A Purse of your Own
The titles may seem better suited for the cover of Glamour magazine. But that doesn’t mean women don’t face special financial challenges. Women live longer, earn less and take more breaks from the workplace to care for children and elderly parents. And though studies show that women tend to save a slightly higher percentage of their paychecks then men, they ultimately end up with smaller balances because of their lower earnings.The average life expectancy of a 65-year-old who has an annuity is 86 for women and 82 for men – in other words, a woman who is 65 today can expect to live to the age of 86, four years longer than the average man.This means women need to take their longevity into account when drawing up their financial plans. However, this is just one financial planning factor that is specific to women. we look at three financial planning scenarios for women in different life stages.“Financial planning is always something that is unique to every individual. There is no one-size-fits-all approach, and just as you can get a tailor-made dress or work suit, your financial plan should be tailored to your needs.”financial planning perspectives that need to be taken into account for women in different life stages with different financial needs:
1.A single, working woman with no children.
The first thing a woman should have in her financial wardrobe is a budget.“You have to be able to pinpoint your income and expenses down to the last cent. Remember that as a single, working woman, there is greater responsibility to be self-sufficient,” When a woman has started earning money and is still free of a family or relationship commitment, that is the best time to invest in herself by becoming financially literate.“One should consult an accredited financial planner to help her set some financial goals and then draw up a financial plan that will help her achieve those goals,”.When you are choosing a financial planner, these are some of the important questions you should be asking:
- Qualifications: Is the financial planner qualified under the Financial Advisory and Intermediary Services Act? Are they registered with the Financial Services Board? Do they belong to a professional industry association, such as the Financial Planning Institute? What are they qualified to give advice on?Be aware that not all financial planners are qualified to advise you on every aspect of financial planning. For example, an adviser may only have the qualification to advise you on short-term insurance, but not on investments or life assurance.
- Tied or independent: Ask the financial planner if he or she is independent or a tied agent. A tied agent is generally a planner who markets exclusively for one product supplier, such as one of the banks or a life assurance company. An independent planner is able to advise you on products from more than one supplier and should be able to offer you a range of products across several brands.
- Women’s biggest asset is her ability to earn an income, so an income protection policy is probably more important for her financial plan. She should look at a policy that has retrenchment cover built in so that she has a financial plan if she gets retrenched,”Since She has no dependents, she may not need a life insurance policy at this stage and can structure her financial plan in one of two ways. The first option is to use the opportunity to channel more money towards her retirement savings while she can. An ideal way to do this is via a retirement annuity, which has added tax benefits such as deductions on contributions and no tax on growth.Although She does not have any financial dependents, she can choose to take out a life insurance policy to address the taxes that will fall due when she dies. Her estate will have to pay estate duty taxes, and ensuring that her estate is liquid means that her next of kin, such as her parents or siblings, will not have to pay money out of their pockets if she dies.She should definitely also be building up her assets during this life stage, so saving towards a deposit on a property or building up an investment portfolio would be a step in the right direction,”She adds, however, that She should have an emergency fund in place. This is normally equivalent to three or six months of net salary. Although She is young and healthy, she should join a medical aid scheme now to avoid a late-joiner penalty if she joins after the age of 35.As an independent woman, short-term insurance is imperative so that her car does not become an expensive liability if she has an accident.
2.A Working Mother.
This Category’s Women needs to have a monthly budget and a retirement savings plan in place.
- Budget: If She is married, she will have the benefit of a two-income household.However, Adviser notes it is important that the budget is split equitably. For example, if Mrs.X earns Rs.10,000 a month and her husband earns Rs.20,000 a month, the expenses cannot reasonably be split 50-50.“Her contribution towards the household should be proportional to her income compared with his income,” She should also be wary of a joint account as this account will automatically be frozen if her husband dies, leaving her with no access to their funds. In addition, should her spouse have been in debt, their savings could be in danger of being used to pay that debt.
- Education: As a mother, she needs to give careful consideration towards saving for her children’s education.“She should start saving towards towards her child’s education as soon as she falls pregnant. The best option is to use a savings vehicle that does not allow for easy access so that She avoids dipping into the money over the years,”.Depending on where she would like her child to go to school, she may need to save for both school and university.
- Life insurance: She needs life insurance cover to provide for her children after she dies, as well as for her husband if she is married. Tied to this may be the need for income protection, dread disease cover and disability insurance. She also needs to make sure that her beneficiaries are regularly updated on her employee benefits, insurance policies and investments. She can do this each year with her financial planner.
- Maternity leave: She needs to plan her finances so that she saves up additional funds to put towards her retirement while she is on maternity leave.
“Some retirement policies allow for a waiver so that you do not pay any contributions during your maternity leave. However, a better option is to save up so that there is no gap in your savings timeline,”.
- Will: She needs to ensure that she has an up-to-date will. This will tell her family and financial planner how her assets should be distributed after she dies.
3.A stay-at-home mum:
‘Many women sacrifice their careers to stay at home and look after the kids, but don’t take care of themselves financially. A priority for them is to agree on a monthly allowance from her husband. This money must be separate from the funds for the household budget and should be her money to allocate as she pleases,”.An alternative is for her husband to contribute towards a retirement annuity and dread disease or disability cover in her name so that she has some independence when she retires or is able to afford to hire someone should she be too ill/disabled to take care of her family.Ideally, she should have some form of independent income and this is not impossible. She could start a small business working from home or offer her services on a part-time basis to companies that could use her skills but cannot afford a full-time employee.