Money is freedom – it’s as simple as that. Yet we are told repeatedly that there is a financial gap between men and women and it’s not getting any smaller. This discrepancy in finances (and freedom) is worryingly across the board from pay to super. What no one seems to talk about is how to close this gap – this it seems is something for women to work out how to close on their own.
To me as a financial planner, a man, and a father of two daughters, this seems really unfair.
I have dedicated my life to helping people sort out their finances, helping all my clients to feel empowered and free as well as guiding all towards a greater understanding of where they are going and how they are going to get there.
I personally think that understanding starts with talking.
It seems to me that men talk about money – all the time, whereas my observation is that women, or at least the ones I know, don’t seem to talk about money very much at all. This is why Empire made a point of running a female client only event late last year celebrating how proactive our clients are and highlighting the importance of financial empowerment for all women.
We chose the Deputy Premier, the Hon. Liza Harvey as speaker – as she is an inspiration and the Path of Hope Foundation as our charity – because financial literacy ultimately enables freedom and limits the capacity for one person in a relationship to have complete control over the other through controlling their joint finances. In all of our client meetings we advocate both partners being present.
Talking about an issue is a good start but to really know how to fix a problem, it is important to first figure out why the problem occurs in the first place.
There are a number of reports about the financial gap between men and women. One from Westpac in 2015 said women would need to work an extra 15 years to retire with as much super as men do. The average superannuation balance for working woman is only 55%, so almost half, of that of men. By the time they retire that gap is somewhat closed, but women still only retire on two-thirds of the super men do.
One of the key reasons put forward for the discrepancy in retirement benefits is the difference in remuneration for men and women, with women often coming off second best in the pay scales.
I am not a recruitment or human resources expert, so I cannot comment on the reported inequality in pay.
At the same time, I can say with authority that how much somebody earns is not necessarily the best indicator of how rich somebody is, or will be.
We see some very modest income earners outperform income high flyers in the retirement benefits stakes, because like all things money, how much you end up with depends more on how much of it you choose to save, rather than how much you earned in the first place.
The other big impairment on superannuation benefits is the result of how much time women take out of the workforce to raise their families.
Superannuation balances are the result of how much is contributed, for how long, and how hard you get it to work for you. The longer you are not contributing to your super the more profound the impact will be.
The difference in balances may not be important with married couples who share their financial resources. But, increasingly, marriages do not always last, more women are staying single and entering retirement without a partner.
So this is where for women being financially literate and taking proactive financial steps play a crucial role.
Traditionally and stereotypically, the men were the main breadwinner of a home, and therefore took charge of the finances. That has changed over the years, with women often being the joint, or main breadwinners in a household, so it is important that their understanding of finances develops with that change in their role in the family.
Good advice is key here.
Boosting superannuation benefits, and having an outcome that bucks the trends may come down to early advice and action. Effective cashflow analysis, budgeting and a financial advisor like myself to assist with sticking to it, can mean that you keep more of what your earn, regardless of whether it is more or less than the man in the next cubicle.
Paying off debt, securing your accommodation, and boosting your investments, including tax-effective salary sacrifices to your super, with a suitable investment strategy (instead of the default your employers fund gives you) will see you streets ahead of your peers, male or female.
For those starting a family together with a partner, taking advice on superannuation splitting can avoid the issue of women taking a hit to super during the child rearing years. Up to 85% of your spouse’s superannuation contributions, employer or personal, can be paid from their account into yours. This of course works both ways, and a wife can transfer her contributions to her husband too. The option has been around since 2007, and was legislated specifically to prevent this inequality in super balances. Yet in our experience it is an option few people know about or exercise unless they take the right advice to do so.
We often look to government to redress this inequality. Government action is of course important and welcomed. But it is not enough in isolation.
Rarely will others do the financial heavy lifting for you.
For women to close the gap, it’s vital that they are financially literate, and that they take early action, and get sound advice to assist them.
And that’s good advice for women and men alike.