Personal Finance — and why it is particularly important for us ladies

You might argue that Personal Finance is a topic of high relevancy and interest to everyone. Fair enough — and still, there are several factors which make it even more important for us ladies.

First, women have a higher average life expectancy, which increases the need to plan for our future and — more specifically — for retirement. We are also more likely to care for dependents both emotionally and financially, not only in case of divorce or separations. And nevertheless, women are to this day still less likely to have significant savings and investments which could provide financial stability. Why is this the case?

The percentage of females working on reduced schedule is higher than among men, for various reasons — being it child care, conservative family arrangements, lower interest in pursuing a career (which seems to be changing slowly but steadily), different personal priorities apart from work, or the choice of career. Typically, female representation is strong in the services sector which is traditionally not known for its high salaries nor excessive possibilities of pay raises, and furthermore is consisting of a high share of unstable and non-full time jobs (many of them not offering traditional defined-benefit pensions or employer supported retirement plans).

Generally, women have been found to be less risk averse than men — which can result in an advantage in financial matters (given we are not as likely to lose money in an investment), however becomes gradually more of a concern in times of interest levels hitting rock bottom (which require a higher degree of risk to provide a certain return). Females are often more likely to prefer putting their savings into a low risk investment, which typically implies limited returns (often even negative if adjusting for inflation), and leads to lower wealth accumulation over time.

On average, women acquire in total less years of working time — for a broad variety of different factors including personal leave of absence for child or elderly care, or stepping back to focus on the partner’s career. The probability of prioritizing care-giving to family members over work is higher among women than men, disclosing a double dilemma: family home care is generally unpaid, and comes with a (temporarily) reduced work schedule or leave which is reducing not only income, but also amount of working experience gained and total working lifetime.

Still today, our interest and level of education in financial matters seems to be lower compared to men. Why? I simply cannot believe in us being “less talented with numbers”. I rather experienced that, there is an unhealthy mix of several potential drivers. Ranging from society (traditionally excluding females from finance related discussions) and traditions (letting the partner take care about the joint finances), to different priorities (focus on family than on oneself and one’s finances).

Furthermore, the limited offer of available female-targeted financial education might lead to the wrong conclusion that it is simply not as relevant to us, or it might cause a feeling of shame (driven by over-representation of male participants). Last but not least, not few of the available materials target an advanced audience which has already been exposed to financial planning, which could lead beginners to feeling intimidated and less willing to start immersing oneself in the matter.

Last but not least, the well-known and much-debated gender pay gap does not help women to build up financial independence either. Pay inequality directly results in female’s lower incomes from social security and pensions (given those are typically determined by wage history and time worked in a lifetime), and it impacts absolute saving levels. In addition to that, it is associated with fewer tax incentives fostering retirement savings (given this benefit is not as attractive for lower levels of income).

Altogether, many different reasons leading to us ladies accumulating less savings and investment over our lifetime. Now, it is on us to turn it around! There are more than enough reasons that this is the time to change the game: life expectancy is further increasing, partnerships are tending to be more unstable with partners being more independent, and there is significant changes going on in the work place (type of jobs, work contracts, job length). Thus the relevance of knowledge in personal finance peaks! And the benefit of today’s connected world is that nobody needs to face these challenges alone — education is available for free, anytime and anywhere.

Let’s debark on this journey together, shaping our finances and taking our future into our own hands!

What do you think? What holds you back? Or what made you move? Let’s discuss! Looking forward to your comments.