How & why women should have financial independence
04 November 2016
You can also listen to these podcasts directly from the Old Mutual app, which is available here.
On mobile, on digital, on demand, this is Old Mutual Live, Money Coach. Hello and welcome, my name is Chris Gibbons. At the end of the month of November we begin the period called ‘Sixteen Days of Activism Against Gender Based Violence.’ In almost all cases in South Africa that means violence against women. Violence as we know and as our courts have recognised, comes in many shapes and forms.
It’s not just the brute violence of a clenched fist. One particularly insidious type of violence is the psychologically damaging impact of holding women to ransom over money. Withholding the weekly or monthly wages or even spending those monies on things like booze and smokes. When your wife and partner needs money to feed herself, to feed the children. That’s a form of violence which can cripple people emotionally and physically over the long term.
It’s important to consider how women, both in and out of relationships can achieve financial independence as a way of protecting themselves from this kind of intimidation. We’re joined now by Old Mutual’s Head of Financial Education, John Manyike. John, welcome, good to talk to you again. First, in your assessment, how bad is the problem and how does it manifest itself?
John Manyike: Hi Chris. Financial independence, look, a lot of intellectuals and academics have different ways of defining. But in simple terms financial independence simply means being able to support yourself financially without being reliant on others. For me that’s a simple way of looking at the financial independence.
How does the problem manifest itself
CG: When we look at women, how bad is the problem, how does it manifest itself?
JM: We found that, I think there has been some studies as well conducted around that and it seems that women who are not financially independent tend to be more vulnerable to abusive households or abusive relationships. Where they accept that they’re not able to do anything because they’re just so dependent. I don’t mean it happens to women who are housewives or home executives as they put it.
But it could also happen to the working class, women who are career driven, women who are academic and so on. Because when they are in a relationship with a partner who controls all financial affairs or even uses their assets without their consent and so on, it is another form of abuse. Abuse is very broad and it does include financial abuse and so on, so it is quite a serious problem.
CG: That’s one aspect of financial independence, when you look at the research, you’re seeing a whole host of things that affect women generally.
JM: Absolutely. There has been some very interesting studies and I think one that really sticks to mind and I really was so humbled. Just looking at how South Africa compares with other countries around the world. Fin 24 actually published the results of a study that was done by Synovate, a global study in 2009.
They actually focused on 4 500 women from 12 countries, including Australia, Brazil, Canada, France, Malaysia, Mexico, Netherlands, including SA as well as the UK and America and guess what? I was stunned to see that South African women in particular emerged as one of the most independent women out of those countries, at 69%. Of course there was France where the French women were around 80% and British women were about 70%, these are women who consider themselves to be financially independent.
While encouraging there isn’t financial equality
If you look at SA in particular, it would seem that the focus that SA has enjoyed post-democracy on gender equality has seen women being provided more opportunities to advance their careers or simply start new ones. We’ve actually done well as a country in terms of doing that. Because sometimes in SA we tend to be the worst PR specialists of our own country and there are some very good stories and that was very encouraging.
However, it doesn’t mean that we’ve arrived because if 69% of women consider themselves to be financially independent, it means there’s still the balance who are not. Also, I realise that this research focused mainly on urban women, but then there are other dynamics. Because it hasn’t really focused on rural women where the dynamics might be different and the picture might be even more complicated.
But another thing also in the research, dating further I found that also OECD, which is the Organisation for Economic Cooperation and Development, they also found that financial literacy of women is actually much lower compared to the male counterparts. Furthermore, women when they were studied, they found that 65% of women have control of their cash flow as opposed to 83% of men. But also when they looked at how women pay their credit card balances, they found that only 48% of women pay their credit card balances in full as opposed to 70% of men.
I think this is also largely because of a number of things. Women have to provide for their children, but also their parents and they’re quite sandwiched between the two. Let’s not forget that generally in the world, women tend to earn less than their male counterparts and because they live longer, they have more complex challenges when it comes to having to save.
CG: Let’s focus then on financial independence, what should a woman do to ensure that she is or she becomes financially independent?
How women can ensure financial independence
JM: The first thing I believe, maybe let’s start with women who are planning to get married. Immediately I think it needs to be agreed and this has to be some kind of a psychological or social contract with their partner. That look, I am going to pursue a particular career, or if it’s not a career, if the woman intends to start a business, this must be agreed upfront.
Because if you’re going to be denied to pursue a career or to start your own business, you’re actually being denied being financially independent. Maybe we should start there. Women need to definitely make sure, especially as they’re getting into being married, that that needs to be dealt with quite emphatically.
Then also there’s the issue of, generally women need to empower themselves. This means to acquire skills, to do different things. Whether it’s business or whether it’s from a career point of view. Then also women need to really start saving early, given the fact that they live longer than their male counterparts. Women need to save early, start saving early, they need to eradicate that debt. Try and steer clear of that debt, but also save for retirement, over and above an emergency fund. But make sure you save for retirement and start it early.
Two last things. One, they need to be very prudent in their financial decision making so that they don’t find themselves borrowing irresponsibly and so on. Last, but not least, women need to speak to a financial advisor much earlier and make sure that they have a financial plan.
CG: You’re listening to Old Mutual Live, the Money Coach edition, on demand, visit dogreatthings.co.za. John, I wonder, is this as much about educating men as it is about women?
It’s about getting a financial education early
JM: I suppose one could say that both men and women need to ensure that they are financially educated and how to manage their money. But I just think that women need to be exposed to financial education far earlier, given the fact that we know women mature better and earlier than men.
It’s not about an age because you’d be amazed that an 18year-old female would be more mature than a 21-year-old male. I think it’s just something that even society has come to accept. It means then that some of these decisions need to be made much earlier. But then for those financial decisions to be made, they need to be exposed to financial education much earlier.
CG: Let’s just end off by recapping those key points again, for a woman to achieve financial independence?
JM: Women need to empower themselves and they need to eradicate bad debt and really be very strict when it comes to borrowing. If they do borrow, they must borrow responsibly. They need to have an emergency fund to cater for rainy days. They need to save for retirement, but actually start earlier saving for retirement. Bearing in mind that they generally live longer than their male counterparts. They need to be very prudent with their financial decision making. Last but not least, they need to speak to a financial advisor.
CG: This has been another edition of Old Mutual Live Money Coach, my name is Chris Gibbons. I’ve been talking to John Manyike, Old Mutual’s Head of Financial Education. John, if anyone wants more information, where would they go?
JM: They’re welcome to join our social media community on Facebook, which is On the Money Financial Education Programme as well as our Twitter account which is …
JM: That’s right.
CG: There we go, John, thanks for being with us. Remember please feel free to get in touch any time if you have any questions for me or topics you’d like covered on Old Mutual Live Money Coach. Just send them direct to me at firstname.lastname@example.org, I’d be delighted to hear from you. Until the next time, thank you for listening, Old Mutual Live, on mobile, on digital, on demand.