There are unique financial challenges faced by women, but the savvy ones have develop ways to take control and build a bright future for themselves and their family
By Amabella Jimenez
Women hold the key to many financial decisions. They are more likely to manage household finances, make most of the choices about purchases, and even decide on investments.” Yet, according to various statistics, they are at the losing end in the financial equation.
Women live longer than men by an average of seven years and need 20% more for retirement. They earn on average 25% less than men. They save less than men do for retirement since they take off from work for around 11 more years than men, to raise children or look after aging parents.
Aneth Lim, consumer education head of leading multinational bank, says “Today, most women face the twin challenge of developing their careers and raising their families.” She adds, “As a mother, you need to make sure that all bills are paid and that there is always enough cash to tide you over should an emergency arise. As a working woman, you have to look out for your and your family’s financial future – saving up to provide for your children’s education and ensure a comfortable retirement for you and your spouse.”
Single women face their own challenges. Businesswoman Angeli Pangilinan-Valenciano, notes, “I think the landscape today of the single woman has a tougher terrain. Women are marrying at a much older age and careers take precedence over marriage.” With no dependents, they can be susceptible to “false advertising, juicy sales offers, and marketing tactics” as “the market has clogged us with so many choices.” She adds, “With no children to support, single women end up with so many things they don’t need, bought out of credit card minimum balance systems, and they end up working to pay their credit cards!”
Josephine Banogon, finance head and comptroller of Pilar Development Corporation and a graduate of the Registered Financial Planner program, thinks the other extreme is the single young Filipino career woman or overseas worker burdened with “parents and other kin who are depending on them for support and as a result there’s nothing left as savings for their future needs.”
Angeli says that many such women are expected to pay for their parents’ expenses when they retire without savings. “Sadly this is a normal situation now in the Philippines because as a country we were not taught how to save nor invest by our government. They are expected to help educate their siblings, sometimes foregoing their own education.”
There are unique difficulties for single parents are also. Josephine says “they are left to single-handedly raise the needs of their children. To this effect, they soon find themselves without any money left for them to save for their future needs.”
How do women, single or married, handle these financial challenges? And beyond mere survival, how can they prosper financially? There are many stories of women who have earned a reputation of being skilled at handling money, able to manage their household budget well, and make savvy financial decisions that have led them and their family to a bright future. These are what we call money smart women.
Some of them are innately good at finances but many have to learn the hard way, by force of circumstance. Either way, they have certain habits that helped them to take control of money and achieve financial prosperity. Here are the seven habits of money smart women:
Habit#1: They take charge of the household budget
Women have traditionally been the keepers of the family purse. A 2008 Pew Research Center survey of couples in the US showed that by a ratio of nearly two-to-one, women say that they (45%) rather than their partner (23%) manage the money in the household.
There are several possible reasons for this. Aneth says, “I suspect it’s because women are better at sweating the details. We can see the forest and the trees. We know how much we need to settle all the family’s obligations, and make sure that they are met.”
Josephine believes it’s because “women normally are the home managers, and are more diligent and prudent in handling money.”
And that’s usually because “they are not risk-takers in terms of investments,” explains Chona Jacinto, senior vice president for marketing at Accette Insurance Brokers. She adds, “Most married working women focus on their family needs rather than spending night-outs with friends.”
In the Philippines, that ratio revealed in the Pew Research study would likely be even higher. Angeli, who manages the career of a number of celebrities including her husband, Gary, thinks this is largely cultural. For one, “In the past, the man was the breadwinner, working very hard while the woman stayed home to take care of the children, so the man naturally turned over his paycheck to his wife to manage.” Further, “The Philippines is also very much a matriarchal society. The mother traditionally runs the household so she runs the budget of the home.”
But while it’s largely true that women rule household finances, that doesn’t mean they all do a fantastic job. The Australia-based Financial Literacy Foundation released its “Financial Literacy – Women Understanding Money” report in 2008, which showed that “although women are generally confident in their ability to manage money, some do not have good management habits, both for issues where confidence in ability is high, such as budgeting, saving, and dealing with credit cards, and for issues where confidence in ability is relatively low, such as investing.”
For instance, around half of the respondents said that they don’t regularly budget for day-to-day expenses, and around a fifth reported that they are not easily able to keep track of everyday spending or do not think about ways to reduce their spending.”
Money-smart women not only take the cudgels of the household budget but also are disciplined when it comes to budgeting and savvy in terms of cutting costs.
Habit#2: They maintain their own financial independence
Many married women make the mistake of being dependent on their husband for their financial security. For one, women are more likely not to join the labor force, temporarily stop working due to a pregnancy or take care of young children, or permanently quit work to focus on managing the household. Many such women don’t have bank accounts, credit cards, and brokerage accounts under their names. They are in danger of losing their financial identity, which can be very detrimental if they end up separated or widowed.
