Britain in Hong Kong March-April 2022 (SJP)

THE ROAD TO FINANCIAL EMPOWERMENT

BY ELEANOR COLEMAN, PRINCIPAL, THE FINANCIAL EMPOWERMENT GROUP

In honour of International Women's Day I thought I would take some time to focus on the financial needs and milestones that most of us, as women, face.

Being a woman is sometimes overwhelming. With the pressure to be the perfect role model/mum/partner/career woman while remaining calm and sane. It can be hard to find the time to think too far into the future or prioritise our own needs.

When faced with a massive to-do list, spanning work, family, personal, and the ever-expanding “miscellaneous-yetvital” tasks it is incredibly easy for “sorting out my/our finances” to drop further and further out of mind. The thought of investing, saving for retirement, filling in forms and developing concrete financial goals often gets lost in the minutia of day-to-day life.

When it comes to financial decisions throughout our lives, women tend to face more challenges than men. We live longer, are paid less, take more career breaks to care for family. We don’t have the time or resources to make mistakes and therefore miss out on opportunities.

Women also have a longer life expectancy and therefore longer retirement and higher potential need for the expenses of old age care. Therefore, it is vital to have a properly thought out and executed plan to make sure that they can afford to live the life they want on their own terms.

The last few years, starting with the Covid-19 pandemic, coupled with the Great Resignation, has triggered a dramatic impact on the way we live and work. It is interesting to note, since the onset of Covid-19 the National Women’s Law Center (NWLC) found that more than 2.3 million women have left the labour force in the US alone, compared to 1.8 million men. It has also triggered a lot of reflection as to how we spend our time and money and how both can be used more efficiently to lead to greater happiness in our lives.

Women need to be financially savvy and independent now more than ever and empower themselves make sound financial decisions today which will determine their own future. As Michelle Obama once said, “there is no limit to what we, as women, can accomplish”. This no doubt rings true, but it is just a matter of women having more confidence in their own skills and judgement. Women must also be willing to take the steering wheel in making their own financial decisions and to build a solid financial plan that evolves with all of our everchanging lifestyles.

The life stage of where a woman is at also affects her financial decisions

Throughout our lives, there are always challenges to be faced, whether physical, emotional or social. No matter which stage of life a woman is at there will be unique financial challenges to face too. By looking at each phase and analysing the challenges, we can better understand how each stage could affect a woman financially. Becoming aware of these can help women better plan for their finances down the line.

Everyone’s life takes different twists and turns – and the below, of course, is a generalisation and none of us in reality can be put in boxes. However the below outlines some financial considerations at different life stages.

Early on a woman’s life is the best time to start saving and making the most of long-term compounding interest to prepare for retirement. However, this is also the hardest time to save as it is probably the time when she will be earning the least.

For most of us, when we start working, we want to live independently from our family and so need to start paying rent. For those of us who go to University, it is likely that we need to start repaying student loans soon after graduation and the challenge of paying bills and being a “proper” grown up can be daunting. Eventually, if we want to buy property, we need to consider saving a deposit and getting a mortgage which might feel like an additional burden of debt.

At the same time as juggling these financial burdens, women starting their careers are probably working at a job with a lower salary than their male counterparts. Research by HRM Asia in 2020 found that the gender pay gap stands at 15% and that generally women enter the workforce on a lower salary than a man in the same position, even if they are more highly educated. How does any woman at this life stage consider a financial plan at this moment in time when they have other priorities to deal with?

As life goes on it presents other opportunities and distractions like career changes, marriage, long term relationships and children. With all of these huge life events to manage there is simply no time for many to consider making the most of saving. At this stage, retirement seems like something so far off that it can be dealt with later. Ironically, the busier you are, the less time you have for financial planning and goal setting and the more important it becomes.

Many women in the early and middle stages of their lives they do not have a clear financial plan or a map of how they are going to get there. A survey conducted back in 2020 by St. James’s Place Asia Retirement and Wealth Planning Survey, highlighted that 48% of Singapore residents and 53% of Hong Kong residents believe they won’t have enough money saved for retirement. What’s more alarming is that over a third surveyed in both territories are not aware of how much income they need to retire and so don’t have a goal to aim for or a place to start from.

It is in the middle stage of life when women are most likely to take career breaks to care for their loved ones, which usually means less disposable income, less saving and potentially eating into money they have already put away. Unfortunately, this is also the life stage where divorce most typically happens, which might mean a split in assets and property and possibly a future with a very different household income – often creating more financial hardship for women in particular. For those facing a loss of a partner though death or divorce, the financial reality of being in charge of all the money decisions can be overwhelming, particularly if this is the first time you have done it.

Finally, in the later stages of life it is likely that most of us want to slow down or stop working altogether and retire. Regardless of whether you decide to work part time, volunteer, or spend your retirement travelling and seeing the world, it is vital to have enough money to be self-sufficient and be able to do what you want. As women we have a much higher likelihood of achieving a 100-year life and spending more years with chronic age-related illnesses also meaning a need of some form of care in later life. Paying for care can be one of the most expensive commitments we will ever have to make as those of us with aging parents can attest to.

