This recently released report reinforces what we’ve been saying for some time now – women are increasingly choosing self-employment for lifestyle and flexibility, but are short changing themselves with lack of earnings and wealth and retirement planning.
Here are our key take-outs and direct quotes from this latest report produced as a collaboration between Edith Cowan University, University of WA, RMIT University, Business Foundations, StatePlus and Women in Super, and download a copy of the PDF to read the entire document:
Self-employment as a small business owner has great appeal to men and women. However for women, self-employment often has a detrimental effect on their retirement savings. This is due to the ‘perfect storm’ of these four factors common to self-employed women:
- They are clustered in the low risk, low profit personal service sector
- Their business often has a low turnover
- They are often motivated to start their businesses because of a need to balance work and caring responsibilities and then subsequently operate their businesses in a way which allows that; and
- They often have poor financial literacy.
This study follows on from previous research which found that self-employed women were less prepared for retirement, and had fewer strategies in place than their male counterparts. That research also raised concerns over the level of financial literacy which existed within the small business community in regard to retirement saving options, particularly among self-employed women.
This, coupled with there being no legal, mandatory requirement for self-employed people to make superannuation contributions, results in this cohort having significantly lower superannuation balances than the general PAYG workforce.
In fact, during the study the group was asked what they would do with a hypothetical $100 at the end of the working week, after all expenses had been paid. In every seminar the majority or sometimes all of the audience nominated items for their family, such as clothing for their children, putting it towards home renovations, occasionally more non-essential items such as alcohol.
None of the women nominated putting the hypothetical $100 towards their own personal financial future.
All of the women put the needs of their family or their business first, and themselves second.
Furthermore, when asked the very direct question, ‘are you actively planning for your retirement?’, 58% answered no. A follow-up question asked ‘when do you plan to retire?’. With 32% planning to retire within the next 10 years this is not good news.
However, the study involved giving the women some financial literacy training, and what was incredibly pleasing to find was each of the study participants had done something post the training seminar to either improve their own financial situation or that of their clients.
This suggests receiving the right and relevant advice may not only help the individual small business owners but have a flow on effect to others.
To read the full report, click here to download a copy.