What are the chances that a woman will end up managing her finances at some point in her life? According to a study done by Oppenheimer funds in the United States, women have an eighty to ninety percent possibility of managing their own finances during her life. Some will have to manage their money because marrying later in life is become very common as women focus on careers. Many will never marry at all and will therefore manage their finances throughout their life. Of those who do get married, a large percentage end up divorced and in charge of their funds while many of those whose marriages weather the storms often outlive their husbands, once again ending up in control. Most women who are married today are likely to be alone some time in future as they typically outlive men of the same age by five to seven years. Remember many women’s husbands are much older than they are. By age seventy five, more than three quarters of women are widows.
If you consider these statistics, you will probably come to the conclusion that personal financial planning is a truly important issue to women and one would be naïve not to learn the basics. You need to get involved because even if the man in your life is knowledgeable and is currently managing the family finances, he may not be there at some point in your life.
When it comes to investing, a common trend among women is being too conservative, which is often a mistake as they need a bigger nest-egg since they will probably live longer. While saving up money in a bank savings account or in a life insurance policy may be your way of avoiding uncertainty, it will not help you fight one of the most sneaky risks of all; inflation. After years of saving in this way, you will find that the purchasing power of your saving has been eroded and you may find yourself in great financial hardship.
A more effective way to deal with uncertainty and ensure you achieve the goal of being financially secure is to develop a financial plan. Then find out your risk tolerance, and invest in a diversified portfolio of various securities with your risk tolerance taken into account. Avoid investing any money that you will need in the short term, say five years in the stock market as the market may be depressed just when you need the money. Your financial plan should consider your short term and also long term goals and make provisions for them. Do not make the mistake of changing direction every time there is some financial noise in the market, stay the course.
Remember retirement is your greatest financial challenge as you will need almost eighty percent of current income in order to maintain the same standard of living and a woman of fifty today may live another twenty years after retiring at age sixty. You can borrow for money for most financial goal but remember, nobody will lend you money to live on when you are old.
Children’s education is another issue that women take very seriously, with good reason. Primary and secondary school fees should come for you current income. Do not pay so much that you are unable to invest for higher education. Since higher education is extremely expensive, one must plan for it. As early as you can in your child’s life, begin investing for higher education. Starting early puts the power of compound growth on your side making it a lot easier. Make sure you do not put your money in investments which have low returns or those that charge such high fees that you as the investor are the one who benefits least. There are many such investments where the salesperson and the financial product provider are the main beneficiaries. A good sign of such a product is the sales pressure you feel being exerted by the sales person. By the way, these days they will have titles such as financial advisor, financial planning manager and so on. While it is important to seek professional help, an independent advisor with no stake in the products is a wiser way to go.
Many people are under the impression that one needs a huge amount of money to invest, simply not true. Several thousand per month invested consistently soon turns into a sizeable amount. Women have a huge stake in the management of family finances and it is crucial that they take an active role. Financial planning is a woman’s issue, one that is too important to be left to a man alone!
© Manyara Kirago, RFC®, CMFC®
