By Palesa Dube
Over the past few decades, there has been a rise in the number of women entrepreneurs who have established successful businesses, are creating employment and wealth for themselves as well as building their legacies.
Women-owned businesses have been ever-increasing, and according to the World Bank, accounts for 1 in 3 businesses globally. In South Africa, this number stands at just below 20%. The majority of women, therefore, still rely on gainful employment to be able to sustain themselves, be able to achieve financial independence and create meaningful wealth over time.
The challenges that women are faced with largely still stand, namely pay inequality, career interruptions, or having to take part-time work in order to care for children or elderly parents, which can impact their earnings and retirement savings. Women tend to live longer than men, which means they need to save more money to cover their living expenses during retirement, let alone accumulate excess wealth to leave to their descendants.
There are several steps that women can take to tread a different path towards wealth creation, taking into consideration the challenges they face in saving and investing:
Set personal and financial goals that are aligned
The first step is to set clear personal goals with a clear understanding of the financial and long-term implications of both. As an example, you may have high professional aspirations and, at the same time, wish to have children. For women with these aspirations, the financial planning conversation and strategy need to factor in these plans, as statistics already tell us that women’s earning capacity can diminish during this period. A proactive strategy, therefore, could include starting an investment contribution strategy at a higher rate than normally recommended to make provision for such future plans. This will help you create a roadmap for achieving your personal goals without compromising your financial well-being in the future.
Start saving early
Women tend to save for shorter periods of time, which can be a disadvantage when it comes to building wealth. To overcome this, start saving as early as possible. More than 50% of the investment portfolio you will have accumulated by age 65 actually comes from money invested in your 20s. Even if you can only invest a small amount each month, the power of compounding means that, over time, your investment will grow significantly.
Take calculated risks
Women tend to take fewer risks with their investments, which can limit their potential for growth. While it's important to be cautious with your investments, taking calculated risks can help you achieve higher returns. When structuring an investment portfolio, it is important to consider what the goal is, what the time horizon is for such a goal, and how much risk you are willing and able to assume to achieve the investment goal. The combination of these considerations culminates into an appropriate asset allocation for your needs and ensures that you neither assume too little nor too much risk for your requirements.
There is an abundance of research that points to the asset allocation decision as the primary driver of investment returns of a portfolio. That is to say, how much of your portfolio is allocated to local and global equity, cash, government, and corporate bonds, as well as property, determines the success of your plan.
While women may be more risk averse, a CERTIFIED FINANCIAL PLANNER can assist you in structuring an appropriate portfolio, set out what kind of returns you can expect from the portfolio, and guide you with regards to how much volatility you can expect from such an investment over time.
Educate yourself
Investing can be complex, and it's important to have a basic understanding of the markets and financial instruments. Take the time to educate yourself by reading books, attending seminars, and speaking with financial experts. The more you know, the better equipped you will be to make informed decisions about your investments.
Network and collaborate
Building a strong network of like-minded women can help you gain knowledge, share resources, and support each other's financial goals. Consider joining women's investment groups or networking events to meet other women who are interested in building wealth.
*Not intended as financial advice but for information purposes only.
Last word
By taking these steps, women can create a different path toward wealth creation that takes into consideration their unique challenges and strengths. With determination, discipline, and a willingness to learn and take calculated risks, women can achieve financial success and security.
At times, your own biases and fear of the unknown can stand in the way of you achieving your financial goals. Taking the decision to start and then partnering with a CERTIFIED FINANCIAL PLANNER that understands you and who can act as a coach and accountability partner is a great way to embark on your journey to creating and safeguarding your hard-earned wealth.
Palesa Dube, CFP® is a Director and Wealth Manager at Wealth Creed. She is a practising member of the Financial Planning Institute of Southern Africa and is the Financial Planner of the Year 2022
PERSONAL FINANCE