The unique financial planning needs of women

Women face unique financial obstacles during their lifetime that require special consideration in the financial planning process. The gender pay gap, women’s role as child-bearers and carers, and the fact that women generally tend to live longer than men, are all factors that contribute to the complexities of financial planning for women. In an environment which is still heavily geared towards the male market, and despite the fact that research shows that women make better investors than men, female investors feel over-looked and patronised in this space. The female economy is now the largest in the world, with women being responsible for the vast majority of a household’s purchasing decisions whilst not necessarily earning the majority of the household’s income. This disparity between earner and spender is cause for tension in relationships. These unique circumstances have given rise to some sound financial planning principles that are designed specifically to support women in achieving their financial goals.

Although 20% of women will find themselves solely responsible for their finances at some point in their lives, many women still allow their husbands or partners to manage their finances and retirement planning, sometimes with disastrous consequences. Women need to plan for a longer retirement, and this is adversely affected by the gender pay gap and the fact that their careers (and therefore their savings) are often interrupted during their child-bearing years. The effects of the gender pay gap have far-reaching consequences and go beyond the inequality of reduced take-home pay. Earning a lower income can mean lower contributions to one’s pension fund, a proportionately smaller bonus, decreased incentives, a lower level of group life and disability cover, and a reduced income protection benefit. It also means that women accumulate less retirement assets with a higher risk of outliving their capital. Research shows that women typically have one-third less set aside for retirement than men.

Accordingly to the 2017 Wage Indicator, the gross median monthly wage for South African men is R18 824, and for women is R13 229, which is in line with the average 30% gender pay gap that exists in South Africa. Over and above the financial inequality that women endure, the emotional and psychological unfairness of the pay gap is difficult for many women to contend with. Effectively, employers are unfairly reaping the benefits from a historic system of undervaluing women’s skills and workplace contributions.

Sadly, many organisations still believe that men have a greater long-term value to the business as opposed to women who are believed to have greater care obligations outside the workplace. Men’s perceived allegiance is to their employer, whereas women tend to prioritise their families. This perception is perpetuated by the fact that, when one spouse is required to stop working to raise children or look after aged parents, it is generally the woman as she is the lower earner in the relationship. Even if a slow rate of change was to be maintained, it would still take 50 years for women’s pay to reach parity with that of men.

Although women have proved to be more successful at investing, their ability to save in accordance with their needs is compromised by the fact that their careers are interrupted during their child-bearing years. Women are often forced to access their savings to tide them over their maternity leave. Many women opt to take a short break from employment while raising their children, and are forced to withdraw their retirement benefits to fund their care leave.

According to thought-leader and marketing strategist, Tom Peters (2014), women make much better investors than mean, and they consistently achieve higher financial returns than men do. This is partly because women are more receptive to advice and are more likely to learn from their mistakes. In her book, “Warren Buffett invests like a girl, and why you should too”, LouAnn Lofton reinforces that women make much better investors because they have the right temperament and can control their emotions. Women are more likely to have a calm temperament, a longer-term outlook, do more research, trade less and remain steady under pressure. Her research shows that women view things more holistically and are open to seeking advice from a financial planner, whereas many men tend to want to go it alone. In addition, women exhibit less over-confidence and are more likely to know what they don’t know, displaying less optimism and more realism than their male counterparts. Women generally have a higher attention to detail, put more time into researching the investment opportunities, and are more likely to consider alternative or opposing points of view – attributes which all impact positively on their investments.

According to “The Female Economy” by Michael Silverstein & Kate Sayre (Harvard Business Review), women drive the global economy and control $20 trillion in consumer spending. Globally, women represent a growth market twice as big as China and India combined. Internationally, women are responsible for making or influencing the majority of purchasing decisions within a household. According to “Women are the majority market”, by Fara Warner, women in the United States are responsible for making 91% of home purchasing decisions, 68% of vehicle purchasing decisions and 80% of healthcare decisions. Simply put, if the consumer economy had a gender, it would be female. Women also rule online shopping largely because they are shopping for a broad range of people other than themselves (children, parents, grandchildren, husbands and domestic workers) and are therefore far more multi-dimensional consumers than men.

