During Women’s Month the focus is on issues that are particular to women, and one of these is the gender wage gap, which makes it more difficult for women to flourish financially. But if you are a woman, are you acting on the aspects of your financial life that are within your control?
BEYOND YOUR CONTROL
Is it possible that someone could earn R1000 for every R714 you earn, doing the same job, even though they have the same level of experience, qualifications and competence? If you are a salaried female employee in South Africa, you’re earning 28.6% less, on average, than a male in your exact position, according to the International Labour Organisation’s Global Wage Report 2018/19.
The effects are worst for the most poorly paid women and for those in upper management.
The report considers possible explanations. Perhaps men are better educated, more productive? In most countries, including South Africa, the Global Wage Report finds that this is not so.
How about motherhood - does the time women take out of their careers to care for their children cause them to lose ground? Are they opting for more family-friendly - but lower-paying - jobs? Again, not in South Africa - the “motherhood pay gap” is only 1.1%.
Women need to fully understand their economic value, says Sue Torr, managing director of Crue Invest.
“According to the Unesco Global Education Digest, women own about one-third of all businesses worldwide, and nearly half these are in developing markets.”
She also points to the option of starting your own business. “Women make excellent entrepreneurs and should take advantage of a developing economy such as ours.”
WITHIN YOUR CONTROL
* Taking responsibility. In your view, who is responsible for your financial success? According to US wealth researchers Sarah Stanley Fallaw and Thomas Stanley, if you take responsibility (rather than believing that the government, the markets, your parents, your children, or your spouse determine your financial outcomes), you are more likely to accumulate wealth.
Often, says Torr, women who are married or in a relationship hand over control of household finances, and recent research shows that this extends to millennial women too.
“A significant proportion of women will find themselves responsible for the family’s finances at some point, whether through death or divorce, so it makes sense for them to shoulder financial responsibility with their partners from the get-go,” she advises.
* How much you save. In theory, a high income-earner has greater potential to save than someone earning very little. However, high-income earners don’t always translate their income into wealth - they may instead opt for a lifestyle of hyper-consumption.
If you do choose to save and invest, it’s important to earn inflation-beating returns to grow your wealth. According to the 10X Retirement Reality Report survey last year, the 37% of women who do save use vehicles such as savings accounts rather than investing, so they are probably not achieving returns in excess of inflation. Only 16% of women invest their savings. When women do invest, they tend to be better long-term investors than men, says Torr. “They take advice, do their research, transact less, demonstrate less over-confidence and tend to stick to the game plan, which is to their advantage.”
The other 36% of women who neither save nor invest are missing out on the peace of mind that a savings cushion affords.
Thamsanqa Cele, the head of savings and investments at Absa Retail Banking, says the Absa Happiness Index research identified a direct correlation between savings and happiness.
“Being financially prepared for the future, staying in control of their savings and being satisfied that their families are well provided for are the key drivers to happiness,” says Cele. The research showed that “45% of South Africans who are saving are significantly happier than their counterparts”. The figure increases to 71% for those who have four or more months’ salary saved.
Are you saving enough for retirement? The Alexander Forbes Member Watch offers a way of checking this: assuming you will rely only on your retirement fund when you retire, a 40-year-old member would need to have saved 3.2 times their annual salary to reach a 75% replacement ratio (the estimated proportion of your salary you will need at retirement, given that you should have fewer expenses). At age 50, it should be 6.1 times.
If you are falling short, increase your pension fund contributions or consider working for longer, or you will be forced to lower your standard of living once you retire.
YOUR FINANCIAL SECURITY CHECKLIST
SUE TORR offers five pointers:
1. Live simply, reduce your consumption and focus on experiences.
2. With unemployment at 29%, coupled with the speed of technological advancement, think very carefully before giving up your job to raise children.
3. Regardless of who earns what, insist on managing the family’s money jointly with your spouse.
4. Protect your income against temporary or permanent disability by taking out an income protection benefit.
5. Contribute towards a retirement fund in your own name, and make sure your returns keep pace with inflation.