How women can take charge of their financial well-being

Singapore

WOMEN tend to be less invested than men, and a smaller proportion of them feel confident or knowledgeable about making investment decisions. But those who do take the plunge outperform men when it comes to investment returns, according to OCBC's survey of 2,000 working adults in Singapore.

In conjunction with International Women's Day, this column discusses how women can empower themselves to make better choices for their financial well-being. According to the OCBC Financial Wellness Index 2020, 60 per cent of women have investments, compared with about 75 per cent of men. To add, just 28 per cent of women - versus 48 per cent of men - are confident or knowledgeable about investing.

Yet, female investors seem to have an edge over their male counterparts. For instance, about seven in 10 women who invest by doing their own research and getting advice from qualified financial representatives have met or exceeded their investment targets, compared with six in 10 men.

The annual survey by Singapore's second-largest bank, which looked at responses from those between the ages of 21 and 65 across the country, coheres with studies done elsewhere in the world.

Warwick Business School, for instance, studied 2,800 men and women in the UK investing with Barclays' Smart Investor, tracking their performance over three years. Not only did the female investors followed by the study outperform the FTSE 100 over the time period, they also achieved better returns than their male counterparts.

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So why is it that women - and especially those without children, according to OCBC's survey - still tend to stick with cash savings in this era of low-interest rates?

The bank's head of wealth management Tan Siew Lee suggested that women tend to be too preoccupied juggling various responsibilities to concern themselves with the additional commitment of investing.

Some who have partners may also prefer to take a backseat where finances are concerned, giving agency instead to their other halves.

Urging women to take responsibility for their own financial planning, Ms Tan said that to ensure the longevity of our personal finances, it is important for women to manage various budgetary essentials in the context of a broader financial portfolio.

She said: "It also helps to relieve the stress of such financial duties if you're able to anticipate future needs and budget and plan accordingly."

Financial planning is crucial for women also because they tend to have a longer life expectancy than men. According to Singapore's Department of Statistics, women have an average life expectancy of about 86 years old, about four to five years older than the average life expectancy of men.

"This makes financial planning all the more important, as they may have to accumulate a larger retirement fund for their twilight years," said Ms Tan.

Her first tip for helping women become more independent in taking care of our finances is to get interested.

"Get clued in on what is going on with your finances, and take steps to put something aside for yourself as well. Unexpected events could easily upend your life if you do not have a firm grasp of your finances," she said.

Then, be clear on what kind of lifestyle one wants to seek. Women should also have a good grasp of their present financial standing, and what it would take to arrive at that envisioned lifestyle.

"The clearer you are about where your money comes from and goes to, the easier it is to adjust your spending behaviour so that you can increase your savings or allocate your budget better," she said.

Tracking expenses can be a hassle in the beginning, but done regularly enough, it will become a habit, Ms Tan added.

Finally, she encourages investing available savings in excess of your emergency funds rather than leaving them idle in a deposit account. OCBC's survey found that cash deposits are still women's preferred way of accumulating wealth - with 81 per cent of women without kids and 67 per cent of mothers indicating so.

"Inflation will diminish the real value of money over the long-run, and so it is important to invest to beat inflation. There are many low-risk products you can consider, that can provide reasonable returns for relatively low risk," Ms Tan said.

She suggests starting with a regular investment plan - at a reasonably low amount of, say, S$100. These plans help individuals accumulate investments over time, and are less daunting for those on tighter budgets. These plans run on autopilot and can be easily set up on mobile banking apps.

"So you don't have to actively think about investing your money on other platforms. It's something that works in the background and should be left untouched for the long term," she said.

Noting that some 38 per cent of women likened investing to gambling, Ms Tan said: "There is a difference between excessive speculation to make a quick buck versus investing for the long term, and these ideas shouldn't be painted with a broad brush."

While investors have to contend with a certain level of uncertainty when putting our money in the financial markets, there are strategies to mitigate and manage these risks, such as diversification, she said.

• The Money Playbook is a new personal finance column that discusses how to take charge of your financial well-being. This is the first of an eight-part series.