2 Financial planning mistakes that women make

Women make up 51% of the population in South Africa. However, statistics show that compared to their male counterparts, women are less insured, and they invest less. 

Justmoney spoke to Daphne Rampersad, a Financial Planning Specialist at Liberty, about the two mistakes that women make when it comes to financial planning.

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1. Women do not protect themselves enough

According to Rampersad, Liberty 2018 Claim statistics show that only 31% of their policyholders are female. The majority of households only have life insurance in place for the breadwinner, who is usually the man. The financial impact of a critical illness or disability on the woman and the family is often overlooked.

Why does a woman need to be equally, if not more insured than a man?

Liberty's claim stats show that more people are surviving a critical illness, and medical aid may be insufficient to cover all costs associated with a critical illness.

2. Women are not investing enough

We know that there are fewer female investors compared to men. We also know that women save less – 5% of their income for retirement compared to men who save 15%, says Rampersad.  The sad reality is that South African women start thinking about retirement far too late in their lives or career.

However, a 65-year-old woman will need approximately 15% more than a man of the same age to provide the same retirement income for the rest of her life.

This is because South African females live on average seven years longer than South African males, and they earn on average 27% less than their male counterparts.  

Women should, therefore, invest more and for the long-term.

Where can women invest?

If you haven't started investing yet, a great place to start is to make provision for an emergency fund – which should be at least three times your monthly income, says Rampersad.

This is set up to provide for financial emergencies. It should ideally be invested in a low-risk investment vehicle that can be accessed immediately.

Once you have that in place, you should invest in a retirement fund. The power of compound growth, tax, and cost efficiency within a retirement fund will benefit you exponentially during your retirement years.

While you may have already invested towards a pension or provident fund at your place of employment, quite often this isn’t sufficient to retire "comfortably" – hence you need to either increase your existing contribution, or supplement this with contributions to a cost-effective retirement annuity vehicle.

You should also invest towards your goals. Depending on the term, risk category, and purpose of the goal, a variety of different investment vehicles via various service providers can be looked at including unit trusts, linked investments, endowments, tax-free savings, and guaranteed offerings.

This is where the importance of selecting a suitable and accredited financial adviser that is able to articulate, prioritise, and action your short-term and long-term goals, is absolutely vital.

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