Various US statistics offer staggering conclusions: almost one in four women is broke within two months of a husband passing away; over 75% of all women are eventually widowed at an average age of 56; 53% of women are not covered by a pension compared to only 22% of men; and 87% of the poverty-stricken elderly are women.
True, dual-income households are becoming the norm in many countries these days given the economic reality. MasterCard International’s “MasterIndex of Women’s Advancement” 2008 survey showed that the female labor participation rate in the Philippines has been steadily growing, from 56.55% in 2005 to 59.53% in 2008. The Philippines also has the highest index score of 86.82 across 13 Asia Pacific markets, meaning women in the Philippines are fast closing the gap in achieving parity with men in the areas of labor force participation, tertiary education, managerial positions, and above median income.
But this doesn’t always translate to financial security for women on a personal level. Liz Perle was a high-powered publisher at Prentice Hall, Addison Wesley, and William Morrow/Avon. In her book “Money, a Memoir,” she confessed that despite her business acumen, “I had drunk the cultural Kool-Aid that told me that having a husband meant social and fiscal security and that I wouldn’t have to deal with my own financial well-being.”
In an article entitled “Men, Women and Money” that appeared on Psychology Today, the writers Olivia Millan and Karina Piskaldo observed that “Women are raised to believe they won’t be good at [money] and, if they’re lucky, some man will take care of the details of money and investing.” They added, “Their biggest challenge in relationships is not losing themselves; it’s holding on to their own sense of self.”
Aneth warns such women to “not leave all the financial decisions to your spouse. It is important that you can stand on your own two feet financially.” She adds, “If you are working, consider having your own checking and/or savings account, your personal credit card, [your own] insurance, and personal investments. If you are not working, talk to your husband about how you can enjoy financial independence – maybe he’ll give you a monthly budget and you can manage it as you see fit.”
Even if you choose not to work full-time, there are still other ways to earn extra income to maintain a certain level of financial independence. Angeli says “a laptop, having the right software installed, a cell phone, and a good broadband or Wi-Fi connection can solve that problem.” She explains that there are many jobs you can do from home, such as editing, writing, Web or graphic design, audit, and consulting.
Josephine even proposes that couples who decided to let the wife stay at home full time should allocate from the household budget an amount for her salary for managing the home. “She will have an income which she can use to save for her present and future personal needs,” she explains.
The other issue is the tendency of women to put everyone else’s financial well-being ahead of them, given their nurturing instincts. Suze Orman, in her book “Women and Money,” explains “Your inner nurturer reigns supreme; you do for everyone before you do for yourself.” As such, women save money for their children, aging parents, and other family members. The Financial Literacy Foundation noted that “women are less likely to have personally thought about long-term financial plans for the future and for retirement.”
Suze emphasized that “By taking care of yourself financially, you will truly be able to take care of those you love. Becoming powerful in a lasting, beneficial way is never done at the expense of others; it is done for the good of all.”
But it’s not just married women. Singles can just as be neglectful of their own financial security, especially in cultures where they are expected to provide financial support to their parents and younger siblings. Angeli says that “sometimes you want to be the Mother of Mercy to everyone to a fault! Sometimes, you do not have the finances, but you end up trying to help when you have other obligations to settle that are commitments you must first pay.”
To be money smart, whether married or single, you need to accept that you really need to watch out for your own good, because that will allow you to help others. As Josie says, “As a single woman, I’m responsible for myself even though I know my family’s around me. To be financially independent is very liberating.”
Habit#3: They work with their significant other as a team
A new study by Allianz Life Insurance Company of North America Finances confirmed the conventional wisdom that finances are often the cause of marital conflict: “Money is 20 times more likely to trigger arguments in a marriage than sex, particularly the fear among couples that they are not saving enough money or that they are in too much debt. Women are more likely to attribute arguments about money to issues of power and control, while men are more likely to attribute it to trust.”
The Psychology Today article noted: “Many individuals have a troubled relationship with money. Then, when they get into a couple relationship, money matters get explosive. Other people may have no problem with money individually; the trouble starts after they’re in the relationship.” That’s because they come from different – often polarizing – money backgrounds, perspectives, and personalities. And they rarely, if ever, talk about these differences.
That’s why Angeli explains “an open communication line with your husband [or wife] through regular talks is wise. You must discuss financial issues so both of you are aware of financial responsibilities and commitments.” Aneth concurs, “It’s recommended that you schedule money talks with one another, regardless of whether you are both working or only one is. During these talks, you can discuss a whole range of things – how you are managing currently, savings for your future, and your financial aspirations.
