Financial Planning Amelia Morgenrood

CAPE TOWN – Research shows that women lack confidence when it comes to investing their money, and they are mostly risk-averse. About one-third of affluent women say the stock market is “too risky” for them, according to a Wells Fargo study conducted in 2013.

It’s a harsh truth that, instead of taking charge of their financial future, many women either leave money matters to the men in their lives or ignore the importance of planning altogether. Couple this with the fact that women face different life challenges and financial risks to men, and it becomes clear why women must take charge of planning their financial future.

More international studies show the following alarming facts:

  • Nine out of 10 women will be solely responsible for their finances at some point in their lives;
  • Less than 15% of women who are married or living with a partner feel responsible for planning for retirement;
  • Only 40% of women participate in their employer’s pension plan;
  • Over 75% of women become widowed, at an average age of 56, and one in four of these women are broke within two months of being widowed;
  • A high percentage of elderly woman are poverty-stricken;
  • Half of all women work in traditionally female, relatively low-paid jobs without a retirement plan; and
  • Women retirees receive only half the average pension benefits that men receive.

You need to be educated and prepared
It is not that difficult. First, you must understand that you need to save, irrespective of your current position, and then you must understand where to invest. If you apply yourself, it’s fairly straightforward.

Investing in a newspaper subscription, for example, can put you on the road to financial knowledge. In his book Outliers, Malcolm Gladwell reveals that the most complex concept can be understood if it is read over and over again. Start by reading only the headlines of the financial part of the newspaper. Do this for at least a month or two: baby steps.

Then force yourself to read the first paragraph of every financial article. After a few months, you can push yourself further. Even if you have no idea of what the article means, force yourself to read it. In time, you will develop an understanding of what is going on in the financial world. You don’t have to be a whizz-kid; you just need to have some idea of what is going on in the world of economics and financial markets.

READ: Your mortgage bond: friend or foe?

You can also turn to investment professionals for guidance. Find someone you can trust, and who will understand your journey, a journey that will never be completed overnight.

Planning and investing for retirement is a journey
Are you prepared for retirement? Your retirement can be 30 years or longer. Learn about the different investment options and retirement plans that are available for you. You don’t have to be a financial genius to get started. Keep in mind your picture of what you want your retirement to look like. That picture will help you to stay on the road towards your dream. You might be alone, and will surely want a quality life.

Take control – no more excuses
Women always have the excuse that they don’t have enough money, and have no time for financial affairs. This is understandable, because they usually have their own job, as well as being the housekeeper. Due to a woman’s child-bearing and household duties and the fact that they act as caregivers to people around them, they do not spend as much time in the workforce and therefore do not accumulate the retirement savings that many men may have.

Housewives always have the excuse that they don’t earn a salary and have no money to save. But what if your husband wants to buy you a new luxury car? Have you thought of asking for a more modest car and having the extra money placed in a savings account in your name? That fancy car you drove in your 30s will be a distant memory when you spend the last years of your life – which, by the way, can be very healthy and good years for you – in poverty.

There are numerous ways of cutting back and investing that money. Saving just R1 000 a month over 30 years, yielding an annual return of 10%, will provide you with more than R2 million.

Start budgeting and allocate your allowance or salary more sensibly. Every rand you save can change your future. Your child does not need all the toys and expensive clothing. I have never heard of a child left with scars from living a more modest life; usually, it is to their benefit.

No amount you save is too small
The wonder of compound growth is well known, and the benefit of time must not be underestimated. If you save R1 000 a month at an average return of 10% a year, your final nest egg will be as follows:

  • After 10 years: R204 844
  • After 20 years: R759 368
  • After 30 years: R2 260 487

Where do I invest?
Understand that there are only four basic “things” in which you can invest. All investments, whether a unit trust, policy, pension or annuity, end up in one or a combination of the following pots:

  • Equities (company shares): returns come from dividends and capital growth;
  • Property: returns come from rental income and capital growth;
  • Cash (money market, or what the banks offer): returns come from interest; and
  • Bonds (government and corporate): returns come from interest.

Try to simplify your investments: invest directly in a unit trust fund and avoid complex, expensive vehicles, such as endowment policies. Over the long term, your investments should be concentrated in shares and property where your capital can grow. If you invest offshore – and it doesn’t matter in which country – these are the only four basic asset classes available. It is no different in the rest of the world.

Don’t be scared of shares and equity unit trusts
The biggest myths about investing in shares are:

  • “It is just like gambling.” Rubbish! The only way you can lose your money is if the company goes bankrupt.
  • “The stock market is an exclusive club for brokers and rich people.” Buying shares directly may involve a higher outlay, but you can invest as little as R500 a month in equity unit trusts.
  • “You have to know and understand the JSE before you can invest in shares.” In an equity unit trust fund, the fund manager decides which shares to hold, in line with the fund’s mandate. These funds have very capable managers.
  • “It is not a good time to buy shares.” It is always a good time, particularly if you do it monthly.
  • “I am too conservative to invest in shares.” This is true if you don’t want to create wealth for yourself.

Women are better investors than men once they decide what to do
Women think they are not good investors and don’t want to make mistakes with the little money they have. This impression they have of themselves is wrong: studies in the United States show that they are better investors once they decide to apply their minds, particularly in groups. Men are perceived to be better investors because they are more aggressive than women and are prepared to invest in shares – the asset class that outperforms all others over time.

The reason women do better when compared with groups of men is that they tend to do more research than men and don’t act as aggressively in buying at the first hot tip. Women look at a lot more factors before making a selection. They are better shoppers and therefore will wait for a bargain when it comes to shares.

To sum up
Women are faced with more obstacles than men, but the issues are not insurmountable.

The first thing to do is recognise that you generally possess all the skills of a man – perhaps more – but have not necessarily put them all to use. The aversion to the risk of loss can be tempered by increasing your knowledge and finding a good adviser (preferably one who is an accredited Certified Financial Planner).

Start reading the financial papers today – invest 10 minutes a day in your future. Even if you read only the headlines, you will start building knowledge, and, hopefully, become curious enough to want to know more. Set your cellphone alarm to remind you daily of this important task.

And most importantly, remember that the money you need for your retirement may be available if you simply do a detailed budget and invest accordingly.

Amelia Morgenrood is an accredited Certified Financial Planner. She is a regional director and portfolio manager at PSG Wealth.