Financial planning is extremely important for every individual, irrespective of whether they are men or women.
When we talk about investing or financial planning as a whole, it should be a gender-agnostic concept. According to LXME’s Women and Money Power Report 2022, overall 49 percent of women in the country are either not investing at all or are unaware of their investments.
This speaks volumes about how little women are exposed to the world of investing.
Financial planning, money management, and investments have traditionally been male-dominated and male-oriented. Even with women excelling in all fields of life and becoming increasingly independent, their financial planning still takes a backseat.
This roots in a lack of confidence in self to handle money.
Women have not been encouraged to actively manage money as the ecosystem has primarily targeted men. The incumbent financial services ecosystem is largely male-dominated and hence focused towards men.
It’s a case of reaching out instead to the ready market as opposed to developing one. Also, most Indian households are still not very encouraging towards the women in their homes to be aware and take charge of financial matters.
There are various reasons why women shy away from gaining important life skills in money management. The deep-rooted orientation that “men manage money much better” has created a huge barrier in the minds of women that investing or financial planning is complicated and only a male brain can decipher it.
Added to this are also years of conditioning that what matters is earning your money.
Traditionally men have been the bread earners. Hence, matters of money have always been left to men starting from saving to investing. Though this pattern is slowly changing due to the rising participation of women in the workforce, there is very little stress on how managing your money and investing is the only path to wealth creation.
Hence women work hard at earning and saving their money but usually stop there. While the society around women is changing and making way for a more progressive work culture, women also need to adapt and start investing.
Women are born money managers. When armed with the right attributes of being risk-aware, disciplined, making informed decisions, and staying calm under stress, women can go from managing home budgets to smart investors.
Men and women undergo different life experiences which differ in their knowledge and attitude toward risks. More than men it is women that have a greater need to actively manage their finances. Let’s take a look at five key reasons why financial planning is critical for women.
1. Financial freedom
In order to be truly independent, every woman must aim to have financial freedom and become self-sufficient or capable of meeting her financial needs.
For this, women need to start building their own wealth with a sound investment plan.
As a rule of thumb, remember to start early to reap the benefits early.
Women are born money managers, they have the potential to bring societal changes as they begin to invest back into the community and their children.
2. Career breaks
According to research done by the insurance agency AIG Life, women are nearly three times more likely to have to take time off work to look after children.
As caregivers in the family, women tend to take more breaks from their careers than men. This could be due to childbirth, taking care of the elderly, or even relocating with their spouse.
This break would indicate a certain period without an income, which is bound to disrupt regular savings and investments. This makes it very important for them to plan their finances more carefully.
3. Lesser earnings
It is an unfortunate yet well-documented fact that for the same job, women are paid less than men.
According to an online source, women earn 82 cents for every $1 man earns when comparing all women to all men. The pay gap increases even more with seniority.
Naturally, this means lower savings and a lower retirement corpus. There exist situations where women have chosen to take up a job that pays them less so that they have a better work-life balance.
With lesser income, financial planning becomes very important for women.
4. Longer life expectancy
Women have a longer life expectancy than men. In India, the average male life expectancy is 68.4 years and the female life expectancy is 71.1 years.
This means that women live longer than men post-retirement and hence need a bigger corpus to survive. Sometimes even working women tend to depend on their husbands to manage money.
In the case of their husband’s early demise, widows find it difficult to manage their finances. Effective financial planning thus becomes more important for women.
5. Life goals
The woman of today is more aspirational and driven. They have many professional as well as personal life goals. It may range from travelling the world to starting their businesses.
All of these goals need to be backed by adequate finances, where investment planning helps. With the right financial plan, women can ensure that they meet their goals in the timeframe needed, without relying on others to back their dreams.
As mentioned earlier, financial planning is extremely important for every individual, irrespective of whether they are a man or a woman.
It is a bit more important for women to know their way around money and learn how to save, invest and spend it cautiously.
Women must take charge of their financial well-being and excel in money management, just as they do in other fields.
(The author of this article is the founder & MD of LXME)
Disclaimer: The views and recommendations given in this article are those of the author. These do not represent the views of MintGenie.