriers – where many women are still taught that they do not have to take care of themselves financially.

So while we still aim for the good jobs, somewhere on a less conscious level this type of old-fashioned thinking prevents us from fully managing our salaries and planning our financial futures adequately.

2. Lower risk takers
Studies show that on average women are much more cautious investors (more risk averse) relative to men.

The Investment Barometer (a survey conducted biannually in the US and UK) shows that, on average, women are more likely to invest their savings in secure but conservative money market accounts.

This means that once you take into account inflation, over the long term their portfolios will not yield much real return.

It must be noted, though, that the level of risk tolerance does differ somewhat between women who have careers and who create their own wealth, compared to those who are the beneficiaries of wealth (like employees).

The “wealth creators” are often more willing to take on higher risk as they have been more exposed to handling their money from an early age and have a more entrepreneurial spirit.

3. Better decision-makers

According to research, most women spend about 40% more time researching unit trusts before making a decision than men.

So despite the fact that women may lack the confidence to be the main decision-maker when it comes to their investments – they are still often better prepared when the decision is eventually made.

It has also been proven that while women tend to lack the necessary conviction when it comes to taking the plunge, men are often far too confident when it comes to their investment capabilities.

This sometimes leads to male investors trading their portfolios more frequently and could result in counterproductive trades that diminish returns for them.

It has also been proven that women are more likely to admit when they do not understand something regarding their financial matters and seek advice.

Women are regarded as looking at an investment decision more holistically and being more concerned with seeking stability rather than increasing wealth just for the sake of it.

If one looks at it from this perspective, then the fact the average female investor tends to be more cautious and thus more concerned with capital protection makes perfect sense.

For many women the hurdle is simply a lack of faith in their own investment decision-making abilities.

The only way to slowly eradicate this mindset is through proper financial planning and to create a culture of actively thinking about personal finances from an early age.

» Matthew is an investment analyst at Glacier by Sanlam

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