March 8, 2009
small change
Girls just gotta have funds
Women can end up in dire straits if they are clueless about family finances
By Lorna Tan
I wonder which is worse. Finding out that your hubby has been unfaithful and he wants to leave you, or that he has died without leaving adequate funds for you and your children to live on.
While there is really nothing much you can do except to get on with your life should any of the two events happen, there is definitely something you can do now about your financial matters to make the best of a potentially unpleasant situation.
Studies have shown that when it comes to money matters, we, women, are a vulnerable lot. But we can do much more to protect our interests and those of our family, and ensure that we are not caught off-guard when something untoward happens.
Before I offer some suggestions, here are five facts you should know.
Like it or not, women live longer than men. Men, on average, die five years earlier than women. Visit any old folks' home and you will find more women there than men. According to statistics from the 2008 World Population Data Sheet, the life expectancy for Singapore males is 78 and for females, it is 83.
Women retire at a younger age or have shorter careers. This is because they take time out to become the family caregiver. As a result, many spend their productive years as housewives taking care of their families. It was reported that a woman's average working period with the same firm is 20.6 years, almost a decade shorter than the average man's span of 29.5 years. Women are more likely to have worked part-time too.
On average, women earn less than their male counterparts.
It follows that women are able to make only basic or minimal contributions to the Central Provident Fund (CPF) and some have none. On average, men have 1.69 times more money in their CPF balances than women.
More people are getting divorced. After a divorce, the average man's standard of living goes up 23per cent, while that of the average woman goes down 10per cent.
Women suffer from more debilitating diseases in old age. Studies show that women have 12 disability-filled years in their old age as compared to nine disability-filled years for men with their shorter life span.
The picture that these facts paint is not pretty.
Women live longer but retire earlier with less money. Because of men's shorter life span and because women tend to marry men older than themselves, the odds of women becoming widowed are very real. As such, we women usually have no spouse to care for us in our long, frail old age. We are also in danger of having little savings by then. This is because by the time we get to that stage, most of the family's savings may have been spent on medical care for our husbands in their last years.
Coupled with another finding that women typically do not take the initiative to do financial planning and are likely to leave key decisions to their spouses, and you have the unpalatable truth: that our risk of financial insecurity is great.
But we can do something about it.
Rather than taking a back seat, start by finding out how much you and your husband are worth. Take an interest in the insurance policies the family has, the sums assured and the coverage. It is worth your while to find out what your husband's bank accounts are and his investments.
Also - and this may sound morbid - it could be helpful to picture your husband dead and imagine yourself picking up the pieces. This was something I did some years ago. It resulted in me generating a spreadsheet of family finances and analysing the financial gaps that I felt needed plugging.
It wasn't rocket science. I simply worked out the family's expenses and projected them till our two kids were of working age. Next, I listed our incomes, savings, insurance, assets, investments and outstanding loans. I divided the net wealth with the amount of projected annual expenses to see how many years it could last.
From there, I could work out the shortfall and estimate how much insurance my hubby and I needed should either of us kick the bucket or become disabled before the kids became independent.
It resulted in me having a serious discussion with my hubby on the need to buy more term insurance and disability income cover because I felt that what he had was insufficient for me and our two growing kids should something happen to him.
Here are some other pointers to get you started.
Find out if your husband has a will. What are the contents of the will? Who are the beneficiaries of his CPF monies? Is there an emergency fund to take care of immediate expenses as you will need time before you can liquidate the more illiquid assets like properties? Where will the funds come from to pay for family expenses and the kids' education? What are his insurance policies and where are they kept? What are the death benefits? Do you know what his assets and investments are?
Was your property bought in 'joint tenancy'? This is to ensure that the property automatically goes to the surviving spouse in the event of death. If it was bought under 'tenancy in common', the co-owner's share does not automatically go to the spouse.
Next, look at your own financial situation and take some action. You should have your own insurance plans, particularly medical ones like a hospitalisation plan, and, if you can afford it, a critical illness plan that covers you beyond 60. The latter gives a lump sum should you be diagnosed with one of 30 specified illnesses.
If your husband does not have a will, you may want to make sure that you have a joint account with him so that you can withdraw the money should he die first. Furthermore, you may want to consider having your own will if you wish to leave some money and/or items to people outside your nuclear family, such as your parents, siblings, relatives and friends.
Finance experts advise women to take an interest in building their own nest eggs over and above any joint savings or investments they may have with their husbands. This is prudent in case he is declared bankrupt or accumulates huge debts.
Also, educate yourself on the different investment tools out there, such as equities and bonds. Women have been known to be conservative investors relying mainly on cash and fixed deposits. However, returns on such investments are low and inflation alone will slowly erode your savings. Think of investing your money more wisely and efficiently.
So women, let's empower ourselves. It is International Women's Day today. There is no better time to get started.
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