Therefore, we need to make sure that the actions we have taken in the first and second stages of our lives will give us savings sufficient for a comfortable retirement that could conceivably last for 30 or more years. The reality is not the case, women are likely to have a smaller retirement pot than men. Research from Brink estimates that there is a gender gap of 44% in retirement savings for working mothers in Asia, because this group of women are paid lesser than men in employment and have a shorter employment period due to family-related career breaks.

At the later stage of their lives, women will need to do all that they can to avoid running out of money. As daunting as it may sound, there are consequences of not being able to manage finances adequately. With women starting off at a disadvantage already, putting off financial decisions which could have been made early on in their lives could result in being constantly worried about whether there are sufficient funds to last for another year or so, when, with a little preparation, they could be living through retirement comfortably and free of financial stress.

By improving our financial literacy and helping to raise awareness of the importance and benefits around making sound financial decisions we can alleviate the struggles and challenges that may occur down the line.

It is never too late, and if you find yourself in the later stages of your career with no clear plan for retirement or goal there is always a benefit to stopping and considering a series of options and how best to afford them.

The importance of financial literacy for women and the need to be financially independent

A study by The WealthiHer Network found that 46% of women interviewed believe financial autonomy is of medium or high importance. On top of that, both men and women who reported a good level of financial education also reported higher rates of self-esteem. This indicates to us that being financially educated and autonomous is important in women’s financial confidence and self-esteem.

Achieving financial literacy and money management skills can help women understand and manage both their personal and household finances. It can also provide women with a deeper sense of security, which in turn makes it easier for them to save and invest for their future. With the right support and guidance, enhancing financial awareness can relieve a woman’s stress over their struggles, and empower them to gain autonomy over their finances.

Women all across the world are moving away from the traditional expectations of cultural and society and are striving to progress and reach their goals and dreams. Yet, statistics from Catalyst show that only 5.8% of S&P 500 CEOs are women, and research from McKinsey states that women of colour only make up 3% of women in C-Suite positions, compared to 66% of white men. There is still a long way to go for women to get the financial support they need to progress.

Nevertheless, it is vital for women to be aware of the value of financial education and planning, as this can empower them with the luxury of choice and the freedom to live as they wish in the future. It is therefore essential for women to have a clear understanding of the challenges they face, who they can turn to for advice and what resources are available to them to help facilitate this process.

In order to build financial independence and wealth, it is important to start saving, investing, budgeting and planning for the future you want. The earlier that you can start this the better. Understanding how to set financial goals in the short, medium and long-term can help to make sure that you are going in the right direction. In all life stages there can be positive steps taken to strengthen your financial position and increase your confidence in your future financial security.

Education is key – So what’s available out there at the moment for women?

When it comes to educating yourself, it is all about taking the first step. Don’t panic if you haven’t had the advantage of starting early – or you feel that you can’t afford to save the “right amount” of money each month. There are still actions that you can take regardless of where you are in your life.

Firstly, start saving now – no matter how big or small an amount. By making it a habit to save on a weekly or monthly basis, you will start to see your savings add up over time. This emergency savings pot can also help in the worst of times, such as a health scare, family emergency or job loss.

Budgeting allows you to spend within your means and save for your financial goals. Even managing the most basics of budgeting and examining it on a monthly basis, can help you get your financial plan on track. Something as simple as listing the incoming money and outgoing expenses for a few months can help you understand where the money is going and where you can make changes. Budgeting does not mean scrimping and cutting back on everything, allocating money to experiences, holidays and luxury goods or a treat to yourself can all be part of it.

Tapping into investments can be another option, as it can serve as a vehicle to help your savings grow. Women are just as effective as men when it comes to investing, sometimes more so. We need to take the time to understand what options are available, how best to make the most of what we have, what we are investing in, how it works and if it is right for us.

Finally, seeking professional support can help you with tailored advice and guidance no matter which life stage you are at. A professional adviser should be able to review all your assets and look at the whole picture and what you have an where it is – be it cash in savings accounts, property or investment portfolios – and can help you determine how all of these could work smarter for you.

Conclusion

Every woman is unique and leads their life differently; there is no one-size-fits-all financial advice or template that we can all follow.

However, we must remember that women face additional challenges that would impact financial decisions, planning and goals. On top of that, different life stages require a different financial focus, which can lead to challenges or create amazing opportunities to better our financial situation.

By educating ourselves, and getting the right support and guidance, we can all (men included) have a better chance at achieving financial freedom, no matter at what life stage we are at.

So start saving now and make it a habit to do so – a small change in your financial habits can make great improvements to your finances down the line. Source: https://www.sjpasiainfo.com/iwd

About The Financial Empowerment Group

The Financial Empowerment Group aims to help women and members of the LGBTQ+ community to achieve financial freedom through education, planning and action.

We aim to provide straight-talking, simple financial advice. Avoiding financial jargon and making you feel good about your choices at every stage of the journey.

The Financial Empowerment Group is a Partner Practice of St. James’s Place, the UK’s largest financial advice provider with over 830,000 clients and £154bn in assets under management.

Eleanor Coleman, Principal, The Financial Empowerment Group Eleanor.coleman@sjpp.asia