Acording to statistics from the Actuarial Society of South Africa, women on average are living longer than men – with the data revealing that the average life expectancy of a 65 year old South African (who has an annuity) is 85.9 years for females and 81.5 years for males.
Michele Ongley, head of Institutional Business Development at 10X Investments, says that the figures highlight the growing need for women to adequately prepare themselves for a longer retirement period than their male counterparts.
“As women live longer than men, they require a bigger nest egg at retirement in order to make their savings last throughout their retirement. This also means that they need to start planning and providing for retirement sooner, because time is the strongest ally in any savings plan.”
What women should strive for
She says that in addition to living longer, there are now more women in senior and leadership positions “Gone are the days where women are destined to be housewives and financially dependent on their husbands. This also changes the way women approach their finances.” Ongley says that the women can be divided into four main categories, namely financially dependent (not actively employed), women in leadership positions (either married or single), single working moms and young career women (who will potentially marry later in life).
“Your goal should be financial independence, regardless of the category you are in,” she points out. “This doesn’t necessarily mean that you run the household finances, but rather that you learn to understand your financial needs and goals.”
Ongley says that although women typically run most aspects of the household, when it comes to money matters the majority still let the man take control. “It is important that women do not rely exclusively on their partner’s financial planning. Circumstances can change quickly and leave them unprepared and ill-equipped to assume financial responsibility. There may then be insufficient time to achieve their retirement savings goal.”
She explains that women should empower themselves to make their own financial decisions, and accordingly educate themselves on financial matters. “Personal finance is not as complicated as it may appear. Every woman should be able to answer the following questions:
Do you have a will?
What is in your husband’s will?
Will you benefit from any life insurance policies?
How much do you have saved?
How are your savings invested – for the long or the short term, in shares, property or cash?
Do you have a retirement plan, in terms of how much money you will need at retirement and how much you need to save, to achieve this goal?
What you can do
Ongley adds that there are a few simple principles that all women should take into consideration when managing their finances:
The advantage of compounding their investment return over many years and the benefit of starting to save as soon as possible;
The available savings vehicles (individual retirement annuity funds, company pension or provident fund, unit trusts etc.);
The benefits of paying off debt as soon as possible;
Minimising investment-related costs;
The importance of preserving retirement fund values on changing jobs.
She says that many women are inherently conservative in their investment strategy. “That can be goal-defeating. Understand the factors that determine how you should invest your money. The most critical factor is your time frame – is it five, 10, 20 or 40 years? If your time horizon is more than five years, you can afford to put a high percentage in shares, as you then have enough time to recover from any bumps along the way. In addition, don’t be fooled by the large pay-out projections, based on returns that include inflation – your expenses will grow by the same magnitude.”
Ongley believes that the best way for women to take control of their finances and make informed decisions is through education, or with the help of a reputable expert. “Today, every woman should have at least a basic understanding of financial matters, as well as her financial position. This will help her avoid unforeseen problems and shortfalls in the future. The sooner women take charge of their financial health, the better,” concludes Ongley.
August 25, 2014 by Finweek Staff