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Empowering women on their journey to financial success

New data from Momentum Corporate shows where women need to take ownership of their financial success

Women are breaking glass ceilings and have achieved incredible success across all disciplines in the last few decades. Yet opportunities for women in respect of financial education and employment remain unequal. This Women’s Month, women need to empower themselves and take ownership of their financial destinies says Emda Fourie, Head of Employee Benefits Consulting at Momentum Corporate Advice and Administration, as she shares some practical steps to achieve this.

There is still a persistent gap between what men and women are paid. “According to Global Gender Gap Report 2021, as the impact of the COVID-19 pandemic continues to be felt, closing the global gender gap has increased by a generation from 99.5 years to 135.6 years. So, if you are a woman, on average, you’re earning up to 32% less than your male counterparts. It’s estimated that it’ll take close to 135.6 years still to achieve gender parity,” says Fourie.

And women are more financially exposed than ever, as a result of the pandemic. The latest Momentum | UNISA Household Financial Wellness Insights says that women, who make up 51.1% of the South African population, were hardest hit by the lockdown. Just over a million either lost their jobs or were prevented from working.

She explains that local women face some specific challenges. “The latest Stats SA General Household report, reveals 41,8% of the households in South Africa were headed by women. Approximately 7.2 million South African women are either the sole or the main income earners in their families. This means many South African women have the challenge of prioritising finances and financial planning while continuously juggling a myriad of other daunting responsibilities exasperated for those who are single parents.”

Fourie says that one of the areas where women are falling behind badly is planning for retirement. This is particularly concerning because, on average, women tend to live longer than men. “Just over 40% of the members on Momentum Corporate’s FundsAtWork Umbrella Funds are women, however 88% of these women have an average retirement replacement ratio of 21.3%, if we only consider the retirement savings they have through their employer sponsored employee benefits offering. This places them in what we classify as the danger zone when it comes to the level of income they can expect in retirement,” she explains.

The retirement replacement ratio is the percentage of your final monthly salary, just prior to retirement that you’ll be able to translate into an income in retirement. Fourie says a healthy financial situation is being able to expect between 70 – 75% of your final salary to be paid as a retirement income. “This highlights the bleak retirement prospects these women face if, on average, they can only expect 21.3% of their pre-retirement income as a retirement income. Will retirement be dining on fillet steak or tinned beans, caviar or cat food?”

Sadly few women take any immediate actions to improve their situation. Fourie says their data shows only 7% of women made additional voluntary contributions to their retirement fund in June 2021.

The Momentum Corporate data also highlights high levels of underinsurance across women in their base, with 78% of women having an average life cover replacement ratio of only 24.16% again placing them in the danger zone. “This means that unless they have life cover from other sources, the families of these income earners are likely to face serious financial challenges should they pass away,” says Fourie.

“As women, we work really hard for our money but we often fail to make our money work hard for us. In the midst of our busy lives, we find a host of excuses for why we can’t find money to save. We often forget that retirement fund contributions are tax deductible, which means that up to certain limits, the more you pay to retirement, the more tax you save. We also tend to overlook the magic of compound interest and how small, regular savings can grow into a much larger amount over time.”

“Just as it takes discipline to follow a healthy lifestyle, it takes a lot of discipline to sit down, prioritise needs over wants, and draw up a monthly budget and financial plan. But your future self will thank you for doing this,” says Fourie.

Fourie uses a simple example and says that a smart move is to put those Covid savings to work for your future and channel them towards your retirement savings. “Let’s say you count up your Covid savings, such as reduced travel expenses, wardrobe savings, etc. and they come to R500 a month, or R16 a day. A 35-year old who is due to retire at 65 will find that this relatively small additional investment can increase to a much larger amount of R1,031,422 by retirement, thanks to compound interest (10% per annum),” says Fourie.

She shares some practical steps all women should take to make their money work harder.

  • Create a financial plan. It’s the bedrock of your financial health and is of utmost importance, particularly in these times of uncertainty. Think about what you expect at retirement, in emergencies or in the event of death or disability. Then test if you are on the right path.

  • It is never too early, or too late, to start saving more. Most employer-sponsored retirement funds allow you to increase your retirement contributions. Work through your bank statement and find those items which you pay for but never use such as added memberships, etc. Rethink those and only keep on paying for prescriptions that you really use and that really add value to your life.

  • Consult the experts. Talk to your fund’s benefit counsellors to understand your group benefits. When it comes to big financial decisions, make sure you also talk to your company’s group benefits financial adviser or your own personal adviser. They can help you to understand where you will end up at retirement and help you adapt what you are doing to meet your goals.

  • Know your money personality – spender, saver or somewhere in between? Our money personality impacts our financial choices. This self-awareness will help you understand what triggers emotional decisions and encourage you to think twice before making a choice.