WOMEN CREATING A FINANCIAL LEGACY
We have numerous women in our lives that don’t
work in a job and are homemakers but still save enough sum for their family
members emergency needs. Although these savings are just cash stored in the
house itself but they are often a savior when a family member is in dire need
of money and all other sources are unavailable. Women save money because they
believe “preparedness prevents plightâ€. Women have always been the main creators of a
family’s legacy, traditionally in passing ahead core values and beliefs and
provides for their loved ones emotionally but also in many materialistic ways.
Not only personal finance, women have proved themselves to be exceptionally
successful in fields of venture capital, private equity, investment banks, etc.
as CEOs, CIOs, economists and venture capitalists.
When we say ‘creating a financial
legacy’, we talk about generating wealth and transfer to the next generations
as well as financial education needed to manage the assets the family members
inherit. Financial education, here, is extremely important for the current and
the next generations. Women at the wealth accumulating side and the inheriting
side should be educated about their assets’ management. Paying bills and
budgeting they are confident about but their confidence becomes significantly
low when it comes to investment decisions. Hence they end up investing less
than needed and sometimes, not at all.
In the fiscal year 2020, the value of financial
assets owned by individuals in India was about INR 262.91 trillion.
Shockingly enough, only 13% women invest and actively manage their assets. They
need to understand that cash at home or in hand is passé, they need to add wings to their wealth which
can happen only with timely and right investments.
Why women need to invest more than men:
Women are paid lesser and have long lives. If women
start planning their wealth at the same time as men usually do, and also create
a similar corpus for their retirement, they will still have to cut short their
expenses in order to invest because of low salaries. Not only that, women have
longer life span than men, which implies that they require a bigger corpus for
their retirement. This problem can be solved if you speak against the gender
pay gap and negotiate for the salary you think you deserve. Career
interruptions is another hurdle in a women’s overall growth as they are often
expected to put hold on their career so they can fully support or nurture other
family members. Women should also invest earlier and a greater amount of their
income for their future and family.
Gender inequality is rampant in all spheres more so
in ‘heir to wealth’, management of assets and being at the helm of
corporate affairs. In our society, in India, women were not made the owners of
their ancestral wealth, not allowed to work other than household work and were
generally not considered as equals. All these factors led to the
financial illiteracy that we see in our grandmothers, despite of them being
tremendously efficient in saving and budgeting for their household.
All these barriers are lessened in this new age but
we have a long way to go to see relevant changes. In a survey by the Economist
Intelligence Unit, taken from people from different cultures, half of the
millennial women (age 22 to 41) said they had earned their wealth from working
and business. Only half of them said they inherited money.
Changes are happening:
Women are starting and running businesses at a
higher rate. As these women are generating wealth, they are also taking charge
of the allocation of the wealth produced. This is just the kind of
participation which is needed from all women irrespective of their fields of
occupation and dependence on family or spouse. There is a paradigm shift these
days; Indira Nooyi, Leena Nair, Falguni Nayar have not only reached the
ultimate level but also demonstrated the prowess of females in business
administration, what can be more exemplary than our Finance Minister Nirmala
Sitharaman!
Fidelity investments - Women and Investments
‘2021 is a study that showed women surpassed men by 40 basis points, or 0.4%
in achieving positive returns through investing. A large number of them are not
confident about starting or managing their investments but the truth is that
women make great long term investors.
Creating a Legacy with a Broader View:
During a survey, just 4% of women said they
do not have enough to give away to charity. Women are the drivers of most of
all the causes that speak against some major social issues. Our favorite
investor Warren Buffett did not know anything about how to give it back to the
people until his former wife Susan Buffett used the wealth to help the society.
She was an activist for civil rights, abortion rights; president of the Buffett
Foundation, contributing to various educational, medical and other charities. She
was also a director of Berkshire Hathaway owning 2.2% of the company. Majority
of the millennial women suggested that investing is also an opportunity to
tackle societal issues. Today’s women highly consider these societal issues
to define their legacy.
How to prepare oneself for financial independence
and legacy planning:
1. Budgeting is our thing! Allocating a budget will save you from
spending extra and you will know how much should be spent and what amount
should be saved. Partner with a financial advisor as early as you can.
2. Your fixed expenses are a large part of your overall expenses,
they should be managed according to the importance. Minimize the amounts which
you think can be minimized and actively manage them to make them less
exhaustive.
3. Use technology to keep organized. Keep track of your investments and put reminders of
premium payments with the help of various apps in the market.
4. Educate your children about different assets and the
generating and managing different sources of income, prepare them to be
independent.
5. Make your investments work for you. One source of income is not sufficient, which is
why we invest. We should be having wealth generated for us when we are not even
thinking of work. This way we can not only beat the inflation but also be
financially free according to our choice.
6. Tax planning. Paying out taxes isn’t what we usually like, seek
maximizing benefits by investing in fund that are tax saving.
7. Plan your retirement. Retire early or work on your own terms, all this is
possible if you are financially independent. Health Insurance is also crucial
to secure your wealth in case of health emergencies.
8. Start early! Your financial advisor will do the planning but you
will be at a much higher advantage if you take charge of your investments and
income sources from the very start.
