WOMEN & MONEY: PLAYING IT OUR WAY

The odds are a little stacked against us, but it takes only a small amount of self-education to be able to manage money with confidence.

Rethinking how to manage your money

The financial services industry has a testosterone problem in the way it thinks. Conceptually, whether referring to savings or investing, it remains stuck in the principle of competition, or a ‘risk and reward’ strategy. The most common mantra is ‘the higher the risk, the higher the potential return’. It’s not surprising, then, that the most common tool for determining investment strategy remains the concept of ‘risk profiling’, and most financial advisors start by trying to establish whether you are a high, medium or low risk taker. For many of us, this is simply alienating. Research shows that women tend to think about their financial lives in terms of life milestones, such as marriage, the birth of a child, divorce and taking care of parents. We want our money to work hard, sure, but we respond to different stimuli, and have different priorities. Women also face different challenges, including longer lifespans, the male/female wage gap and a higher likelihood of career breaks. Then, in the case of a divorce, women often find themselves drawing the shorter straw. All this means that appropriate financial planning advice for women needs to take a different path.

Online lending company Payoff recently launched a digital financial planning app called Joy, which has found a loyal following among women of all ages. Rather than using the traditional approach based on risk appetite, Joy took the approach of determining the user’s financial personality by asking the “big five” questions in modern psychology: questions about openness, conscientiousness, extroversion, agreeableness and neuroticism. Do you consider yourself tidy and prepared, or disorganised and carefree? Creative or conventional? Dramatic or calm? When it comes to the concept of wealth, traditional thinking defines it in terms of money; i.e. how much money do I have in my retirement fund and investments? How does it stack up against others’ money?

Women – and many men, these days – tend to have a broader definition of wealth, which includes health, happiness, relationships and rewarding careers. Money matters, but it is not the sole determinant of whether we see ourselves as successful. In financial terms, this means we are not primarily looking to maximise our investment returns, but rather looking for the certainty of achieving our savings objectives. There is a fundamental difference.

When women think about money, it is important to understand the common differences between ourselves and men. Most men work between 25 and 65, progress in their careers and earn salaries that increase in a fairly linear manner. As the child-bearers, on the other hand, and not having grown up with the pressure of having to be

Women – and men, these days – tend to have a broader definition of wealth, which includes health, happiness, relationships and rewarding careers.