Psychology Today concluded, “Spouses who start talking genuinely about what they like about each other’s money style create an atmosphere of safety and non-defensiveness. Once such a way of talking about money is established and once couples understand the positive intent of the partner, they can then work out a solution to almost any problem, a solution that best fits their own unique needs.”
Angeli says, “A husband and a wife must also mutually agree on what to purchase when disposable income increases. Although some women may disagree with me, I believe that the husband, if responsible, must have the last say, as a woman must submit to the husband’s decisions (that’s what the Bible says!). This practice eliminates strife.”
In her case, she and Gary also practice tithing for over 20 years, and she says that God’s promises of prosperous finances, health, and family life as a result of tithing have been proven real in their lives. “Gary and I apply the tithes and love offerings principle. We give 30% of our personal income to the Shining Light Foundation that manages the donations to churches, support for less privileged diabetics, ministries, and some scholars. Giving is a must! If we have more, it only means we were given the responsibility of helping others in their lack,” she shares. “So a balance of faith and practicality will lead you to a more secure future,” she concludes.
Habit#4: They have a healthy relationship with money
The idea of having a health relationship with money sounds foreign, but Suze believes it is the key, especially for women, in gaining control of it. One extreme is not having a relationship with money at all, ignoring its power, and on the other end is having an abusive relationship, misusing money to substitute for something deeper. For women, that often is manifested by a compulsive shopping addiction.
Josie explains however that it is normal for women in general to love shopping: “I for one love shopping with friends and sister. This is a form of bonding for us. The addiction comes when a person substitutes shopping for something else like love of a partner, family relationships, etc.”
A Yahoo article noted that “previous studies have shown that between 2% and 10% of adults have some compulsive shopping tendencies, with women nine times more likely to be affected than men. One study found that up to half of all 14 to 18-year-old girls in Scotland, Italy, and Spain displayed signs of shopping addiction.”
Chona thinks that non-working married women who are spoiled by their husbands will tend to spend more “since she has no value for money. However, for working women, shopping will only become an addiction if she is still single; otherwise married working moms would rather buy stuff for their kids first.” There have been cases though of compulsive shopping for one’s children.
Josie says that items on sale often drive people to buy, even if it’s unnecessary. “When this kind of situation [is repeated], then it becomes a habit which lead eventually to addiction to shopping,” she adds. Angeli also blames the lure of name-brands. “Unless you can afford it, don’t attempt to buy name brands. There are tons of great buys from tiangges and sales that will serve the same purpose,” she notes.
Angeli also believes that because of credit cards that offer 0% interest deals, “people get ensnared by stores’ offers to sell products,” clarifying that “installment is acceptable if you do have the capacity to pay monthly given other budget items that fit into the monthly average expenses you may have.” She also warns that some women may be deceived in just paying the minimum required balance: “It is a trap that has destroyed many lives. You end up living beyond your means and instead of living within your monthly paycheck, you purchase groceries, etc. with a credit card and rack up your bills to unhealthy levels.”
Habit#5: They take more investment risks
A new study by Allianz Life Insurance Company of North America revealed that, when it comes to investing, men are three times more likely than women to take risks. The Financial Literacy Foundation report concluded that “compared to [everyday money management issues like] budgeting and saving…women are less confident than men when it comes to investing, and are less likely to take factors such as risk and return into consideration when making an investment decision.” The US-based Financial Services Authority observed that women are more cautious, more careful, and more traditional than men when it comes to investments.
For one thing, it’s in their nature to more cautious. Angeli says, “We are naturally safe creatures who are not as experimental or adventurous as the businessmen around us. Men are more of risk-takers. Women like low-risk investments.” Chona thinks being more conservative is not necessarily a bad thing: “It is good in a sense since it balances the supposedly aggressive nature of men.”
It could also because, as the nurturers in the family who look after everyone else first, women want to make sure their investments are safe. Aneth shares, “I read somewhere that this is because men want to get rich, while women want to send their kids to college. Once they bought into a stock or an investment, women hesitate to get in and out to save on transaction fees and capital gains taxes.”
Besides, Filipinos are conservative investors in general, preferring safer vehicles like time deposits – women even more so. Angeli observes, “Women like to see and touch their investments. Filipinos have also not been as exposed to working on investment portfolios which consist of a package of real estate, stocks, mutual funds, bonds, and insurance products.” She shares, “I personally would rather see a condominium we have purchased than invest in pre-selling projects especially with the boom in construction of such projects now. I personally feel that investing in a company whose management team I do not know is risky.”
The global financial crisis certainly is not making paper assets like stocks, bonds, and mutual funds look good. Angeli says, “Today with the market crashes, things seem scary and the traditional savings opportunities like real estate, gold and jewelry, paintings, and collecting antiques are starting to become the safer options again.” However, some see falling prices in the capital markets as a buying opportunity. Angeli for one is considering other viable investment options.
