Financial literacy means understanding your own financial situation and being able to look at ways to improve it.
Women today are living in a far different world from their mothers. We now have the highest levels of female workforce participation ever recorded and the chance to rise to the top of our chosen careers.
So it makes sense that women are now looking to improve their financial literacy and take a more active role in planning their financial futures. We’re no longer waiting for the knight in shining armour to come along and save us. Which is good, because statistically that’s unlikely to happen.
Let’s get comfortable with financial literacy
Research has shown that although women are often better than men at budgeting, saving and managing a mortgage, they’re still less confident when it comes to financial literacy and planning broader investment or wealth management strategies.
Many women are well educated and work at senior levels, yet the language of finance is still overly complex, often focused on male situations and not attuned to the needs of the other half of the population.
The financial services industry is slowly changing to address these financial literacy issues. Over the past few years, as more females occupy senior positions in finance,some advisers are now customising their approach to be more inclusive and mindful of the needs of their female clients.
Women have a different approach
Women often have a different approach to financial literacy. They want to understand the details and the risk ratio in investment options. They want choice and time to think about decisions. They tend to be more about long-term, more stable strategies. They might want to plan secure provisions for children and be looking for more facilities that cover flexibility and control of when and where they place their money.
It’s important to make sure an investment adviser takes your personal needs into account and that you feel comfortable talking with them without feeling pressured. It’s reasonable to expect that details are explained in plain English and that there isn’t any pressure to make immediate decisions until you’re ready. Most female clients respond better to a collaborative approach where decisions are made in partnership.
Why you need to start financial planning today
We need to become more comfortable with financial literacy and thinking about finance and investments because that will help us to learn what we need to know to manage our future with confidence,and to have the skills to cope with the unexpected.
Women take breaks from the work force, often work part-time, and live longer. Pay gaps are still a part of life and women earn less than men. That means we retire with less as well. And did I mention the high cost of divorce, if that’s in store down the track?
Coming to terms with your financial situation now and how you can make plans for building wealth down the track can be very empowering.
Confidence is the key to financial literacy
In the next three decades the pool of wealth that will be transferred from baby boomer parents to children is significant and women should be equipped to manage and grow their assets rather than waiting for someone else to do it for them.
Whether you choose to consult an adviser or not, there are many things women can do today to start building additional financial literacy about money and investment issues.
Managing your own investments and planning for the future will give you the confidence to achieve the lifestyle you want and will ensure a more secure retirement down the track.
1. Read the personal finance pages of online publications or newspapers
It’s a good way to come to terms with the various investment products and strategies that are often featured in news stories.
2. Take the time to understand how superannuation works
Look at how your funds are invested in your super fund – for example, changing at the right time from a balanced risk profile to a high growth profile could make a huge increase to the end result. Even consider contributing just a little bit extra to super on a regular basis, it can make a big difference to how much super you accumulate. Get advice early if you need it.
3. It’s never too early to start planning a long-term investment strategy
The early years of your working life could be the best time to start investing, before you have big commitments like mortgages and school fees. Start thinking about how much you have to invest and look at the options available.
4. Set yourself a budget
Work out what you need each week or month to meet your living expenses, making sure you allocate enough for holidays and going out as well. Then once you work out what surplus you have from your income, start a regular savings plan and invest that surplus. Ideally the investment options you consider should provide growth on the money invested, plus allow for income to be reinvested.
5. Take a ‘magic wand’ approach
Think of all the things you want to achieve, write them all down, don’t hold back. Once you have your list, set yourself some goals and come up with a plan for how to achieve each one of them. What may seem unachievable now can soon become reality if you take this approach. As you start ticking them off, the momentum should build from there.
