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Women and money

by Neesa Moodley | Sep 25, 2013

When it comes to investing and financial planning, women have a unique set of circumstances and issues, such as longevity and maternity leave, which they need to take into account.

Living longer on less

In May this year, Statistics SA revealed that despite one in 10 South Africans being HIV-positive, life expectancy rates have increased. The life expectancy of South Africans has increased by a year to 59.6 years (57.7 for males and 61.4 for females). Higher income earners can expect to live until around 80 years old and again, women are expected to outlive men.

Nolwandle Mgoqi-Mbalo, Stanlib’s head of strategy, points out that women living longer means that they will face greater expenses than men in the long term. “At one end of the spectrum, they will need to meet their basic necessities for a greater number of years. This will include healthcare, rent, utilities, food and all the other living expenses,” she says.

Jaco-Chris Koorts, a product manager at Glacier by Sanlam, says on average, women tend to live five years longer than men. This means that a woman who started investing for her retirement at the age of 25 would have to save 11 per cent more than her male counterpart in order for her retirement savings to last to her projected life expectancy.

Time off to have children

“Maternity leave and the decision to take just three years off work in order to raise a baby, undoubtedly has an adverse effect on a woman’s retirement savings,” cautions Mgoqi-Mbalo.

She says if you choose to do this, you should avoid cancelling any investments or retirement savings contributions at all costs. “A leave of absence from work can be disruptive and women in this position often take a break from investing as well. This can throw out your investment calculations and cause a delay in reaching your savings goals. Ideally, you should find a way to contribute a minimum amount towards your retirement savings,” she says. At the very least, do not cash in whatever investments you have already accumulated.

Koorts says if one looks at a normal retirement age of 60, a working mother who has taken a three-year leave of absence will have to contribute 20 per cent of her income towards her retirement savings when she returns to work. “This is based on the assumption that she was contributing 15 per cent of her income towards retirement savings before she took the leave of absence. She has to increase her contribution by five per cent on returning to work,” he says.

10 money issues to discuss with your partner

Talking to your partner about money is usually uncomfortable for women but there are some discussions you just have to have:

1. Which type of marriage agreement would be the right option?
Get advice and make sure you understand the financial implications of your marriage contract – especially in terms of your partner’s debt.

2. Does he have a budget and does he stick to it?
This will give you an idea of his attitude towards money and whether you are involved with a spendthrift or hoarder. Opposites attract, so hopefully you are not both spendthrifts. Also use this opportunity to discuss how you both contribute to the household finances.

3. Does he have sufficient risk cover, such as death and disability cover?
Men have a sense of invincibility and some even hate the idea of someone profiting from their death, but if you rely on him financially or have children this is a non-negotiable. Even if you are financially independent, who will cover his income if he is unable to work?

4. How much debt does he have and for what purpose was the debt incurred?
Again this will give you an idea of his money management skills but this is also important as his debt could leave you financially vulnerable. If his debt is out of hand, do not play the blame game but rather help him to find a way to get it back under control. Sometimes men take on debt to keep up appearances, especially to their partners. Let him know that being financially secure is more sexy than the latest BMW.

5. What is his credit rating?
This will affect your ability to buy a home together – if he has a poor credit record you may not qualify for a home loan. Again, use this opportunity to work together to get your finances in order.

6. Where does he see himself in five years with regards to his career and financial goals?
Are these in line with your ambitions? It is far easier to reach your goals if you share them with your partner. This could be paying off the house in ten years or taking a year-long sabbatical.

7. Does he have savings and/or an emergency fund?
You don’t want a partner whose only emergency fund is his credit card. What happens if he loses his job? Is he making sufficient provision for retirement? If you are a stay-at-home mom is that retirement provision enough to support you in retirement?

8. Separate accounts or joint accounts? How will the expenses be split?
A woman should always have her own bank account where her salary is paid, as joint accounts get frozen when the principle holder dies. You may however want to have a joint bank account for household expenses.

9. Does he have a valid will and does it need to be reviewed?
Make sure he has updated his will to include you and that everything isn’t about to be left to his mother! It is always best to have an advisor draw up both of your wills together so that you make the most of the tax provisions.

10. Does he support children from a previous official or common-law marriage?
A lot can be said about a man who looks after his children – it sets a good precedent for how he will treat you. But also be aware that this obligation needs to be included in his budget and it would also have ramifications for estate planning in terms of his estate and pension fund.

Additional information provided by Natasja Norval Hart, member of the Financial Planning Institute

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