How women can build their financial literacy
Recent studies show that more than two in five Australians lack confidence when it comes to financial decision making.1
The Federal Government believes this is largely due to a lack of financial literacy within the community, which is why it has developed the National Financial Literacy strategy. This initiative aims to motivate Australians of all ages, genders and socioeconomic backgrounds to engage more with their finances. In turn, this will help people make informed financial decisions that will improve their economic wellbeing.
What does it mean for women?
As social norms and family structures have changed, financial decision-making is no longer the sole domain of the male breadwinner -these days it's just as important for women to take charge. Yet women experience higher levels of stress when it comes to managing money, with more than a third saying they find it overwhelming.2
That's why it’s vital for women to build their financial literacy. Becoming more financially savvy can change a woman's life, by empowering her to be self-sufficient and make confident decisions that will improve her financial situation. Currently only 10% of Australian women retire with enough savings to fund a comfortable lifestyle3 - so by arming women with strategies to help close the 'super gap' at each life stage, they may become less reliant on social services in retirement.
How women can take control
The financial decisions women make throughout their lives can impact their financial position in later years. With this in mind, here are some things your clients can do to take control at each stage of their life journey.
Generally speaking, the gender pay gap puts women on the back foot as soon as they enter the workforce. Although there may be greater equality between the sexes than ever before, women's average salaries are still 17.3% lower than those of men doing the same job.4
This highlights how important it is for women to be able to budget if they want to build their savings and get ahead. You can find out how their finances are looking with the CommBank budget tool.
Raising a family
Women are still more likely than men to take time out of the workforce to raise kids, which means they receive less in employer super contributions during their careers. This leads to a significant super gap - men have an average super balance of $292,500 when they retire compared to $138,150 for women.5
That's why women need to prepare carefully for their career breaks, and top up their super either before or after to make up any shortfalls. The Government's Parental Leave Calculator and Career Break Super Calculator make it easier to plan their finances around having a family.
Paying off debts
If your client is like most women, the largest debt they'll ever have to pay off is their home loan. Before taking the plunge into home ownership, a Mortgage Calculator can show your client how much they can afford to borrow, so they can work out a repayment plan that fits their budget. And if they're prone to splurging on their credit card, a Credit Card Calculator could help stop their debts from spiralling out of control.
Insuring against the unexpected
Life insurance is an important consideration for financial protection when changing jobs, entering the property market, starting a family or other major life event. Income protection insurance can help replace regular income if unable to work, with the added benefit of premiums usually being tax deductible.
Other potential insurance products include TPD, which can provide a lump sum if unable to work due to illness or injury, and trauma insurance, which can help cover the medical costs from major illnesses or injuries.
Investing for the future
With lower confidence levels and a smaller appetite for risk in their investments, women are less likely than men to choose high-growth investments like shares. This also means they miss out on potentially higher returns. But as women generally retire earlier and live longer than men,6they can expect to spend more time in retirement - which makes it even more important for them to have enough money to last the distance. As the first step, make sure their investment mix matches their life stage. That way their super and other investments will have the best chance of growing over time.
1 ASIC, 2016. Australian financial attitudes and behaviour tracker, Wave 4.
2 ASIC, 2015. 'How much can a wedding cost?' MoneySmart.
3 ASFA, media release, February 2015.
4 Workplace Gender Equality Agency, 2016. Gender pay gap statistics.
5 ASFA, 2015. Superannuation account balances by age and gender.
6 Australian Bureau of Statistics, Retirement and retirement intentions, 2013; and Life expectancy and deaths hit historic highs, 2014.