The next GFC could hit women hard but there are ways to avoid poverty pitfalls. Nicole Pederson-McKinnon explains.
Over the years about 100 women have said to me: “I just can’t get interested in that money stuff. He takes care of all of that.”
Well, if you can’t get excited and enthused about your finances, then what about your future? Because it’s the same thing.
“I’ve coined the term ‘Girls’ Financial Crisis’ to highlight that if we don’t take control of this “money stuff”, the next GFC will be ours – and it will have a massive effect on not just your solvency, but the country’s."
We’re talking about 50 per cent of the population. If they aren’t financially secure, then we have a big problem as an economy, not just on a household level. Already, single 60-year-old women have the highest poverty rate in the country at 36 per cent, according to the 2016 Household, Income and Labour Dynamics in Australia survey.
All it takes is a bit of interest in the subject, a bit of extra superannuation, a bit of understanding of compounding interest and you can make sure that’s not you.
Five reasons to care about your financial health
1. You may earn less
Issue: That male colleague sitting beside you? It’s possible he earns more than you even if you both have the same job. Inexplicably, men are paid on average 16.2 per cent more than women, according to Workplace Gender Equality Agency research. Those higher salaries enjoyed now mean more wealth later – it amounts to $1 million more over a lifetime says Rice Warner (the estimated advantage for men who are in their 30s and 40s today).
Solutions: Don’t be scared to go for a pay rise this year – sometimes women are shy about asking for the salary they deserve because they don’t quite believe they deserve the job in the first place. This is the so-called, so-common ‘imposter’ syndrome. But there’s strong evidence you do deserve it… your employer thinks so and if you put forward a calm, convincing, evidence-based case for extra cash, it may well be granted. Back yourself with your boss (no doubt your partner would).
2. You may ‘work’ less
Issue: Females are still more likely to take career/pay breaks to raise kids. Increasingly, you may also find yourself part of the ‘sandwich generation’ with ailing parents to care for too.
Solutions: The ‘who becomes carer’ is a decision for you and your partner – in general, it makes sense for the lowest-paid person to take on the bulk of the unpaid carer role – but as a couple you need to recognise and redress the financial detriment it creates (more in a moment, though).
3. You may live longer
Issue: Those first two points are things you can personally influence – but typically women then go and live longer than men. More than four years longer, to be precise. Which means we have to stretch our money that much further.
While we’re being negative, there are reasons other than death – sorry! – that your loved one might not always provide for you. Divorce or even simply their dire money decisions could leave you broke. Besides, what a responsibility for a man to shoulder your financial future, too, on the basis of outdated gender roles? He may be clueless.
Solutions: Make a vow to get across the basics of your money life: know your accounts (and be sure you can access them) and your insurances (ensure they are enough). Come what may, you need to be protected but most importantly understand that...
4. You are super (challenged)
Issue: Taken together, the three factors above can conspire to create a significant shortfall in your super fund – and this is the crucial ‘future’ bit of your finances. For both sexes, life gets all-consuming … and we can consume all our funds for life, unless we're careful. But women’s current end super balance is $52,272, as opposed to men’s $87,589 (according to Australian Bureau of Statistics’ gender indicators).
Solutions: This is easily fixed by females just saving that little bit extra – always. Do your utmost to salary-sacrifice 2 per cent extra at all times you're working – because this is before tax, it will cost you far less.
Plus, actually read your super statements from now on, assess your fund’s performance against its peers and ditch a dud product when necessary. Just 1 per cent extra in returns (or fee savings) from age 25 can mean $250,000 extra at retirement at age 70, reports Rainmaker Information.
5. You may be missing out on freebies
There are cheaper and easier ways to get extra money in super as well. If a spouse makes an after-tax super contribution of $3,000 for their non-earning or low-earning partner (with less than $37,000 in taxable income, from 1 July 2017), they can earn a rebate of up to $540.
And if you're earning but you’ll make less than $51,021 this tax year, you’ll get up to $500 free from the government (as a ‘co-contribution’), provided you make an after-tax super contribution of $1,000 before June 30. This goes directly into your super fund so it can grow and grow.
Nicole Pedersen-McKinnon is a money educator and television finance commentator who delivers her Smart Money Start multimedia financial literacy presentation, including a version especially for young women, in high schools around the country.