Women remain financially vulnerable, and it’s time we did something about it.
I was reading recently that women are tired of being spoken to differently about finances – treated as if they are different from men. This is an important point. There is nothing that annoys me more than when an adviser starts talking to my husband about our investments and ignoring me.
But there is also the reality that finances affect women differently: we are the main caregivers, we live longer, and salary discrimination still exists. But there is also the psychological aspect of our upbringings and history of women and money.
I have a confession to make: despite being a financially independent woman contributing to our family finances, buying my own cars, and handling my own investments, there are days where I daydream about handing over all my financial worries to my husband – or just winning the lotto!
A woman’s unconscious need to be taken care of is not an uncommon fantasy – it is in fact one that many women live out every day. It is so common that American psychologist Colette Dowling described it as the “Cinderella Complex”, named after the fairy tale in which a poor, dirty orphan is miraculously turned into a princess when the handsome prince falls in love with her.
This idea of being taken care of was highlighted by a survey in the UK that asked men and women about their fantasy partner. The number one dream man for women was a fireman, followed by a soldier and then a businessman. We want someone who can carry us out of a burning building and protect us physically, but failing that, we want a man who can take care of us financially.
This need for financial protection is not unfounded. We know from South African salary surveys that women are paid on average 30% less than men. In some cases, it is for the same job, where executive pay comparisons show that women earn 28% less than men. The PWC Women in Work Index shows that even in OECD countries, women earn on average 16% less than men. So it’s no wonder we sometimes wish a man could come along and save us financially.
But even if he does arrive on his white horse and pay all our bills, how long will that last? Today we live in a different world where we know that irrespective of our current circumstance, 80% of women will manage their own finances during their lifetime for various reasons: remaining single, getting divorced or being widowed.
In South Africa we have a really serious issue with the financial pressure on single mothers. The Old Mutual Savings and Investment Monitor survey, which only interviews working, urban mothers, found that around half of them were raising children on their own and only 12% received regular income from the father. We are not even factoring in unemployed or rural women in this figure.
The effect of divorce
Every year around 25 000 marriages in South Africa end in divorce, which equates to a divorce rate of over 50%. Interestingly, most divorces are initiated by women. Although we don’t have official statistics in South Africa, there are numerous studies in developed economies that show that a man’s income increases after divorce, while a woman’s income declines substantially.
This refers back to the earlier point of earning less. Apart from real pay discrimination, women also tend to work in caretaker roles such as teaching and nursing which are paid less, or they take on part-time work or a career that offers flexibility rather than a good salary in order to be the main caregiver for the family. The PWC survey found that in the 37 most developed economies in the world, women undertake 75% of childcare responsibilities.
This can make sense in the family construct – one parent will be the main caregiver and put the children first. It is challenging to create a dynamic where that is shared equally. While that is understandable, what is not OK is when the main caregiver, usually the mother, now feels she is not part of the decision-making process when it comes to the family assets, or even worse, she doesn’t ensure that there are assets to begin with!
The downside of being a stay-at-home mom
I can quote you so many stories where a woman chose to be a stay-at-home mom and keep the household going as her husband had a very high-powered job. Invariably these women lead a great lifestyle but the long hours at work do not lead to a happy marriage, and so often the result is divorce.
The divorce settlement is often a 50/50 split of assets which sounds fair, but the problem is that other than the house which was partly bonded, the only other asset is usually the husband’s pension. A high lifestyle doesn’t generate investable assets.
While the wife receives half the pension and half the equity in the house, it is barely enough to buy a home for her and her children, let alone provide a decent income. In most cases the ex-spouse is only required to pay the wife a rehabilitation income for two years. In those two years, it is extremely unlikely that the ex-wife will be able to build up a career to match the income of her ex-husband. He will continue to be able to afford his new life, but her lifestyle will be significantly changed. A woman whose career took a back seat will struggle to ever catch up on her husband’s earning capability and there is a good chance she will end up being more financially responsible for the children than she expects.
Even if you have the perfect marriage and never get divorced, statistically your husband is more likely to die before you. This is not a subject we like to talk about, but we cannot shy away from it as we need to ensure we are financially prepared for this reality.
The big-girl-panties talk
So, time for the big-girl-panties talk. Understand the importance of building up assets, especially if you are a stay-at-home mom or not the main breadwinner. Most marriage contracts are in community or property or ante-nuptial with accrual, so half of the marriage’s assets will belong to you.
Most married women run the household budget and therefore have a direct impact on what is spent and therefore what there is left to invest. Even rand spent is a rand not invested. If you control the day-to-day finances, why not take control of the investments as well? If you are not doing it already, start your own investments, get financial advice and start looking after yourself.
Further reading on this topic