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There is little doubt that the financial literacy of a population can be directly linked to the overall health of the economy. It is in a nation’s best interest to ensure all people are equipped with the necessary skills and competencies and to have access to relevant information thereby enabling them to make appropriate financial decisions for themselves and their families.
However, in many circumstances women are not always afforded the same parity as men when it comes to increasing their levels of financial literacy. The difference between women and their male counterparts, when it comes to financial literacy, was highlighted in the Financial Services Board (FSB) baseline study conducted in 2012 which determined that women scored lower than men in all areas with a national score of 55 as opposed to men’s score of 58.
This, in spite of growing data which reflects women are becoming increasingly exposed to financial risk but remain reluctant to consult professional help when it comes to planning their finances. This was reported in FSB study which found that less than 20% of women had sought professional financial advice within the preceding 12 months. The exposure to risk was again highlighted in a recent report from TransUnion SA which indicated that 47% of credit-active South African women are in arrears with their clothing accounts and that women make up 53% of South Africa’s credit-active consumers.
The need to increase financial literacy among women should be a national priority for a number of reasons. These include:
• Women are largely responsible for raising their families and play a central role in teaching their children financial habits which will they will take with them into adulthood. If women are financially literate they are more likely to pass on better financial habits to their children.
• In South Africa it is approximated that more than 40% of households are headed by women.
• Women live longer and generally earn less than their male counterparts and therefore need to be savvy to ensure they have enough money for the long term. It has been reported that a woman will need 15% more than a man of the same age to provide the same pension income over her estimated lifetime.
In the past, it was traditionally the man who was responsible for the major financial decisions with women trusting that their needs would be adequately provided for. However, more and more women are discovering the hard way that marriage/ dependency on others are no guarantee to a financially secure future. There is no shortage of financial planners who will tell you at least one story where a widow has discovered her partner did not have life cover even though she was certain he did. Or about the women about to retire who assumed her partner had made adequate provision for their retirement only to discover to the contrary.
Lelane Bezuidenhout, a Certified Financial Planner (CFP®), and Certification Manager at the Financial Planning Institute provides the following tips for women when it comes to financial planning:
1.Know your own limitations when it comes to finances – use an authorised financial services provider for assistance and do not leave it for too long. Act today.
2.Have a valid will in place – we do not like to think of death or taxes – but the consequences of not doing so could be devastating to the ones you love.
3.Budget – and if you have a spouse – do the budget together. It is amazing how much peace you will have knowing that you know what is going on with your money matters.
4.Do not spend more than what you earn.
5.Cash is king – try not to buy your hearts’ desires on credit – limit your retail accounts, do not underestimate the power of inflation ?and interest charged on the outstanding amounts still owed on those accounts
6.If you do have retail accounts – take out insurance to cover the outstanding amounts should something happen to you.
7.Save for your retirement. You are never too young to start saving towards this goal. Ask yourself how fast did the past 10 years fly by? Before you know it, you are at retirement age. Again, see a financial planner today, do not delay.
8.Have some financial independence.
9.Have an emergency fund in place for those unforeseen circumstances.
10.Make sure that your life is correctly insured. Whether it is life cover, disability or severe illness cover, there is no harm in reviewing your situation as it currently stands. Too often we think that we have this and that policy – but will it be sufficient the day that you really need it?
11.Short-term insurance – review your policy – what excess structure do you have in place. Make sure you understand the excess structure as it differs from insurer to insurer.
12.Take charge of your finances by critically reviewing all of the above.
To find a Certified Financial Planner in your area visit the Financial Planning Institute website at www.fpi.co.za.
There is no doubt that women are progressing into what previously were traditionally male fields, not only in the workplace but as heads of families and key decision makers in their own right. With such progress there is the ever-increasing need for women to become self-reliant and to take charge of their own financial futures.
Manager: Consumer Education Department
Financial Services Board