Walking the talk – Financial Planning for Women

When Ginger Rogers was asked how she felt about being paid less then her partner Fred Astaire, she supposedly quipped that Fred was a great dancer, but her role had been to dance not only as well as him but to do so backwards and in high heels. Her point about inequality was made with humour which is why it sticks in the mind. Nevertheless, many women have to handle such seemingly impossible roles on a daily basis, juggling their professional lives with running a family and a home.

Until recently, very little notice has been given to the potential losses faced by women who take career breaks to bring up a family. And women have been finding out much too late in the day that their own financial security during these breaks was at risk. An average working woman will break from her career path for as many as 11 years because of family commitments. Such enforced interruptions compromise earning opportunities, damage short term saving plans and threaten potential retirement prospects.

How child bearing affects financial planning

Personal finances can fracture at the very outset of child bearing as illustrated by a survey from Maternitycover.com which shows nearly half of women (45%) actually got into debt because their maternity leave pay was simply not enough to cover the extra costs incurred by child-bearing. And, as many as 68% of women returning to the workplace after childbirth found that they earned less than they did before having a baby.

As a financial advisor, it is pleasing to note the increasing number of women who exercise personal financial decision-making and control. And no one will be surprised to hear that women reveal themselves to be at least as capable as their men-folk when it comes to mapping out and managing a financial plan. Women don’t buckle when faced with a call to action. When the time comes to make an investment decision for a future event, women do so with conviction.

Investment decisions must deliver not only on capital gain but also on peace of mind

The biggest potential threat to future financial security is lack of preparation. Careful financial planning gives women the opportunity to concentrate on where the financial strains of tomorrow will be in order to iron them out today.  We all know that a secure financial future doesn’t just drop out of the sky. Nevertheless, taking decisive action years before the anticipated occurrence of an event demands a concerted effort.

To begin with a plan must identify the primary financial risks faced by professional women generally. There are those 11 years that a woman may be absent from earning an income. But even here, early planning can shore up income provided a strategy has been put in place at the outset. Three layers of protection should be considered: life insurance, critical illness and health insurance cover. This will ensure all is not lost for your family should something happen to you. Prevention is the better cure. Risking a rushed investment purchase could leave you and your family high and dry. A well thought through strategy brings peace of mind; and that, in the hour of need, is priceless.

For women planning a family, health and medical care cover is particularly important

It’s worth checking today exactly what benefits are included in any such cover you have or are considering. And don’t forget to check through the medical care cover offered by your partner’s employer. How far does that policy’s list of benefits stretch to include the family or future family? For example, does it include maternity care? If so, will it cover childbirth costs or is the sum for such care capped? Given that the cost of a normal delivery on the popular maternity ward here at the Matilda International Hospital starts from US$26,000 you’ll need to know whether any of the bill will be down to you to settle. If so, it’s worth checking now what health care insurance packages are available that will take care of those fees when the times comes.

Financial advisers fully expect to stay with their clients through the tough times as well as the good

A key element of purposeful planning is to monitor the progress of any set strategy at regular intervals. No established plan can run itself – and as changes in your life occur, new job, new family, new location, new ambitions may reveal themselves. Such changes should always trigger a review to check where your money is invested and whether your investments are still appropriate in the light of the new events you may be saving for. At Pyrmont Wealth Management we guarantee to walk our talk with our offer of a free financial health check to get you started or re-started drawing up your own bespoke financial roadmap.

What needs to be discussed at such a check up? Certainly, the protection issues for yourself and your family as described. But it will also be the right time to look at the scope of any long term savings you may wish to commit to for future retirement. It is intriguing to note from our own research that while 66% of women say they expect to carry on their current lifestyle in retirement, over 50% admit they do not contribute to a company or personal pension. And last time we surveyed older women on this subject we discovered that just 20% receive an adequate pension to support a retirement lifestyle of their choice.

How a professional financial health check can help

With effective preparation a sufficient pensionable income becomes not only plausible but realistic. The structuring and implementation of a long term savings plan that is both flexible (one that will permit time out when family pressures cannot be ignored) and robust enough to withstand an expatriate woman’s chosen career path (one that can accommodate and support job changes, company switches and location moves) should be given priority.

Again, we learn from statistics that women have more years in retirement to make provision for than men. On average, women will outlive men by five years – that’s five more years over and above the average retirement term that they must save up for during their working/earning years. And women will on average retire five years earlier than their male partners. So, on top of the retirement term itself, another decade’s worth of living has to be provided for.

Financial advice and planning is also important for Expats

There are a number of positive aspects that expatriate professional women discover when they set about sifting through financial products and services to match their plan’s ambitions and targets. To begin with, career women find that working overseas means they are more likely to be earning a higher salary than their peers back in the home country. Expatriate employment packages can still cover a number of living expenses over and above the pay grade, generating an increased disposable income some of which can be made available to finance these future plans. A significant further advantage to working nomadically, as expats tend to do, is the opportunity to invest in international cross-border pensions which have inherent advantages built in both within the saving term and when it comes to actual retirement.

And there’s plenty of encouraging data confirming that more women are seeking professional advice to learn the steps that must be taken to ensure independent control of their financial futures. So, whether it’s a pair of Ginger Rogers-style high heels that you’re looking to spend your money or some other luxury – it will be these practical steps that’ll give you the means to keep on dancing.

Simon Parfitt, Director Wealth Management – Pyrmont Wealth Management