A Financial Guide For Women To Kick-start Their Wealth
It is not uncommon to hear women in their 20’s and 30’s to lament that they do not have enough money to start investing, nor is it surprising to hear women above that age to say that they do not know anything about investment or it’s too risky to start now.
These are common excuses used by women of all ages when asked about investment. However, these excuses have no basis and they are taking an even bigger risk by not investing. A Malaysian financial planner specifically for women, Alice Neow shared with us why Malaysian women are more of a risk-taker than they think.
Investment and women
Financial planning for women is still at its infancy stage. The barrier that stops most women from investing purely lies in their mindset. From observations, they have fallen into the habit of letting the men take charge of the family finances. While men, since the stone-age, have been stereotyped as the ones who should be providing and protecting their family. These stereotypes to a certain extent affect women’s investment personality.
“For the sake of generalisation, in my line of work, I usually meet two types of women who are keen to invest. The proactive type who is taking the first step to invest to prepare a back-up in the event something unfortunate happens to her husband or his income. The investment provides a safety net for the family, especially their children.
“The second type invests and manages her money better to protect herself and her children, in case her husband is no longer in the picture,” says Neow.
Whatever the reason that spurs them to take the first step, the ultimate motivator is to protect their family.
However, due to the societal norm, most women regardless of whether they are a homemaker or a career woman, tend to defer most financial decisions to their husbands.
Men are from Mars, and women from Venus
Financial needs do not differ much between the two genders. However, what makes them different are their financial wants.
“Whenever a new client comes and see me, I’ll gauge their inflation rate based on the impression they give. A simply dressed person may have a lower lifestyle inflation compared to one that is decked in designer wear and accessories from head to toe,” Neow adds.
“We live in a material world and everyone leads a different lifestyle and this affects our individual’s inflation rate.”
Most people who decide to manage their money to protect their financial future are usually the ones who are going up the social ladder. These are the ones who have reached the self-actualisation stage in the Maslow Hierarchy. It’s about having choices. They want to have a choice of whether to continue with their lavish lifestyle in retirement, or lead a simpler life. The point is: they want to have both options.
Are women averse to risk?
Most people make the mistake of assuming women have low risk appetites compared to men. However, according to Neow, they just have a different take on risks.
“Most married women know they are taking a risk when they marry a man. There is no way to know that the men they are marrying is Mr. Right, and they will live happily ever after. That is an even bigger risk than investing. As least with your investment, you can liquidate anytime!” Neow emphasises.
Even for women entrepreneurs, they are taking a risk when they choose to start a business but they trust their instinct. Women tend to make their decisions intuitively and they are very meticulous — which can be a good or a bad thing.
Being over meticulous can make one over think their decisions and drive them to inaction. This is largely due to lack of confidence in their financial and investment ability.
“However, they fail to see that by not doing anything with their money, they are taking an even bigger risk. The risk of their savings depleting due to the rising inflation, and losing what they could potentially gain through investments,” Neow explains.
What do women want?
This question has plagued men for centuries and it does give women a sense of mystery. However, when it comes to financial security, women want the same thing as men. They want to ensure they can afford to send their child to university and also lead a comfortable retirement.
Even women who are not earning an income can achieve this. And it is important for women from all walks of life to plan ahead for their retirement to ensure financial security in their golden years.
Most women forego investing on their own as they believe their husbands are providing for the family sufficiently. However, they fail to see that whatever they invest is their contingency plan for the family and herself during rainy days. Nothing is certain in life, after all.
The first step is the hardest
The problem with women and investment is the lack of awareness and knowledge. They fall victim to some of the common investing pitfalls, such as investing with the herd mentality, basing their investment decision on hearsays, and lack of familiarity with investment.
“The first thing I tell my clients to do is to read books about investment. Expose themselves to the investment world as much as possible. Listen to a radio station that talks about investment. The more you hear and familiarise yourself with it and the jargons that come with it, the less fearful you are and the more comfortable you are in investing,” Neow advises.
Most women investors are already familiar with putting their money in Fixed Deposit (FD) accounts. However, putting your money in an FD account should just be done for your emergency fund. To achieve your financial goals, you need to invest!
Once you have taken the first step of investing, do not make the mistake of leaving your investments unmonitored. This is not just about monitoring if the stocks you bought have gone up or down, but about what is going to happen to your assets when you are no longer around. Always plan the distribution of your assets. Draw a will professionally with your husband, especially if you have a minor child. This is extremely important to protect your assets and your family.
Risk is not your enemy, lack of knowledge is. Understanding risk and how you can manage it before you put your money into an investment vehicle is key.
One way of managing your risk is to diversify your investment. This will minimise the risk of putting all the eggs in one basket.
Next, set a benchmark for yourself. Set a limit to the percentage gain or loss before you liquidise your investment. If you decide to cash out when your gain reaches 15%, then once it does, you can either liquidise everything, or lock the profit (taking the profit but leaving the capital for further investment). However, if your loss reaches the set limit, liquidise as planned.
It is important for the inexperienced investors to get expert advice in different areas of managing their financial plan. Get a financial planner to plan the route to your financial goals, and a fund manager to strategise a way to get there.
Unlike what most women think, nobody can multitask efficiently. Always delegate the job to the right people!
For those who are still sceptical to take the first step into investment, it’s never too late to start. Enlist the help of a professional to help you customise a plan to reach your goal. There’s likely a line of financial planners or fund managers outside your front door right clamouring for a shot at helping you take control of your financial future.
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Alice Neow, LUTCF, CFP, IFP, Associate Director, A.D. Financial Sdn Bhd.