Financial planning for women: changing needs
The month of August was Woman’s Month, so it is fitting to highlight certain financial planning matters that affect women directly.
Many financial planners have, in the past, focused primarily on the requirements of the bread-winner (who is traditionally the man in our society) when drawing up a financial plan. This was often done without taking into consideration the fact that a woman is statistically likely to out-live a man of a similar age.
Much work has been done to create a greater degree of equality between men and women in areas such as the workplace, but the financial plans of many women have not been updated to keep up with these changes. It is vital that the needs of both men and women are given due consideration when drawing up a financial plan, as often each have slightly different priorities.
Despite efforts to eradicate inequality in the workplace, some women still earn less than their male counterparts.
They will often have to invest a larger portion of their income in retirement and savings products to ensure a financially sustainable future and in order to survive unexpected challenges such as a health crisis, disability, divorce, retrenchment and single parenthood.
When a child is born, it is invariably the mother whose career suffers while she takes primary responsibility for the upbringing of the child. This is compounded significantly in the case of a single mother. When she returns to the workplace after bringing up her children, she is often at a disadvantage compared to her peers whose careers have not been interrupted.
It is often difficult for her to catch up this lost time when saving or investing to ensure that she enjoys a comfortable retirement. This impacts on the compounding effect that time has on an investment.
Women need to be mindful of the fact that they are more at risk than men when it comes to contracting certain diseases, most notably breast and ovarian cancers.
These diseases account for the majority of critical ill- ness and disability claims by women. Threats such as heart attacks and strokes, previously associated primarily with men, have now also become significant risks for women. Surviving a critical illness or disability can be financially devastating without having adequate financial cover in place. A female client visited our offices recently and, after carefully reviewing her financial circumstances, part of our recommendation was for her to take out dread disease cover.
However, her husband encouraged her to rather focus on her retirement by investing in a retirement annuity. Unfortunately, she developed breast cancer less than three months after our consultation. Had she taken our advice, she would have received a sizeable tax-free lump sum payment which would have allowed her to afford the significant extra expenses which were not covered by her medical aid. There is no time like the present for women to discuss their financial planning circumstances with a certified financial planner. Rands and Sense is a monthly column, written by Ross Marriner, a tax practitioner and a CERTIFIED FINANCIAL PLANNER® His Financial Planning Office number is 046 622 2891