Aneth clarifies that actually, “being conservative is neither good nor bad. If you are nearing your retirement age, then it’s good because you may need your funds sooner and can’t afford to wait out market volatility. If you are young though, you could be losing out on a lot of earning opportunities if your money is just in a savings account or time deposit.”
She for one doesn’t consider herself a conservative investor: “I tend to shift between being moderate and aggressive. I am not investing to fund a trip around the world or a vacation home. I am in it for the long haul, so I can afford to take more risks because of my longer investment horizon.”
Money smart women know when to be conservative and when to take a little more risk. In fact, women tend to be better investors than men, according to a recent study by the National Association of Investment Clubs in the US, which found that women’s investment clubs outperformed their male counterparts by a wide margin in 9 out of 12 years. Digital Look, a financial research Web site, surveyed and analyzed 100,000 portfolios, and discovered that ordinary women investors are consistently doing better than well-salaried professionals, with the average woman’s portfolio rising by 10%, compared to just a 6% increase for the average man’s portfolio.
Thankfully, more and more women are learning to like investing. Josie shares, “I’ve always found investing interesting. For me, this is like playing Monopoly when I was young. Buy low, sell high. I’m always trying to be one step ahead of the market.”
Habit#6: They educate themselves financially
A major barrier for women when it comes to being confident about their financial abilities, aside from lack of time, is lack of knowledge. Prudential’s fifth biennial study “Financial Experience and Behaviors Among Women” showed that about half of the women surveyed are unfamiliar with basic financial products. “Even mutual funds…are not well understood.”
In addition, the reported noted, “Significant numbers of women hold attitudes and beliefs that can get in the way of them managing their money better – from thinking it doesn’t matter to finding it stressful, uncomfortable, or boring.”
A report called “Women, Money and Power,” commissioned by global insurance and financial services giant Allianz, revealed that women feel overwhelmed by materials and language: “Difficulty in understanding financial information is a critical barrier for many women.” When asked about their financial planning concerns, 44% of the women respondents said that information is overwhelming, 36% replied that information is complicated or hard to understand, and 32% found materials are really boring and dry.
Josephine thinks it’s not accurate to zero in on women: “I do not believe that only women find investing boring. This is true for everybody, men and women, who do not know how to outpace inflation.”
Aneth also sees a growing shift in women’s attitudes. “As our income grows, so do our interest in investments. Hard earned money deserves more than guesswork when we choose our investments,” she says. “When we host talks on market outlook and other financial seminars, I see a lot of women in the room and they are not afraid to ask questions. They are comfortable making investment decisions, not only for themselves but also for their spouse,” she observes.
Investing in yourself through education and in building up your own career is very important, Angeli says. “For example when Gary started, he started investing in equipment which allowed him to produce musical albums that he earns from even if he is asleep.” She advises, “Invest in your career not in flashy cars or the latest plasma TV. It also pays to educate yourself on what your bank accounts are, what your land titles are, what loans you have, what financial commitments you have so that you do not end up broke simply because of ignorance.”
Habit#7: They seek help from experts
The Allianz report found that for women, while the Internet is usually the first thing they turn to for information, it ranked very low in effectiveness. Human contact remains “the most meaningful and effective” source of information, with some 50% of respondents preferring a person explaining financial information rather than reading about it. Family members, financial advisors, banks, friends, and seminars ranked much higher.
Prudential’s study also confirmed this. In their survey, more than six in 10 women prefer learning about financial products through friends and family: “For all generations, relying on a trusted network is important, as friends, family, and advisors top the list as a number one place to go for learning about financial and insurance products.”
In addition, they tend to remain loyal with a financial provider with whom they have an existing relationship. “They prefer to buy financial products face to face, feeling happy to take the recommendation of a financial adviser, whereas men are better at shopping around,” the report said. It also added that regardless of age and status, “women are much less likely than men to read the financial pages of the newspapers. Overall more than one in three men regularly read the financial pages compared to only one in five women.”
Financial institutions and information providers should take note. Angeli even has some intriguing suggestions: “Seminars that are attractively packaged would be great to have. Or e-mail blasts to inform women on simple investment and accounting principles. In the 70s, there were Tupperware parties where the products were sold while having coffee and a snack. I think that small-group parties organized to teach about making wise investments would be ideal.”
Aneth says, “If you are single and earning, the best time to start planning your financial future is now. Talk to a financial expert or financial planner about your money goals and how you can make these happen. You need to have a financial roadmap where you will map out the quickest way to get from Point A (where you are) to Point B (where you want to be).”