Multiple studies across the developed world, as well as the experience of microfinance companies in the most underdeveloped regions of the world, have come to the same conclusion: women manage money much better than men. This is particularly true for day-to-day money matters. The one very important area where women can and should improve is long-term financial planning. Let’s talk about that.
The first question to ask is why women should do financial planning. There are four very good reasons.
Firstly, women live longer than men. Many studies have confirmed this, and have tried to explain it. Some of the reasons given include that women are genetically programmed to live longer so that they can give birth and raise children and possibly grandchildren. Many women also marry men who are older than them, which makes it more possible that their partners will pass away before they do. As women are more likely to outlive men, they will need financial resources to ensure they live securely in old age.
Secondly, women’s careers are often more unpredictable than men’s. Having children and raising them result in long breaks from work, which can disrupt cash flows. Even if you make these decisions with your husband or partner, you have to consider their impact while planning your finances. If you plan to be a single mother, it is even more important.
Thirdly, divorce rates are increasing. Divorces are not only an emotional strain; they can result in big financial pressures too. It is therefore hugely important that you do the proper financial planning so that you can manage your finances even when times are tough.
Lastly, women are becoming equal contributors to the household finances. More than ever, it is important for working women to start financial planning early. It will not only impact your personal well-being, but the well-being of your family as well.
Now that we understand why women should take financial planning seriously, here are 10 tips to make it happen:
- A man is not your financial plan. Please stop telling yourself that your man will take care of your finances. Even if he offers to do so, you are going to do a better job (the research tells us so!).
- The first step to great financial planning is to secure yourself against unforeseen emergencies. A good place to start is health insurance, even if it is only a hospital plan. If you are married, sit with your husband and decide on the best medical aid for your family.
- Decide on your financial goals and review them as you go along.
- Saving and investment are two different things. Don’t only save, invest as well. Saving will help you cope with rainy days, but only investments will help you live comfortably after retirement.
- If you are married, have the money talk with your husband. Do this as soon as possible (the best is to have the conversation before you get married) so that you both know how the money will be managed in your life together.
- Have a proper retirement plan. Remember, you might outlive your partner.
- Look critically at your family traditions. Just because Christmas was always celebrated with lots of gifts and food, it doesn’t mean you cannot do it differently. The same applies to big weddings and funerals. Talk to your family about these traditions. You may all decide to start a new way of doing these. If you decide to maintain the old ways, you know that you have to make provision in your financial planning.
- Raising kids is not cheap. Make sure that you put money aside for your children’s education, lobola and marriage expenses, and so on.
- If you need help to draw up a financial plan, talk a financial adviser right away.
- Teach all of this to your daughters.