24 Sep Why women need different financial planning to men
The dynamics of the traditional family unit are changing worldwide; more and more households are being headed by women and South Africa is no exception.
According to Stats SA General Household report, women head almost four out of ten South African households (37.9%). The majority of children (43.1%) live only with their mothers, in sharp contrast with the much smaller percentage (3.3%) who live only with their fathers, while only one-third (33.8%) of children live with both parents.
Coupled with the persistent gender pay gap and the fact that women generally live longer than men by at least 5 years, this means that women’s financial needs are that much more complex.
So, what can women do to navigate the road to financial freedom?
- Protect your income
Your biggest asset is your ability to earn an income and if you do not protect that, it can have dire consequences in your life. Most insurance companies have released their annual claim stats and there is a rising trend for living benefits compared to the death benefit. This means that more people are likely to claim for a dread disease or disability than for death.
So you need to know your employee benefits more thoroughly, to ensure you are sufficiently covered for the ‘big five’, which are:
- Cancer
- Cardiovascular disorders
- Respiratory disease
- Cerebrovascular disorders (Strokes)
- Renal disorders
And if you are self-employed, it is that much more important to take out personal cover to ensure that you are not caught off guard should an illness or disability arise.
Rigitte Van Zyl, Head of Client Value Propositions at Momentum Corporate believes that employers can help by providing these women with holistic employee benefits that ensure income certainty. “For single mothers who would have no one else to rely on financially if the unfortunate was to happen, the provision of holistic employee benefits that include disability and critical illness cover at the right level for their needs is crucial. This will also ensure that they can get the care that they need to get back to work, without having to spend their personal savings that is kept for rainy days.”
- Save for retirement
It can be overwhelming trying to tick off the seemingly long list of managing your money, but one of the easiest and convenient ways to save for retirement if you are employed is through your pension or provident fund. Take advantage by contributing the maximum your budget allows, and to find out how you can discuss this with your HR or Benefits manager. And if you ever leave your employer, don’t cash in your pension/provident fund. Although you have heard this before, I cannot stress enough just how much you lose by cashing in your pension/provident fund.
Firstly, there is the heavy tax bill that you will incur.
If you withdraw your pension/provident fund in cash, you will be taxed on a sliding scale:
| Taxable income (R) | Rate of tax (R) |
| 0 – 25 000 | 0% |
| 25 001 – 660 000 | 18% of taxable income above 25 000 |
| 660 001 – 990 000 | 114 300 + 27% of taxable income above 660 000 |
| 990 001 and above | 203 400 + 36% of taxable income above 990 000 |
2020 tax year (1 March 2019 – 29 February 2020)
The larger the amount you take in cash, the more tax you pay! If you leave your employer and you opt not to take the funds in cash, you can transfer your pension/provident fund into:
- A preservation fund or
- A retirement annuity
- To your new employer pension or provident fund without incurring any tax
Secondly, you will be losing out on the most important part of the wealth-building equation: the compounding interest your money could have earned in the long run if you had not withdrawn the funds.
If you are self-employed, a retirement annuity provides a solution to save towards your retirement.
- Negotiate your salary
Studies reveal that women get paid at least 25% less than their male counterparts, this means that in your current job, you are probably getting paid 25% less than your male colleague for the same job.
According to Vumile Msweli, CEO of Hesed Consulting; women can do the following to negotiate their salaries:
- Find out what the role pays especially if it was held by a man prior. Do this by chatting to male colleagues, recruiters and HR professionals as women often make 17-23% less than their male counterparts.
- Always ask for a dummy payslip to see if your take-home is in fact higher than your current earnings and use this as a base for your negotiating
- Always ask ‘is this the best we can do’? It’s a negotiation not a dictatorship so always feel free to not accept the first offer and ask for more
- Start as early as you can
Even though women make better investors, studies show that they only tend to start investing later in life. As difficult as it may be, begin investing with your very first pay cheque – even if you start with R300 per month. Avoid withdrawing your pension/provident fund when moving between jobs. Check your employment contract carefully in respect of maternity benefits to ensure that you can stick to your investment plan during your child-rearing years.
It therefore, is important for women to take charge of their finances by educating themselves and equipping themselves about how money works then partner with a trusted financial adviser who can look at both at their finances holistically, someone who will look at both their benefits at work and circumstances
*This article first appeared in City Press
In this week’s edition, Maya and I explain how you can pay your house off as quickly as your car and discuss how easy it is to fall for a scam. The recent raid by the authorities on CoinIt and Commex Minerals highlights the rise of dubious investment offers which are aimed at financially desperate people.