Despite the overriding purchasing power of the female economy, marketers still misread and under-estimate their audience by failing to understand that pink is not a strategy. Dell Computers, Honda and Bic are prime examples of companies that misunderstood what the female consumer wants. A few years back, Honda revealed a pink car with special window tinting to combat wrinkles, and was faced with an enormous backlash from women. Bic released ‘Pens for Her’, a range of pens in various shades of pink and lilac specially for women, and the company was widely ridiculed, including an attack by Ellen DeGeneres. Similarly, Dell computers introduced an online store for women which allowed them to “use your Mini to track calories, carbs, and protein with ease”, much to the dismay of women.

As a group of consumers with a unique set of circumstances and challenges, financial planning for South African women needs to be comprehensively and individually tailor-made to meet their needs, and should include the following considerations:

  • The fact that women live longer, earn less and therefore generally save less presents a unique financial situation that needs careful planning. As a result of increased longevity, a woman’s financial plan should take into account increased healthcare expenses later in life, bearing in mind that medical inflation outstrips CPI. The future costs of assisted living and frail care facilities must be included in the planning process.
  • Women who do not work still hold economic value in that they are fulfilling important roles such as child-minder, teacher, house-keeper, cook, administration and tutor. Stay-at-home moms have a need for life and disability cover on their lives but, because they do not earn an income, this cover needs to be tailor-made for their circumstances. Consideration would need to be given to the costs of replacing the stay-at-home mom’s functions if she were to die or become disabled.
  • Women’s careers are often interrupted to raise children, or care for aged parents or grandchildren. This results in many women working part-time, flexitime or on a freelance basis. This impacts on their income as well as their ability to save, and a plan needs to be put in place to ensure that her savings are not compromised by the disruption.
  • Unfortunately, many women still allow their partners or husbands to take care of their finances. Many women entrust their joint retirement planning to their partner, believing that they will have enough at retirement. This leaves them in a vulnerable position if they are widowed or divorced, and these women are often taken advantage of by unscrupulous, commission-based advisors. Women, whether married, single or partnered, must be encouraged to be fully involved in the retirement planning process.
  • Although women are better investors, they only tend to start investing later in life as a result of the fact that they generally earn less when starting out their careers, and because maternity leave interrupts the savings progress. This is compounded by the fact that they live longer and therefore need to have more saved for retirement. The unique investment timelines of women need to be factored into the planning process.
  • Women make the majority of purchasing decisions in the household, but don’t generally earn the majority of the net disposable income. This can create tension between the earner and the spender in a household. Because they are carers by nature, women make purchases on behalf of their partners, children, aged parents, domestic workers, grandchildren and godchildren. The name of the credit card doesn’t tell the whole story. Females are the gatekeepers to household expenses. Being somewhat removed from the day-to-day spend, tension can arise between partners, and the household budget is something that should be managed through effective financial planning.
  • Women are more detailed when it comes to planning their legacy and drafting a Will. Things such as a Living Will, organ donation and the bone marrow register are important to them, and should be taken into account when developing a holistic financial plan.

It goes without saying that women want their financial planner to make their lives simpler and more efficient. They have too many demands on their time and are constantly juggling conflicting priorities. However, many women still have to fight against stereotypes in the financial services industry, and it can be challenging for women to obtain financial advice without feeling patronised. Thankfully, the number of female CFP® professionals in South Africa is increasing, and current statistics show that 30% of all CFP® designations are held by women.

Marketing messages are diametrically opposed to conventional wisdom in that women are encouraged to spend money as a means of empowering themselves. On the other hand, men are encouraged to invest and save as a means of attaining power and status. This is a daily conflict that women deal with and, as financial planners, our role is emphasise that saving and investing is a means of empowerment for all people, and that financial freedom has no gender.

Have a wonderful Wednesday!



Pink is not a financial strategy.

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