What women need to know about managing money
There
are many problems that women face today due to their aversion for finances. They
need acknowledge their problems, take charge & get counted.
Men are from Mars and women are from Venus,
they say. When it comes to money, the martians seem to have an edge. The
beautiful beings from Venus seem to want nothing to do with money. There seems to be a revulsion about things to
do with finances, for those from the shining planet.
A lot of things could be to do with the
roles men and women are expected to play in society. There are conscious and
subconscious messages which get passed on from birth, that we internalize them
and start acting them out.
For instance, the message that women receive
is that they are nurturers and their primary role is to maintain a good home
and raise children. This infact has been the traditional role. But women have
transcended this role and are actively participating in the workforce, in a
major way. They have made inroads in most fields and are earning good incomes.
When they are now earning well and have become a force to reckon, it is
surprising that they do not take much interest in managing their money.
Their vulnerabilities - We don’t realize
it but the imprinting that women receive from childhood upwards regarding
money, creates a barrier, which they find difficult to surmount in later life.
They tend to feel that finances are a man’s domain and tend to switch off, when
it comes to money.
Due to this, their finances are managed by
their father, husband, friend, brother etc., which further puts some distance
between them and their money. Since they do not want to know about finances and
products in which to invest, they would have to trust the person taking care of
their finances, implicitly. That can create problems lots of times. Many times,
women sign papers which they have not read, based on trust. Trust is fine, but
such blind faith can sometimes lead to malpractices, using the money, siphoning
of money etc.
Also, money may not be managed the way it
should ideally be and will instead be managed based on someone else’s thinking.
Also, this other person may not be an expert on finances himself, which
complicates matters further. All this can be traced to the message that money
is man’s domain and women need not bother with it.
Specific problems women face - Apart from the
demons that they need to exorcise, they have other problems to contend with.
Women pursuing careers find that there are interruptions/ discontinuities there
due to marriage, child birth & upbringing, transfer of spouse, care for
elders in the family and other reasons. This leads to women leaving the
workforce from time to time. Discontinuities in their career impact their
career progression, growth & promotions and the time they are able to
devote to their jobs itself. To keep up their home commitments, women tend to
seek a job rather than a career. They look for flexible work or part-time work,
which are near their home and compromise on their earnings if these criteria
are met. Hence, their earnings don’t match their potential. It is safe to say that women earn less in
their lifetimes due to the reasons mentioned above.
Also, women who invest themselves, tend to
make a beeline for the traditional investments options like FD, RD, Post office
investments, Gold, property etc. Due to their lack of knowledge in the personal
finance domain, they tend to ignore the newer asset classes like Mutual funds.
Also, there seems to be major risk aversion in case of women as a whole as
compared to men. Due to this, their participation in equity & Mutual funds
is muted. This means that their corpus would be invested in traditional asset
classes, which may not be able to beat inflation. The only exception could be
property.
So the problem they face is that they tend
to earn less and invest in a manner that would yield lower returns. But, women
are living longer than men. This is a statistically proven fact. Hence, there
is a good chance that they may be underfunded in retirement.
What they need to do - Firstly, women
need to acknowledge the problem. The discontinuities in their career and their
earning less due to the flexibility they seek is a fact of life. But, they can
address other areas. They need to acknowledge that ceding control over their
finances, is a major problem area. They need to get over their aversion for
finances, which does not have any logical reason in the first place. Basic
knowledge on finances is easy to acquire.
The next thing that they need to do is to
seek to understand the products they are investing into and seek out other
investment options that may fit their profile.
They need to start looking at products outside of what they are
investing today and evaluate for themselves, if that makes sense. They need to
understand the basics of planning for their future, which is quite easy. Once
they do this, things will start falling in place. They need to have a full
compilation of all their investments and should look at it atleast once a year,
if not more frequently.
They should look at deploying their surplus
amounts in proper instruments, rather than letting it lie around for months on
end in the savings accounts.
Risk aversion is another aspect they need
to work on. They would need to educate themselves on the risk- reward aspects
and understand the need to assume certain amount of risk in the appropriate
products, for getting higher portfolio returns.
Conclusion - The problems that
women face are of two categories. Discontinuities in their career and lower
earnings etc. cannot really be changed due to their personal situation. What
can be changed is their active interest and participation in managing their own
finances and ensuring that their future is well funded. An effort is certainly
required on their part to start off on this. Most of them should be able to manage
on their own. Involve a good financial advisor, if needed, who would be willing
to assist and educate you rather than another version of your father or husband.
They need to understand these even more today as they would be well prepared
even if there are devastating events like death of the spouse or separation,
which can otherwise take a very high toll on the person.
Article published in Business Standard on Jan 12, 2014; Author : Suresh Sadagopan ; www.ladder7.co.in
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