Women vs men – savings habits

As many as 76% of South African women feel financially insecure despite demonstrating better budgeting and saving habits than their male counterparts. According to Lizl Budhram of Old Mutual Personal Finance, women’s lower rates of financial confidence reflect their higher levels of financial vulnerability.

The Old Mutual Savings and Investment Monitor shows that only 39% of women have banked cash savings, while this figure is 45% for men. “While women may find it reassuring in tough times to have surplus cash in their purse, inflation, or the general rise in the price of goods and services, continually eats away at the value of this uninvested money, which means it doesn’t actually contribute to  personal wealth.”

Similarly, when it comes to investing for the long term, 53% of men contribute to a pension or provident fund, as opposed to only 47% of women.  This is despite research by Statistics SA indicating that women’s average life expectancy is four years longer than men in South Africa.

Women, however, appear to be better at saving for short-term goals. The Monitor reports that 22% of women are already putting aside money for Christmas and other year-end expenses, compared with only 16% of men. “Women are 8% more likely to stick to their monthly budget than men and allocate significantly more money to informal savings vehicles, such as stokvels, than the opposite sex,” says Budhram. “Yet, they are also 6% less likely to save money in a formal interest-bearing savings vehicle.”

Some have speculated that women are naturally more risk averse than the opposite sex. By not banking cash savings and keeping money in cash or “stokvels” instead, many South African women are not taking advantage of investment vehicles, such as saving accounts and retirement annuities, that promise to grow their personal wealth. However, Budhram believes, women’s lower tolerance for risk is not the result of a reluctance to invest, but rather the consequence of a generally more precarious financial situation.

Alarmingly, the Workplace Research Programme at the University of Johannesburg suggests that South African women earn, on average, between 15% – 17% less than men. According to the Monitor, 72% of women are or will be financially supporting their parents this coming year. The data also suggests that 42% of South African households are headed by single mothers, with only 12% receiving financial support from the fathers of their children.

“Focusing only on immediate financial needs and ignoring longer term needs and goals is likely to create a situation of long term financial uncertainty and risks,” says Budhram.

When it comes to seeking advice, the Monitor reveals a correlation between feeling financially secure and having sought the counsel of a professional financial adviser. “The value of financial advice can’t be overemphasised. Independent research suggests that informed women investors, especially when it comes to active trading, for example, are better at investing as they are more cautious, resulting in trading less frequently and staying on course during market swings.”

According to a study, “Gender Differences in the Investment Decision-Making Process”, published in the Journal of Financial Counselling and Planning, risk aversion is less about biology and more about access to resources and financial education. The study suggests that men are more likely to invest in risky assets if they are unmarried, older and educated, while women are more likely to hold risky assets if they’re employed or hold a higher net worth.

“With the right financial advice, women have the potential to be as good (or better) at investing than men, especially with increased confidence in managing their personal finances. A tailored financial plan, one that is both realistic and goal-oriented, will help meet financial needs as well as long-term financial goals,” concludes Budhram.

 

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